And we have invited any suggestion that anyone would want to give to us to help us in making this as airtight as possible.

Senator FONG. I understand that section 116 also relates to an operator who buys his own jukebox and places it on his own location?

Mr. ALLEN. Yes, sir; there is no exception in the bill as it is written, and we think that is the way it ought to be.

Senator FONG. And this small operator would also be asked to do all the paperwork if he were to follow the procedures?

Mr. ALLEN. It is pretty hard to imagine, but that is right, that is the way it is.

Senator FONG. Thank you. I think I have the gist of it now.

Senator BURDICK. Thank you, gentlemen. I think I understand you, too.

Mr. ALLEN. Thank you very much, Mr. Chairman.

Mr. BRENNAN. Mr. Chairman, before we recess for lunch, Senator McClellan is absent on official business. On his behalf, I request that there be printed in the record a letter to Senator McClellan from Mr. Charles Stewart, executive secretary for the Arkansas Music Operators Association.

Senator BURDICK. Without objection, it is so ordered.
(The letter referred to follows:)

ARKANSAS MUSIC OPERATORS ASSOCIATION,
Little Rock, Ark., March 13, 1967.

Senator JOHN L. MCCLELLAN,

Senate Judiciary Committee,

Washington, D.C.

DEAR SENATOR MCCLELLAN: I am Charles Stewart, Executive Secretary for the Arkansas Music Operators Association. This Association represents the more than one hundred small businessmen who own and operate coin-operated phonographs in Arkansas. Our smallest member has eight machines and our largest operator has less than one hundred.

We urgently request that your committee consider very carefully the almost confiscatory provisions section 116 of Senate Bill 597 imposes on the owners and operators of mechanical phonographs. It is my understanding that Section B of Section 116 would require that mechanical phonograph owners inventory and report every single song, its recording artist and the performance rights society involved every three months with a remittance of 3¢ per song for each three months period. The cost of bookkeeping alone for this sort of taxation would, of itself, be prohibitive to most of my members, since more than three fourths of them are one to two man businesses.

The only seeming_alternative to the prohibitive regulations imposed under Section B of S.B. 597 are provided in Section A of the bill. This section, which provides that we could make direct deals with copyright owners, is even more confiscatory and far-fetched. I have no idea how many copyright owners there are, but we would be forced to pay on demand, a separate royalty to each one of them on demand. There would simply never be an end to this.

The hardships imposed by Section 116 cannot be absorbed by the small operators we represent. We are willing to pay an additional royalty, if we must. but it simply has to be assessed and collected on a more businesslike and workable basis. For many years our operators have paid a Mechanical tax, or royalty, when they purchased each record and we are quite willing to continue this method of payment. If this committee should decide to increase this mechanical tax, twenty five, fifty, or even one hundred percent, we will raise no objection.

If I may attempt to make a point with a personal example, a few years ago I recorded for one of the major record companies in this Country and my contract provided that I receive 21⁄2 cents for each song on my records on the sale of these records.

Section 116 would require more than this amount every three months from our operators even though the record may not have ever been played by a cus

tomer. We do not believe this sort of confiscatory tax will be countenanced by this Congress.

We recognize the right of the performing Arts Societies to represent the artists and composers but we do not believe that this Committee and this Congress will allow the performance societies to emasculate and eventually destroy the coin-operated music industry as they will surely do if Section 116 of S. B. 597 as allowed to become law.

On behalf of all the members of the Arkansas Music Operators Association, we respectfully urge this Committee to strike Section 116 of this bill and retain the allowed exemption of Coin Operated phonographs under the present law. Yours very truly,

CHARLES A. STEWART,
Executive Secretary.

Mr. BRENNAN. The junior Senator from New Jersey, Mr. Williams, has introduced Senate amendment 113 to S. 597. I request that this amendment be incorporated as part of the proceedings.

Senator BURDICK. Without objection, so ordered. (The document referred to follows:)

[S. 597, 90th Cong., first session]

(Amdt. No. 131)

AMENDMENT Intended to be proposed by Mr. WILLIAMS of New Jersey to S. 597, a bill to amend the Copyright Law, title 17 of the United States Code, and for other purposes, viz:

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the bill (S. 597) to amend title 17 of the United States Code, entitled "Copyrights," is hereby amended in the following respects (new matter in italic; deleted matter shown in brackets):

SEC. 2. In § 101, amend the definition of "perform" to read:

To "perform" a work means to recite, render, play, dance, or act it, either directly or by means of any device or process or, in the case of a sound recording, to make the sounds fixed in it audible, or in the case of a motion picture or other audiovisual work, to show its images in sequence or to make the sounds accompanying it audible.

SEC. 3. In § 101, immediately following the definition of "perform," insert the following:

"Performers" in sound recordings are musicians, singers, conductors, arrangers, actors and narrators who perform literary, musical or dramatic works to be embodied in phonorecords.

SEC. 3. In § 106, amend the introductory portion to read:

Subject to sections 107 through [116] 117,

SEC. 4. In § 106, amend subdivision (4) to read:

(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, sound recordings, and motion pictures and other audiovisual works, to perform the copyrighted work publicly;

SEC. 5. In § 110, amend subdivision (1) to read:

(1) performance or display of a work by instructors or pupils in the course of face-to-face teaching activities of a nonprofit educational institution, in a classroom or similar place devoted to instruction, unless, in the case of a sound recording, or a motion picture or other audiovisual work, the performance is given by means of a copy or phonorecord that was not lawfully made under this title and that the person responsible for the performance knew or had reason to believe was not lawfully made; SEC. 6 In § 110, amend subdivision (2) to read:

(2) performance of a nondramatic literary or musical work, or of a sound recording, or display of a work, by or in the course of a transmission by a governmental body or other nonprofit organization, if:

SEC. 7. In § 110, amend subdivision (3) to read :

(3) performance of a nondramatic literary or musical work, or of a sound recording, or of a dramatico-musical work of a religious nature, or display of a work, in the course of services at a place of worship or other religious assembly:

SEC. 8. In § 110, amend subdivision (4) to read:

(4) performance of a nondramatic literary or musical work, or of a sound recording, otherwise than in a transmission to the public, without any purpose of direct or indirect commercial advantage and without payment of any fee or other compensation for the performance to any of its performers, promoters, or organizers, if:

SEC. 9. In § 112, subsection (a), delete the following: [or under the limitations on exclusive rights in sound recordings specified by section 114(a)]

SEC. 10. In § 112, subsection (b), delete the following: [or under the limitations on exclusive rights in sound recordings specified by section 114(a)] SEC. 11. In § 114, amend subsection (a) to read:

(a) The exclusive rights of the owner of copyright in a sound recording are limited to the rights specified by clauses (1), [and] (3) and (4) of section 106 [, and do not include any right of performance under section 106(4)].

SEC. 12. In § 114, amend subsection (c) to read:

(c) [This section does not limit or impair t] The exclusive right to perform publicly, by means of a phonorecord, [any of the work specified by section 106 (4)] a copyrighted literary, musical or dramatic work, and the exclusive right to perform publicly a copyrighted sound recording, are separate and independent rights under this title.

SEC. 13. In § 115(c) (1), amend the second sentence to read:

The owner is entitled to royalties for phonorecords made and distributed after he is so identified but he is not entitled to recover for any phonorecords previously made.

SEC. 14. In § 115(c), amend subdivision (2) to read:

(2) Except as provided by clause (1), the royalty under a compulsory license shall be payable for every phonorecord made in accordance with the license and distributed to the public. With respect to each work embodied in the phonorecord, the royalty shall be either two [and one-half] cents, or [one-half] one-quarter cent per minute of playing time or fraction thereof, whichever amount is larger.

SEC. 15. Add a new § 117, reading as follows:

§ 117. Limitations on exclusive rights: Public performance of sound recordings. (a) Notwithstanding the provisions of section 106(4), after a sound recording has been performed publicly by or under the authority of its copyright owner, any other person may perform such sound recording publicly upon payment of a reasonable royalty to the copyright owner.

(b) To be entitled to receive royalties under this section, unless the parties have agreed otherwise in a written instrument signed by them, the copyright

owner:

(1) must be identified by name and address in the registration or other public records of the Copyright Office; and

(2) must have consented to binding arbitration by an independent private tribunal of any dispute over the reasonableness of the royalty to be paid, which shall take into account, in addition to any other relevant facts, the dependence of the user on sound recordings, and the rates and amounts paid by the user for other performance licenses. Such arbitration shall be conducted in compliance with procedural regulations that the Register of Coprights shall prescribe.

1

(c) (1) Any person who wishes to avail himself of the provisions of subsection (a) shall serve written notice of his intention to do so on the copyright owner in advance; provided, however, that in the case of a coin-operated phonorecord player, it shall be sufficient to serve a duplicate of the annual statement required by section 116(b) (1) (A). Failure to serve such notice renders the public performance of the sound recording actionable as an act of infringement under section 501 and fully subject to the remedies provided by sections 502 through 505.

(2) If there is a dispute over the reasonablness of the royalty to be paid, failure of the user to participate in an arbitration under subsection (b)(2) renders the public performance of the sound recording fully actionable as an act of infringement under section 501 and fully subject to the remedies provided by sections 502 through 505.

(3) In the case of a coin-operated phonorecord player, the proprietor of the establishment in which the public performance of the sound recording takes placeis is not liable for infringement with respect to such public performance unless: (A) he is the operator of the phonorecord player; or

(B) he refuses or fails, within one month after receipt by registered or certified mail of a request by the copyright owner of the sound recording

to make full disclosure, by registered or certified mail, of the identify of the operator of the phonorecord player.

The terms "coin-operated phonorecord player" and "operator" as used in this clause have the same meanings as in section 116.

(d) (1) Royalty payments shall be made quarterly in January, April, July and October and shall include alll royalties for the three months next preceding. Each quarterly payment shall be accompanied by a detailed statement of account, which shall include such pertinent information as the Register of Copyrights shall prescribe by regulation.

(2) If the copyright owner does not receive the quarterly payment and statement of account when due, he may give written notice to the user that, unless the default is remedied within thirty days from the date of the notice, the user's rights hereunder will be automatically terminated. Such termination renders the public performance of all sound recordings, for which royalty has not been paid, actionable as acts of infringement under section 501 and fully subject to the remedies provided by sections 502 through 505.

(e) All royalties received by copyright owners of sound recordings for the public performance of such works are the property of the copyright owner and the performers, and shall be divided equally between them. One-half of all such royalties shall be segregated promptly upon receipt and paid to the performers. In the absence of a written agreement authorizing a single representative to receive the performers' share of such royalties, the copyright owner may comply with his obligations hereunder by depositing the performers' share in a bank or trust company or with the Register of Copyrights, and the performers entitled to such royalties may claim the same, all as provided by regulations that the Register of Copyrights shall prescribe.

SEC. 16. At the end of § 303, insert the following: A sound recording created before January 1, 1969, phonorecords of which have theretofore been distributed to the public, shall be deemed first published on January 1, 1969. Copyright in such a work and in any other sound recording created before January 1, 1969 shall subsist and endure as provided by this section for other works.

SEC. 17. In § 402, delete subsection (d), which reads:

[(d) EFFECTIVE DATE OF REQUIREMENT.-The requirements of this section apply to all phonorecords publicly distributed on or after January 1, 1969.]

Mr. BRENNAN. For the benefit of the audience, I might mention that this amendment is a substitute for the provisions of the bill relating to mechanical royalties and would also establish a right of performance in sound recordings.

Senator BURDICK. The committee will be in recess until 2 o'clock. (Whereupon, at 11:55 a.m., the committee recessed, to reconvene at 2 p.m. on the same day.)

AFTERNOON SESSION

Senator BURDICK (presiding). The first witness this afternoon will be Mr. Arnold, partner in Price Waterhouse.

Without objection, your entire text will be included in the record. You may proceed as you wish. If you wish to summarize, this is totally up to you.

Mr. ARNOLD. Mr. Chairman, there is already a summary of a good deal of material; so, if you do not mind, I think I can do it faster by reading it.

Senator BURDICK. Very well.

STATEMENT OF DEWEY ARNOLD, PARTNER, PRICE

WATERHOUSE & CO.

Mr. ARNOLD. My name is G. Dewey Arnold. I am a partner in the firm of Price Waterhouse & Co., independent public accountants.

At the request of Mr. Perry Patterson of Kirkland, Ellis, Hodson, Chaffetz & Masters, legal counsel for the automatic phonograph manu

facturers, our firm assisted in preparing a questionnaire which was sent by the manufacturers to all known jukebox operators in the United States. We have summarized and tabulated the replies which were received directly by us and have prepared some information designed to show the probable effect on the jukebox operators of a proposed change in the copyright law, now under consideration by this subcommittee.

The questionnaire used and the procedures followed in circularizing the operators and in tabulating their responses were the same in all material respects as those previously used in the survey made by my firm in 1952 with reference to the year 1950 in connection with the hearings on H.R. 5473 conducted by this subcommittee, and the survey made in 1959 with reference to the year 1958 in connection with hearings on H.R. 5921 conducted by the House Subcommittee on Patents, Trademarks, and Copyrights. Mr. Theodore Herz, then of my firm, gave testimony during each of those hearings. The testimony appears on page 134 and page 227, respectively, of the transcripts of the proceedings before the subcommittees.

Counsel informs us that approximately 22,000 questionnaires were mailed on the basis of mailing lists of the several jukebox manufacturers to approximately 6,000 to 7,000 jukebox operators in the United States. Each operator was asked to return one completed questionnaire directly to Price Waterhouse & Co. and each operator was assured that the information furnished in response to the questionnaire would be kept confidential.

Since an operator could appear on more than one mailing list, each operator was asked to send in only one reply and, of course, the responses received were checked to avoid tabulation of more than one response from any one operator. We have not examined the records of any of the operators. The statistics and information presented in this testimony are based solely, first, on the information furnished to us by the operators through these questionnaires and, second, on information supplied to us by counsel with respect to the proposed changes in the copyright law now under consideration by this subcommittee.

The people who own, operate, and service coin-operated phonographs were asked in the questionnaire-which is similar to the questionnaires used in 1952 and 1959-to supply data for the year 1966 concerning number of jukeboxes operated, revenue, expenses, investment in jukeboxes, and number of records purchased.

The operators were asked to state their 1966 revenue collections from coin-operated machines net of the amount they must pay to location owners. We understand this payout is equal, in general, to 50 percent of total collections. The operators were asked also to report the amount of the expenses incurred during the year. We understand that none of these expenses are borne by location owners. To prevent possible confusion in the minds of sole proprietors or some of the smaller operators, this question specifically asked the operators to exclude their own salary and Federal and State income taxes.

The operators were asked also to supply us with their total investment in coin-operated phonographs at the end of 1966. Among accountants and businessmen, the most commonly accepted interpretation of "investment" in real or personal property is cost less accumulated depreciation. We think the answers received to this question indicate that the operators responded with this commonly accepted interpretation of "investment."

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