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it really. That prediction has been only too accurate, I am afraid I must say:
Significantly, when we meet in our associations, the men come around and they know we are one of the very few companies who have this. They ask, “How is that stuff doing? Is it worthwhile? Should we get into it?". All we can say, in all honesty, is that first of all it is awfully tough to scrape $150,000 together to buy it, after taxes and high wage rates and high costs generally,
After you buy it, it is awfully tough to be prepared to lose a quarter of a million dollars to run it until you get the thing working. As a result, I must say very few other typographers in high-wage areas are putting it in.
Mr. St. Onge. Thank you. That is all, Mr. Chairman.
Mr. TENZER. Mr. Chairman, I am concerned about whether this witness testimony will be well preserved in the record because the witness from time to time referred to "this type of printing" against “this type of printing," holding up a sample. I wonder if the witness can go down the line, very briefly, and select one item at a time and properly identify it.
For example, when you show the metal type, can you identify it by its trade name so that we would be able to preserve it for the record and when you refer to “several types” of tape and several types” of photographic plates I would like you to identify each one.
Mr. CANTOR. Please forgive my unprofessional approach to this. I am a business proprietor, not an attorney. If I may suggest, rather than take your time here now, we do have a description of these processes in our statement. I would be delighted to go through it again and more specifically describe them and furnish you a supplementary record if I may.
Mr. TENZER. That would be satisfactory. And also, subject to being returned to you, would you leave a sample of each one of the samples properly labeled with our counsel ?
Mr. CANTOR. We had planned to do so.
Mr. TENZER. So that when this subcommittee takes it back to the full committee, we will have it available for a demonstration.
Mr. CANTOR. We had hoped that that would be the case, sir, because these speak more graphically than any words.
Mr. KASTENMEIER. Without objection, these several exhibits will be received by the committee.
Mr. TENZER. Thank you, Mr. Chairman.
Now, with the indulgence of the next scheduled witness, we are going out of order to hear from Mr. David A. Boehm, president of Sterling Publishing Co., because Mr. Boehm has quite a brief statement, and we feel he might well be accommodated at this time.
STATEMENT OF DAVID A. BOEHM, PRESIDENT OF STERLING
PUBLISHING CO., INC.
Mr. Boehm. I don't represent any organization or association, and I came as a small publisher to speak for myself and perhaps other small publishers.
I think that some of the testimony that you have heard has seemed to indicate that the publishers are all big. I don't think that that is a true fact. I think also, before I go into the statement which I would like to make part of the record, that some of the terms are probably not quite clear in the minds of the committee, if they have listened to these witnesses. I would like to point out a few facts that I have heard here this morning which bear on the facet of the business that I am testifying about, which is the exporting of American produced books.
First of all, the wage rate scales cannot be considered by themselves alone because there is a matter of productivity involved, and very blandly Mr. Van Arkel and Mr. Cantor have been talking about prices here. One of the Congressmen pointed out that it was impossible to induce the publisher to buy at $10 a page when that page is available abroad at $2 or $5. Mr. Cantor also mentioned that he was selling a page for $10 at a 5 percent profit but willingly came down to $7.50 a page to get the business. He didn't lose money on that. It just does not make sense.
I am amazed at this kind of testimony. Mr. Van Arkel is talking about the wage rates paid to Belgian women. They are not setting type in English. Those rates have no application to this at all. The wages in South America in regard to typesetting are for typesetting in Spanish. I don't see how they can be taken into consideration. We are talking about the setting of English type in foreign countries here and I think that if you compare the quality that you get in American type with the quality that you get in English set type in Britain and in English set type in Canada or in Japan or in Holland, you will find that there is not a tremendous disparity in the wage rates.
The reason there is a tremendous disparity is because the American printers and book manufacturers add on to the wage scale a tremendous margin of profit which is protected by the present manufacturing clause. If you continue that present manufacturing clause or revise it or include any kind of manufacturing clause in the new copyright law, you are going to encourage the some profiteering that goes on in the printing trade today, as it has existed for the last few years since
Now the reason that the typesetters and the printers here are so upset about foreign competition is that their markup is much greater than the foreigners'. Now if it is possible to produce type by film abroad and invest $150,000 in a camera, it should be possible for Americans with a high profit margin, with the substantial financial backing that the American printers have, to buy more cameras than foreigners. But the printing trades have been held back in their development of modern efficiency by the fact that this manufacturing clause is tied to copyright.
If the Congress sees fit to protect American printing, and I don't think it is necessary in view of the substantial profits in the printing in
dustry, then it should be a separate law. There is no reason to cause the publisher or the author to withhold or fail to receive a copyright because he does not print by the processes that cost so much in this country.
Now our particular interest here is that American ideas and American books containing these ideas should be sold everywhere, not only in the United States, but all over the world. If the prices of American books are being kept high by the profiteering of the printing industry, then the ideas are not coming through, they are not getting across to foreigners who can be influenced by them.
Moreover, we are an exporting nation and at the present time we are not exporting enough books. We are not importing anywhere near as many books as we are exporting, but still we are not exporting enough books. We will never be able to capture any substantial portion of this foreign market in English language books if this manufacturing clause is inserted in the copyright law and enforced.
Now the Copyright Office today, itself, admits it does not understand the meaning of the manufacturing clause that was written in 1909. Therefore, it does not apply to copyright the manufacturing clause in regard to type which comes in in reproduction-proof or film form so long as the plates are made in the United States.
Now there is something else that has not been mentioned here either. Books have pictures in them. Nobody has mentioned that today. Modern books have many pictures and many of them in color. There is a very restrictive union in the photoengraving business which causes prices to go up high and also the photoengravers have a large markup on photoengraving.
Now if the manufacturing clause is applied that is going to stop any kind of competition from foreign photoengraving. That is a big part of this business—and will be more important in the future. If you are going to rewrite a 1909 copyright law and make it applicable to 1949 or 1965, I don't think there is much purpose in it. I think that the copyright law now should be rewritten for the future. This is part of it, the color work. Now we have to compete with our American books in a world market. There are British books coming in here, there are American books going abroad. Our big competition is with Britain, it is not with Canada. Of course Canada does not make a bit of difference. You can let all the books come into Canada and come out of Canada that you want, it makes no difference in this country because there is no production of any consequence in Canada. Canada publishes Canadian books. They don't publish books that are going to be salable in the United States. Britain does publish a lot of books and they have lower production costs there and they are on a tighter profit margin. That is our competition.
If we cannot compete by buying type from any place in the world where we can get it at a reasonable figure and if we are prevented from
buying our color film and our color separations abroad in order to ? compete, we cannot produce a book which will come anywhere near the quality and the price of the British book.
Now if the manufacturing clause is allowed to continue, what will happen here is that prices are going still higher. With the additional
protection of the manufacturing clause American books will be so to high priced we will lose whatever market we now have in the world.
We have another problem, too, in regard to other languages. At the present time we have convinced most of the countries of the world that they must know English in order to get the information in technical fields which they are now getting from the United States. We have the best engineering books in the world. We have the best practical books on almost every subject.
In order for somebody in Venezuela, for example, to learn architecture, he very likely has to learn English first. If books are going to be published in Spanish because the American books are so high, we are going to lose not only our book market, but we are going to lose the whole idea of educating in English which has been so important in making the United States a world power.
I think that the rest of the statement that I have here covers these subjects adequately.
I am glad that you gentlemen gave me an opportunity to present this.
Mr. KASTENMEIER. Would you like to offer your statement for the record ?
Mr. BOEHM. Yes, I would.
Mr. KASTENMEIER. Without objection, it will be received and made a part of the record.
(Mr. Boehm's prepared statement follows:)
TESTIMONY OF DAVID A. BOEHM, PRESIDENT OF STERLING PUBLISHING CO., INC.,
NEW YORK, N.Y.
The United States will never be able to capture any substantial portion of the foreign market in English language books and is in danger of losing the little we now have, if the manufacturing clause is inserted in the new copyright law and enforced.
Requiring American publishers to have type set and plates made in the confines of the United States at prices higher by far than are current abroad, and then expecting American books to compete on a price basis with British books is a fallacy. But worse than that, British copyright laws and the Universal Copyright Convention to which we belong allow a British publisher to photocopy the American-set type and print an edition in England or in Australia at a fraction of our cost.
The manufacturing clause contains the seeds of its own destruction, for by allowing the British to undersell us, we weaken our own export publishing industry and this means that fewer and fewer books will be published, and less and less typesetting and platemaking will be performed by American labor. The restrictions of manufacturing in the United States will not benefit the United States. Quite the reverse.
The United States is the only country in the world with a provision that ties copyright to the place where a book is produced. This places the author's work under the control of the printer and binder, for they can refuse to produce a work they disapprove of. Do we want censorship of our literary works by mechanics? For too long already, we have allowed the printing and binding industry to prevent publishers and authors from copyrighting their works, and to tell how much to charge for their works. Prices of American books are as high as any in the world. Their content (at least in the field of nonfiction) is generally regarded as superior to any in the world. Yet the enforcement of the manufacturing clause in the copyright statute has raised the price of U.S. nonfiction books so high that few students can afford to buy those they need here at home, libraries alone being the customers for them. And abroad, we cannot compete we sell almost entirely to institutions.
If the restrictions were removed, prices would be reduced to a reasonable level, and sales in the United States and abroad would rise so much that all of us would prosper.
Mr. KASTENMEIER. Thank you for very interesting testimony, Mr. Boehm.
Are there any questions?
Mr. POFF. Mr. Chairman, I would like to have some estimate if the witness is unable to give precise figures, of the amount of this high margin of profit.
Mr. Boehm. The average typesetting shop I have been told multiplies its labor cost by four.
Mr. KASTENMEIER. Will the gentleman yield?
Mr. KASTEN MEIER. Did we not understand the last witness to suggest that their profit margins were something like 4.2 percent? It does not seem to square with that.
Mr. BOEHM. Exactly. I don't understand the last witness' testimony in regard to profit margin.
Mr. Poff. Do you have some knowledge with regard to profit margin?
Mr. Boehm. We buy typesetting in New York. I am told they multiply their wage, their basic wage.
Mr. Poff. I asked, do you have any personal knowledge of the margin of profits? You say you were told.
Mr. Boehm. I am not a printer. I do not hire typesetters. I do buy typesetting. When I get an estimate, I try to determine whether there is a high margin of profit. I believe that there is this margin. When you multiply your labor cost by 4 you end up with something like 40 percent profit provided nothing goes wrong with the production of that job.
Mr. Porf. What is your definition of margin of profit? Are you speaking of gross profit?
Mr. BOEHM. I am talking about gross profit before taxes.
Mr. Poff. You would estimate that would be as high as 40 percent?
Mr. BOEHM. I am very friendly with one typesetter in New York who has mentioned this figure to me. I believe that it can be broken down this way: 25 percent of the selling price is labor, 25 percent is materials and mortgage payments on machinery and general mechanical overhead, and 10 percent is for administrative and selling expenses.
Mr. Poff. Do you care to say, and I won't ask you to say if you would rather not, what your own margin of profit is?
Mr. Boeum. We are lucky as a small publisher if we end the year with 6 percent before taxes.
Mr. POFF. That is all.
Our last witness this morning is the Book Manufacturers' Institute, represented by Mr. James H. French.
Mr. French, will you identify your colleague?
Mr. French. Yes, Mr. Chairman. My principal function, actually, today is to introduce Mr. Harry F. Howard, my colleague, who will present the principal statement for the BMÍ.
I have a very brief statement relating to some specific recommendations for amendments in the section which the BMI would like