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Othee to this request and that the staff of your Committee already have been advised of this nerded correction.

THE MECHANICAL FEE Section 113 would increase the existing mechanical fee from 24 to 3¢ per Thyroiing. This new royalty would have its most burdensome effect upon the juke bor industry, as this industry is the largest user of phonograph records. Thus, the jukebox industry faces a doubling up of new royalties under both Sections 115 and 116. This goes far beyond the proposal offered by our representatives in the 1:bearings when they recommended an add-on to the mechanical fte to be paid bir juhe operators (Ilearings, l'art I, page 83). In 1966 and 1907, this Coinmittee recommended an increase in the mechanical fee from 24 to 29.34 (H. Rept. No. 83. th Congress, page 74), and that was the amount of the proposed mechanical fee when the $s jukebox royalty was agreed to and adopted. We urge the Committee to require music publishers and composers to come forward with proof that any increase in the existing royalty is needed to compensate them fairly for the music they produce. In the absence of such persuasive proof we urge the Committee to retain the present rate of 24 per recording.

RECORDING ARTS PERFORMANCE ROYALTY Although H.R. 2223 does not include any provision for a recording arts performance royalty, we note such a proposal has been made in H.R. 5345, a bill which we understand is also before this Committee. We are opposed to this proposed new royalty for the reason that it would upset the compromise agreement by which the proposed se jukebox royalty was first established. We also oppose any such new royalty as a matter of principle because we believe that there should be but one royalty for any one performance, and that if Congress creates any new kinds of musical copyrights they should be shared in a single royalty among all of those who claim to have contributed to the finished product.

CONCLUSION In closing. I would like to state to the ('ommittee that within the jukebox industry there have been, and still are, many who vigorously oppose conceding any performance royalty to copyright owners. This is because they believe jukebox operators perform a compensating service to the benefit of copyright owners. Any new proposal to increase the royalty rate, or to subject it to further revision, would substantially intensify that opposition and would make it increasingly dithcult for the industry's leaders to preserve support for the provisions of the Bill as they have been agreed to,

We earnestly urge your Committee, therefore, to approve the provisions of H.R. 2223 relating to the jukebox industry in their present form, with the exception of the minor change in Section 116(b) (1) (A) discussed above, and excepting also any increase in the mechanical royalty under Section 115.

Thank you for giving us this opportunity to present the views of Music Operators of America, Inc.

TESTIMONY OF RUSSELL MAWDSLEY, CHAIRMAN, LEGISLATIVE

COMMITTEE, MUSIC OPERATORS OF AMERICA, ACCOMPANIED BY
NICHOLAS E. ALLEN, COUNSEL
Mr. MAWDSLEY. Yes.

Mr. Chairman, I am Russell Mawdsley of Holyoke, Mass. I appear here in behalf of Music Operators of America, Inc., the national organization of jukebox operators which has members in every State of the Union. I am the immediate past president of the organization and presently serve as chairman of its national legislative committee,

I have been a member of MOA for 20 years, and I have served on its board of directors and as an officer in each of its several offices over the past 13 years.

I am also vice president of the Massachusetts Coin Machine Association, the statewide organization of jukebox operators, and vice president of the Western Massachusetts Music Guild, a local association of jukebox operators in the western part of the State.

In my city of Holyoke, I am presently a director of one of our leading commercial banks, and I am a member of the Holyoke Planning Board, having served as its chairman for 2 years. I have been a member of the board of directors of the Holyoke Chamber of Commerce. I am a past president of the Holyoke Kiwanis, and a former trustee of a local savings bank.

I am president of Russell-Hall, Inc., a firm which operates jukeboxes, amusement machines, and a full line of vending machines in the greater western Massachusetts area, an area which is centered around the city of Springfield, Mass. My firm operates about 100 jukeboxes, 150 amusement machines, and 700 vending machines, in about 450 locations in this area.

I would now like to give you a comprehensive view of the jukebox industry, nationwide. According to industry estimates, which we believe to be substantially correct, there are about 7,500 jukebox operators, and about 450,000 jukeboxes on locations throughout the United States. We also estimate that jukebox operators purchase about 75 million records each year for play in their machines. Prior to 1974, there were four manufacturers of jukeboxes in the United States, including Rock-Ola, Rowe-AMI, Seeburg, and Wurlitzer. In the spring of 1974, however, Wurlitzer discontinued its manufacture of jukeboxes due to a significant decline in jukebox business.

We would also like to give your committee as clear an understanding as possible regarding the current economic condition of the jukebox industry.

Like most other industries, the costs of our equipment and materials have been rising drastically. New jukeboxes cost up to $2,500 each, as compared with a maximum of about $2,000, 10 years ago, when this committee held hearings on this subject-hearings on H.R. 4347, 89th Congress, part I, page 561.

Our singles records now cost on the average 75 cents per record, which is a marked increase from the 60 cents which a typical operator reported to this committee at its hearings in 1965—-hearings, part I, page 570.

Wages of our electronic and mechanical technicians and our other costs of operations have risen even more drastically, and are continuing to rise.

On the other hand, jukebox operators are unable to increase prices per play so as to keep abreast of their increasing costs of operations. In some businesses, prices can be increased merely by changing the price tag, and the change may not be noticed. In our industry, it is a matter of reducing the number of songs a customer can play for a quarter, and also of changing the coin receiving mechanism on every one of the operators' machines. Also, the location owner must be consulted and his consent obtained, for he may object that a raise in the cost to play music will be detrimental to his business. Prices of two plays per quarter have been established by operators in some areas, but this is by no means generally accepted. In many areas, rates are still at 10 cents per play or three plays for a quarter, and there are even some areas where the rate remains at 5 cents per play.

These conflicting and continuing pressures have necessarily and inevitably resulted in a general reduction in the level of operators' income from operation of jukeboxes. While we do not have statistics on operators' revenue throughout the United States I think we can state with reasonable certainty that revenues are declining. As a general average, gross receipts do not exceed $25 per jukebox per week. I know that in my own area gross receipts average only $24 to $25 per machine per week. And, I would like to stress that these figures are gross receipts before they are divided between the operator and the laxation owner, which is done usually on a 50–50 basis. Thus, the Operators' gross revenues average something on the order of $12.50 per week. It is out of this small figure, of course, that we must pay for our equipment and all of our costs of operations.

This economic picture explains why almost all operators have diversified their activities by adding amusement and vending machines to their jukebox operations. In fact, I am quite certain from my own experience that most operators cannot afford to operate jukeboxes unless they also operate amusement and vending machines. It may be asked, then, why do operators continue to operate jukeboxes! The answer is that location owners usually require jukeboxes to be installed as a condition to having amusement and vending machines placed in their locations. And they insist on having jukeboxes in their locations so as to attract customers to their amusement and vending machines. This situation reflects the fact that jukeboxes provide the principal musical entertainment which most working people can now afford. Jukeboxes are, indeed, as someone has said, the poor man's orchestra.

II.R. 2.9.3 will have a serious impact on the jukebox industry. It must be noted that the jukebox industry has never before been subjerted to copyright performance royalties. Thus, any new royalty will impact severely upon the industry, and will necessitate economic readjustinents throughout the industry. The $8 royalty under section 114; will add a completely new burden in the total sum of at least $3.6 million per year. Over and above this, there will be at least $1.5 million in mechanical royalites on the 75 million records at 6 cents per record under section 115--- which jukebox operators buy each year. This amounts to an increase of at least $1.5 million per year in mechanical royalties over the existing rate of 2 cents per recording-4 cents per Iword. We understand that a study made for the Record Industry of America, RIAA, indicates that the increase which would result from the proposed new 3 cents mechanical royalty would amount to at least $5 per jukebox per year, or to some $2,250,000 more than the existing mechanical royalty. Thus, it is evident that the royalty burden imposed upon jukebox operators by H.R. 2223 will amount to at least Ss million per vear.

We hope the committee will agree with us that this is more than a fair return to copyright owners from this industry of small businessmen who serve as promoters of records, as well as being the largest single industry consumer of records.

We would like to summarize the position of Music Operators of America, Inc., on the jukebox royalty provisions of H.R. 2023 as follows:

One: We support the proposed new $8 jukebox royalty as provided in section 116.

Two: We oppose any increase in that proposed royalty.

Three: We also oppose any provision for readjustment of that royalty through a copyright royalty tribunal, or otherwise.

Four: And finally, we oppose any fee for registration of jukeboxes.

Our reason for supporting the $8 royalty is the fact, as your committee is well aware, that our representatives made an agreement with the other interested parties to accept this royalty at the time the general revision bill, H.R. 2512, 90th Congress, was under consideration by the House of Representatives. It was, and is, our understanding that this compromise was intended to be a complete resolution of royalty claims against our industry. We have stood by this compromise in the expectation that all other interested parties would likewise do so.

We oppose any increase in the proposed $8 royalty for whatever reason, whether because of adjustments in the Consumer Price Index, or otherwise. As we have shown above, the jukebox industry simply cannot withstand any further increase in copyright royalty burdens.

Our opposition to any provision for a readjustment of the proposed statutory royalty rates rests upon the same grounds, that is, that the jukebox royalty is an agreed compromise which does not include any provision for such readjustment, and further that the jukebox industry cannot withstand any royalty increases, and should not be exposed to the uncertainties of such open-ended liabilities.

We continue to oppose any fee for the registration of jukeboxes, again, for the reason that such a fee would be inconsistent with the agreed compromise, and for the further reason that the administrative costs of registering jukeboxes should be borne by the beneficiaries of the new royalty, rather than by the jukebox operators who bear the burden of the royalty. In this connection, we would like to ask your committee to delete from section 116(1)(1)(A) the phrase which appears at lines 4 and 5 of page 24 of the bill, and reads as follows: "and in addition to the fee prescribed by clause (9) of section 708(a)."

That phrase was left in the companion Senate bill-S, 1361, 93 Congress-through oversight when the registration fee that was then provided by section 708 (a) (9) was deleted from that bill. We understand there is no objection by the Copyright Office to this request and that the staff of your committee already have been advised of this needed correction.

Section 115 would increase the existing mechanical fee from 2 to 3 cents per recording. This new royalty would have its most burdensome effect upon the jukebox industry, as this industry is the largest user of phonograph records. Thus, the jukebox industry faces a doubling up of new royalties under both sections 115 and 116. This goes far beyond the proposal offered by our representatives in the 1965 hearings when they recommended an add-on to the mechanical fee to be paid by jukelox operators-hearings, part I, page 583.

In 1966 and 1967, this committee recommended an increase in the mechanical fee from 2 cents to 21,2 cents-House Report No. 83, 90th Congress, page 7th and that was the amount of the proposed mechanical fee when the $s jukebox royalty was agreed to and adopted. We urged the committee to require music publishers and composers to come forward with proof that any increase in the existing royalty is needed to compensate them fairly for the music they produce. In the absence of such persuasive proof, we urge the committee to retain the present rate of 2 cents per recording.

Although H.R. 22:23 does not include any provision for a recordings arts performance royalty, we note such a proposal has been made in II.R. 5343, a bill which we understand is also before this committee. We are opposed to this proposed new royalty for the reason that it would upset the compromise agreement by which the proposed $8 jukebox royalty was first established. We also oppose any such new rovalty as a matter of principle because we believe that there should be but one rovalty for any one performance, and that if ('ongress cre. ates any new kinds of musical copyrights, they should be shared in a single royalty among all of those who claim to have contributed to the finished product.

In closing, I would like to state to the committee that within the jukebox industry there have been, and still are, many who vigorously oppose conceding any performance royalty to copyright owners. This is because they believe jukebox operators perform a compensating service to the benefit of copyright owners. Any new proposal to increase the royalty rate, or to subject it to further revision, would substantially intensify that opposition and would make it increasingly difficult for the industry's leaders to preserve support for the provisions of the bill as they have been agreed to.

We earnestly urge your committee, therefore, to approve the provisions of H.R. 2223 relating to the jukebox industry in their present forin, with the exception of the minor change in section 116(6)(1)(A) discussed above, and excepting also any increase in the mechanical royalty under section 115.

Thank you for giving us this opportunity to present the views of Music Operators of America, Inc.

Thank you, Mr. Chairman.
Mr. KASTEN MEIER. Thank you, Mr. Mawdsley.

Mr. Mawdsley, for my benefit, I would ask you, or Mr. Allen, on page 8 you refer to "and in addition to the fee prescribed by clause (9) of section 708 (a),” which certainly is in the bill, you have as. sumed that to be 50 cents.

How did you arrive at the fact that that would be 50 cents, you know.just for my benefit!

Mr. ALLEN. Well, are you speaking now-are you speaking of the registration fee? Mr. KASTEXMEIER. Yes; correct.

Mr. ALLEN. Well, it was 50 cents when added to the bill by the Senate subcommittee back in 1969, I believe. It was at that time that the committee reversed their original Senate bill provision with respect to the royalty and adopted the $8 as passed by the House, which added three other things. One of them was the 50-cent registration fee.

Mr. KASTENMEIER. It does not appear in the bill.
Mr. ALLEN. That is right.

Mr. KASTENMEIER. Designated as 50 cents, but a sum-it would be that!

Mr. ALLEN. We are assuming it would not. We are hoping it would not be put back in there.

Mr. Chairman, we are only talking about 50 cents because that is what it was. It never was anything else, and when the 50-cent registration fee was deleted by the Senate Judiciary Committee, that tie-in phrase that Mr. Mawdslev referred to was not also deleted. It really was just an oversight, and I understand both on the Senate side and on

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