In order to get to the bottom of the facts as to the evolution of this industry, I would like to make as part of the record some material from the "World Almanac" of 1967, page 715, under the heading "Recordings". This particular section of the almanac shows the evolution of the record industry, and the fact that millions of records are now being sold on the market for which publishers and composers are getting literally thousands and millions of dollars, and for which we really can't see that the publisher is performing any real service. William S. Gilbert of "H.M.S. Pinafore" fame aptly said:

The Ballyshannon foundered off the coast of Cariboo,

And down in fathoms many went the captain and the crew;

Down went the owners-the greedy men whom hope of gain allured; Oh, dry the starting tear, for they were heavily insured.

There should be no tears here for the composers or publishers, for they, indeed, are heavily insured. The jukebox operators have not used these so-called creative works of art without paying compensation. The most reliable statistics regarding the music box operators of America appear in House Report No. 2237 of the 89th Congress, which is the same report as No. 83. From information in that House Judiciary Committee report, page 111, we estimate that the music box operators of America paid the composers and publishers $8,640,000 directly through mechanical royalties over the past 4 years. I am limiting this time period to the past 4 years as I am submitting a list of the top records for that period, and these hit records make up the basic part of this $8,640,000 paid. Of course, these composers and publishers also received millions of dollars from other sources.

I might add that the National Small Business Association, checking on the facts, found that in 1965, over 80,000-yes, over 80,000 copyrights, were issued for new songs created in that year. Previous testimony by ASCAP would lead you to believe that because of a lack of money, nobody wants to write songs anymore, but the fact is that over 80,000 new songs were copyrighted, or copyrights issued by the Government, in 1965.

Senator BURDICK. Is that a normal amount, do you know?

Mr. NIMS. Mr. Chairman, I was afraid you would ask that question. We didn't have time really to determine whether there is an uptrend or a downtrend. It appears that the way the record industry has gone, that it is on the uptrend. We will find out the additional facts and submit it for the record later, Mr. Chairman, if that is all right.

Senator BURDICK. That may be done.

Mr. NIMS. From previously reported conclusions in other hearings, it is obvious that except for the businessman involved in the operation of the jukebox industry, there is a gross misconception of the jukebox operator today. However, we have had some very good witnesses today. Mr. Cannon certainly enlightened a lot of people, even me, and I have been in business for a long time, as to some of the parts of the jukebox business.

THE CONDITION OF THE INDUSTRY

It has been reported that there are 450,000 to 500,000 jukeboxes in operation in the United States. About 10 percent of these units are individually owned by small businessmen whose primary businesses are operating restaurants, taverns, recreational facilities, et cetera. A bona fide music box operator cannot afford to operate extremely sub

marginal locations, so the owners of these locations are forced to own their own or do without. Another 50 percent of the jukeboxes in operation are operated in locations earning for the operator an income below the reported national average of $9 per week. A total of 20 percent fall in the reported "average" bracket and the remaining 20 percent are the select group that are in the upper income bracket. The upper 20 percent pull the majority of coin-phonographs into the accepted very nominal national average. This average income for the music box is just slightly higher than it was 30 years ago.

The groups most frequently patronizing jukeboxes are lower and limited income brackets. The jukebox is not competition to live entertainment of cabarets, amusement parks, lounges, theaters, supper clubs, et cetera. It is actually found only in places that cannot afford this type of entertainment and consequently its major competition comes from television and radio. Television has and continues to replace the jukebox in many locations.

It is an undeniable fact that the present law does not discriminate in favor of operators of coin-operated phonographs. These operators actually pay about 5 percent of their reported net income, before taxes, in royalties to the composersr and publishers-through mechanical royalties I might add. However, section 116 of S. 597 will discriminate against the jukebox operator by requiring him not only to pay increased mechanical royalties on the purchase of records, as provided in sec. 115, but to pay so-called performance royalties in addition to the composers-publishers, or their representatives. Yet the only competition of the music box operator will continue to enjoy an exemption. Yes, the owner that turns on the radio or television in his small restaurant, bar, community center, et cetera, will continue to enjoy his exemption under the revision of the law, and justifiably so, but the jukebox will not.

Today, just as 10, 20, 30, or 40 years ago, the individual selection of a recording on a coin-operated phonograph does not constitute a public performance any more than selectiing a radio or TV station to listen to a recording.

The language used in section 116 is misleading. Although the terms "performance royalty" or "performance rights" are used, Congress is actually talking in terms of royalties to composers-publishers or their agents. The performers are not involved directly unless they are double-dipping and are the authors of the songs they record. A “hit record" produced under this combination of author and recorder will make more money for that person on that one record than the average person will make in his lifetime.

There are many economic factors to be considered before the present law is changed. Study should be given to the impact on small firms in the industry and the possibility of further increasing the already mammoth share of business now being done by the larger firms. Your Subcommittee on Antitrust and Monopoly issued a report, "Concentration Ratios in Manufacturing Industry," in 1963. This studysee attached tables-shows that small firms are beginning to get a foothold in the record manufacturing industry. Increasing the mechanical royalty even one-half cent for each record could reverse this trend for small firms to participate in this industry, would force out the marginal manufacturer, reduce competition, and increase concentration in the hands of a few major manufacturers.

ONLY SPECIAL INTERESTS ARE PROTECTED

Section 116 is not only discriminatory against the jukebox operator; it discriminates against the small or individual copyright owners in favor of the all-powerful ASCAP, BMI, and SESAC, Inc.

If section 116 is enacted, the coin-phonograph owner-operator could not comply with the statutory part of the bill, and this has been emphasized in previous testimony, because of the volume of paperwork and redtape involved in maintaining statistical records. His business would be conducted in an atmosphere of fear because of the threat of penalties if he made a mistake.

Consequently, the jukebox operator would be forced to deal with ASCAP, BMI, SESAC-we will call them the "Big Three"-on a contract arrangement on their terms. But, the jukebox operator would also make sure that he used only Big Three's music on his machines to keep away from any other infringements. Finally, ASCAP, BMI, SESAC would lock up every jukebox in the United States for their music. The truly small and independent copyright owner would be out in the cold. I'm sure that the Big Three will not call this to your attention.

The small business men operating coin-operated phonographs can be compared with the thousands of small business men that operate lending libraries. They both buy a product that includes the payment of a royalty to the author-composer-publisher. They both realize a small, perhaps I should say meager, profit from the use of this product. Should additional royalty payments be demanded?

Such a demand in the jukebox industry can destroy its foundation. The probability is that noncompliance with section 116 of the proposed law would be the rule, not because of any intent to defy Congress, but because compliance, as a practical matter, would be impossible. If such a law were enforced, the result would be the removal of at least 40 percent of machines from their present locations and severe economic disaster to an industry that is truly American from its conception, an industry that has become a part of our heritage, an industry whose products have been taken to every continent and corner of the world.

The arguments of the composer-author-publisher societies have considerable gloss, but their tactics are shabby. For years they have looked upon the jukebox industry as just one more area from which to skim millions of dollars off the top to be added to their overstuffed treasure chest-a treasure chest disposed of by some undetermined mysterious formula.

If the Government is to become a party to, or is to assist in the perpetuation of a trust arrangement for a small handful of private societies, should not there be a requirement of annual public disclosure of the terms of the trust, the salaries of the administrators, the total administrative costs, the computation of percentages, actual payments made and to whom made, and the terms of all licensing agreements to which the societies are a party.

At present there is no source of official information that ASCAP or BMI can utilize to obtain the number and location of jukeboxes in this country. Through the method of "royalty payments" suggested

in section 116, they would have the Government performing this function on behalf of private interests. The language of the proposed section 116 is so favorable to the composer-publisher-author societies that reimbursement for Government expenditures made entirely in their behalf is not even required. Since it would cost the music box operators millions of dollars to meet the requirements of section 116, the end result would be that the composer-author-publisher societies would have information available to apply even greater economic pressures.

The so-called performing rights societies claim:

The Coin-Operated Music Box of today is not comparable to the Coin-Operated Music Player of 1909. Consequently the jukebox exemption should not be continued.

There would be no jukebox industry today except for the 1909 law. That law provides that the playing of a recording by insertion of a coin by an individual for his own individual enjoyment does not constitute a public performance.

There may be no jukebox industry tomorrow if the 1909 exemption is discontinued. In any event the probability is that the industry would be so changed as to become unrecognizable because of the severe economic effect that would result from the enactment of section 116.

The foundation of our industry is the 1909 law. A foundation cannot be removed without destroying, or at least permanently weakening, the structure.

Finally, it is evident that a great deal of effort has been made by the proponents of this legislation to place the jukebox in a category in which it does not belong.

The coin-operated phonorecord player is part of the record industry. As such, it remains in the mechanical royalty payment business. If a method can be satisfactorily arranged, we will pay further mechanical royalties if Congress deems that necessary. But, the jukebox operator does not belong in the "performance rights royalty" business. Section 116 would change the concept of music box business entirely and eliminate one of the few remaining businesses in the United States where the small businessman presently has equal opportunity with big business.

I wish to thank you for the opportunity to appear before this committee.

(The attachments to Mr. Nims' statement follow:)