try. Each of the companies selling VCRs at the manufacturer's level has a marketing structure and merchandising staff. They have advertising agencies. In many cases there are distributors. ceivable. The havoc that an injunction would cause is incon Summary With this background, we give you our reasons why an explicit amendment to the Copyright Act is essential: 1. We are threatened with a nationwide injunction which would be vindictive and discriminatory. 2. If we are denied rehearing by the Ninth Circuit we will, of course, ask the Supreme Court to con sider an appeal. But of the 5,000 petitions filed per year, the Supreme Court hears only 150 to 200 cases. Important as this case is we can't be sure the Supreme Court would take the case. 3. An appeal to the Supreme Court, even if accepted would not be resolved for a year or more. 4. In the meantime it is very tricky business to try to keep the case from going back to the district court in Los Angeles while the Supreme Court proceedings are going on. 5. In the meantime, in the Ninth Circuit at least, every person who is using a VCR to record copyrighted material off the air for private use is a law violator. On this last point the motion picture company plaintiffs in the lawsuit are trying to have it both ways. They say they are not interested in pursuing the individuals who are doing the recording with VCRS. But their whole case hinges on a claim that the people doing the recording for private use are law breakers. This is because the whole exposure of the manufacturers and retailers to a possible injunction depends entirely on a "contributory infringement" theory; and if there is no violation by the private tapers there can be no contributory violation. What it boils down to is that Universal and Disney don't care if, under their theory, millions of private tapers are breaking the law. They are only interested in "getting" and destroying the VCR manufacturing and merchandising industries. tries This is not just a battle between two big indus one, the movie companies, thriving from their triple dipping, and the other, the television manufacturing industry, threatened with loss of their most popular product. It is a consumer issue. The copyright laws, like all laws, are supposed to benefit the public at large. The VCR user is not taping for commercial use. He is merely using a convenience that developing technology has made possible as a by-product of television broadcasting. The copyright laws should face up to and adjust to the vast strides in technological advancement which have made time-shifting possible. The copyright laws should not be used for greedy purposes to hold back inventiveness and technological creativity. We urge enactment of legislation to exempt from the copyright laws off-the-air VCR recordings for private, noncommercial use of copyrighted material broadcast for television viewing. Senator DECONCINI. Our next panel will consist of Sidney Sheinberg, president and chief operating officer of Universal and Mr. W. G. Williams, former president and current board member of the Independent Media Producer's Association. And there is a third person here, Mr. Hadl. Gentlemen, would you please come forward? Would you each identify yourselves and proceed? Your statements will be printed in the record. You may summarize them for us. I notice we are going to have a vote, so we have about 7 minutes here, and then we will take a 10-minute recess and come back to listen to the balance of your testimony. STATEMENT OF SIDNEY SHEINBERG, PRESIDENT AND CHIEF OPERATING OFFICER, MCA, INC.; ACCOMPANIED BY ROBERT HADL Mr. SHEINBERG. My name is Sid Sheinberg. I am the president and chief operating officer of MCA, Inc., the parent company of Universal City Studios, one of the plaintiffs in the Betamax case. I might point out before turning to my observations that with respect to some of the questions asked by the Chair earlier, the SonyBetamax case as it relates to Sony and their acts prior to any action that might be taken by Congress, will continue in the courts. So at least in our judgment there is present and existing jeopardy which the present Congress cannot do much about, if our interpretation of the law is correct. Mr. Chairman, I am appearing today to vigorously oppose the adoption, in its present form, of S. 1758, a bill which would amend the Copyright Act to provide a statutory exemption for home video recording. At the outset, we are not here discussing one or two individuals copying our films. Currently we are talking about approximately 3 million video cassette recorder owners, and in the future tens of millions. When all of the copies made by these millions of owners are added up, we will not have just one or two little infringements; we will have hundreds of millions of copies made on a mass scale. This very committee recognized very recently that such mass proliferations of small individual infringements cannot be tolerated under our copyright scheme when it stated in connection with the passage of our current Copyright Act, "Isolated instances of minor infringements, when multiplied many times, become in the aggregate a major inroad on copyright that must be prevented." This is from Senate Report 94-473, page 65, of 1975. S. 1758 should not be enacted for several important reasons. First, S. 1758 in its present form strips from authors and creators the rights to their property without just compensation. This property, consisting of the entire output of motion pictures in this country over the past 75 years, represents the investment of billions and billions of dollars by members of the American film industry. The current bill gives manufacturers of video recorders, all of whom are foreign, and manufacturers of videotape, almost all of whom are also foreign, a free ride on the backs of the American creative community. The foreign manufacturers of these machines would have no real market for their product without the ability to copy our films-our property, American property. The producers of programing, like any other property owners, rely on their legal ability to control when their property-their films-will be available for viewing. Indeed, the availability of our films for viewing constitutes their only real value. While technology is severely changing and diminishing our ability to control the uses made of our films, we cannot accept technology taking our property, benefiting from it economically, and giving us nothing in return. Legislation mandating such a free ride is unfair, unjust, and in our view unconstitutional. I want to be very clear on the latter point, and I say so notwithstanding the learned colleague from Hofstra. Congressional action purporting to permit copying of our presently existing copyrighted films in their entirety, without fair compensation, is a violation of the Constitution of the United States in our judgment, and we will furnish to this committee a memorandum of law supporting this contention. Second, S. 1758 in its present form is contrary to sound public policy. The Supreme Court has recognized that the economic philosophy underpinning the copyright clause in the U.S. Constitution is the conviction that encouragement of individual effort by personal gain is the best way to advance public welfare through the talents of authors and inventors. Such encouragement is the American economic way. S. 1758, if enacted, would grievously reduce and in some cases destroy the incentive, if not the very ability, to create and deliver the quality entertainment fare which the American public is entitled to receive. The American film industry will be severely impaired if the Congress expropriates its property without just compensation in the name of modern technology. Moreover, hundreds of thousands of ordinary working men and women who are members of national unions and guilds are dependent upon income from this industry for their paychecks, their union pension funds, and their health and welfare benefits. No public policy is served by legislation that so specifically takes the property of an American industry that annually contributes hundreds of millions of dollars to our balance of payments and pays taxes on its profits in favor of an industry which is controlled. by foreign interests. Third, a complete statutory exemption for home taping is no solution, given the real and adverse impact of video recording devices. It should not be necessary for the owners of copyrighted property to prove harm or damage when their property is taken to prove a violation of law. No one asks a person whose house or car has been used without permission to demonstrate specific harm to prove that the use was unlawful. Furthermore, would anyone seriously claim that they have a right to make phone calls in the privacy of their home using the telephone company's property without paying the phone company? Copyright owners will suffer unavoidable and serious harm by the proliferation of home taping. Copyright owners are not now and will not in the future be compensated by network or station licensing revenues based on purported additional time-shift viewers because time-shift viewing is not measurable. It is not true that A. C. Nielsen and Arbitron are prepared to report time-shift viewing. Even if a system of measuring such timeshift viewing were to become feasible, a study of video recorder owners indicates that 84 percent skip commercials. The study to which I refer is "Video Recorder Households, What They Say, What They Do," by Media Statistics, Inc., Spring, 1980. What advertiser or broadcaster is likely to pay for time-shift viewership when it is either unmeasurable or such viewership is without commercials? Moreover, every time-shift viewer of our property is less likely to be a potential or actual viewer for subsequent broadcasts of such films. Subsequent viewership is essential to the economic viability of the television production business, as we know it today in the United States. Additionally and obviously, the time-shift viewing of a recorded program diminishes the audience for programs then currently being broadcast, resulting in a reduction of advertiser revenues and ultimately compensation to the copyright owners of such programs. In a well financed and deceptive campaign, the Sony Corp. and others imply that consumers are only time shifting programs, not retaining them in permanent video libraries for multiple viewings by their families, friends, and neighbors. However, the evidence is overwhelming that the number of blank video cassettes being purchased per video recorder household, estimated to be an average of $18.35 per video recorder household, is far in excess of the number required for time shifting alone. Apart from the foregoing instances of harm, copyright owners will be adversely affected in their attempts to sell or rent prerecorded materials. If more and more video recorder owners, instead of buying or renting prerecorded cassettes or discs, are able to obtain copies by recording from their television sets at the cost of a blank tape, the sales and rental potential of prerecorded video cassettes or discs will be severely eroded. Can it be seriously argued that MGM's sale or rental of prerecorded video cassettes of "Gone With The Wind" are not harmed by home video recording? Let me assure the committee that Universal City Studios, Inc., would not have expended several million dollars of its own funds in prosecuting the Betamax case to date if it did not believe that the potential damage and injury to its property were severe. Fourth, legislative solutions may be available that would both allow the public to have access to copyrighted works and to secure to program producers, authors, and other creative talent compensation according to use and enjoyment. Indeed, while President of the Sony Corp. of America Mr. Harvey Schein recognized the propriety and fairness of creating a pool of funds from which copyright owners injured by the video recorder technology could be compensated. Mr. Schein did so, separate and apart from any position that he may have held with respect to the legality of off-the-air taping. |