vertising message. If only the song is picked up and no payment is made by the "secondary" user, the latter will receive a free ride which cannot be justified on any basis; the primary broadcaster cannot collect from an advertiser for a commercial message that does not reach a CATV subscriber's set. Actually, all these sets are removed from the possibility of being used to view those programs or those messages that are not carried by the CATV operator.

When communication satellites are used, the CATV operator may replace the present-day network affiliate. In that event, local television stations may occupy a subordinate position. Yet the only possible income of music writers and publishers from programs transmitted to the public will be from the networks and local stations, both of which will be able to argue that their markets are limited because the public no longer has direct access to their broadcasts. Perhaps that is why the networks and broadcasters are buying up so many CATV enterprises. Ultimately it is the public that pays for delivery of the commercial message which accompanies or precedes or follows a program of entertainment. In part, the public pays by a charge for the commercial product being advertised, and in part it pays a CATV operator directly. The indirect charge (in the price of the commodity) represents the advertiser's payment to a broadcaster. The proportion of the amount paid by the public directly to owners of CATV enterprises is constantly increasing. The public thus pays for the entertainment it receives.

Unlike most other works, the primary market for musical compositions is in the field of performance. The commercial users who benefit most from those performances today are broadcasters, CATV operators and juke box operators. There is no reason for exempting any of them. If there is a clearance problem, Congress may set up clearance machinery if voluntary arrangements fail. But there is no reason for an outright exemption of a commercial user. This is contrary to the spirit of the Constitutional mandate which recognizes that copyright owners should be given "exclusive rights."

CONCLUSION

It is unsound to exempt any group of commercial users of music, particularly those who profit from performances originated by others.

We join with other writers and publishers in encouraging newly evolving technology and the rapid access to musical works which it makes possible. Just as the manufacturers, suppliers and users of this machinery are paid, so we believe there should be adequate rewards to the authors whose works supply the raw material which makes the use of this machinery profitable. Simple systems of obtaining licenses for the use of copyrighted music are as readily available to so-called "secondary" transmitters as they are to others. There is no reason to grant them an exemption that other commercial users do not enjoy.

Senator HART. I think I speak for the committee in expressing the wish that the negotiations had avoided this topic. I have no idea whether they could have or not.

Mr. FINKELSTEIN. Our doors are open.

Senator HART. If I seem to be in disagreement with you, it is only to help me understand. I buy your basic theme that if my mind can create something which is enjoyable and somebody can package it for profit I should be remunerated. But would it not be true that your royalty would increase even though you do not get directly to CATV, because of the fact that the network advertising rate depends on the total of the audience, and as that audience is increased through the use of CATV, so is the fee to ASCAP increased?

Mr. FINKELSTEIN. There may be something in that, Senator Hart. But let me say this. Suppose the telecaster-suppose the network furnished that subscription service and collected those hundreds of million of dollars a year. That would be a factor in addition to what they get from advertisers in determining how much they ought to pay for the use of that music. Now, I think it is the same difference as

69-173-67-10

having a balcony seat and watching a play or having a seat in the orchestra. You see it better, you pay more money for it-the author gets his royalties, he gets his 6 percent or whatever it is of the box office, and the more that is paid for admission the more he gets. And if you have a play in a straw hat theater where the seats are hard and the stage is small and the actors are secondary, the royalties are lower. But if there is something to furnish a plush reproduction by means of this privately organized and operated wire television system that can bring more money in for only one thing, entertainment, then the composer should be in a position to share it. The amount from the advertiser should not be the sole test. There is no law that says only receipts from advertisers shall determine what authors get. What we are saying is that if there is other income-which there is not to the telecaster-if there is other income to someone else that is engaged in giving a public performance, that income should be subject to payment, some payment. That should be a factor to be taken into consideration in determining what is a fair amount to be paid to the

author.

Now, the author is indifferent about whether it be the community antenna operator who makes the payment or the broadcaster whose program is picked up. But if you should enact a law that says that the performance is exempt when it gets beyond the broadcasting point, and whoever picked it up, for what the House subcommittee called the secondary transmission, that that shall be exempt, then that could not be considered as something that can be taken into consideration when the author says, "This is a royalty that I am entitled to," and where he has the habit, in the case of play, or in the case of music, of having the royalty fixed as a percentage of something, I say the base ought to include what the community antenna people get from their subscribers.

Senator HART. Thank you. I think also it is well that you refreshed our recollection of the long-term result of an action which Congress took in 1909, seeming to respond reasonably and prudently to an immediate problem. But what disturbs a good many of us is the possibility that in responding to a very appealing or obvious dilemma, trying to resolve an obvious dilemma here, or some kind of tailored schedule of exemptions, we would be setting ourselves on a course that would create in the long haul some weird results undesirable to everybody, many of whom at the moment think that they know exactly what we should do at this time.

Mr. FINKELSTEIN. I am not among those, Senator Hart. I do not think that I know exactly what you want to do. But I do think this, that there are certain principles that must guide us in whatever we do. And the minute you depart from those principles you do not know where it may lead you. In other words, expediency is not a safe guide when it seems to clash with principle. This is something that I think we have learned from history. And we can avoid it.

Senator BURDICK. Let me pursue this discussion just a bit more. You have been in the hearing room today, and you have heard that there is some agreement between the CATV people and the broadcasters as to two particular areas. One characterizes it as with no difficulty, and the others as deserving of an exemption, words of that nature. Let us take a case where we have a B contour, and station

X has the license to broadcast into that area. That is their normal receiving area. But there are some canyons and there are some high buildings, and there are some difficulties. So CATV, let us call them A, comes in to fill in those spaces. So when you negotiate a contract for music with X, heretofore you charged, let us say, $100 for a particular performance, but now since the CATV people are in there you say, "Wait a minute, I have this property right, and someone else is using it, so I think the fee this year should be $110 instead of $100 to take care of that extra charge.'

I am sure these things are not realistic. I am just using it as an example.

Then suppose that CATV finds it difficult to operate because of the charges, and they cease to operate, and station X takes over the job of filling in those spaces. Would you charge them the $100, or $110?

Mr. FINKELSTEIN. Mr. Chairman, it would depend upon how station X took it over. If they put a booster setup and charged nothing extra to the public, then their sole income would be from advertisers, and they would be paying only the $100.

That $100 would be computed as a percentage of what they get from advertisers, not a flat fee. Now, if instead of putting up this booster station, or whatever you call that antenna, they decided that they are going to take over the wired television business, and charge something now to the subscribers, then they would have an additional source of income. And I would say that that should be a factor in determining how much they pay. And if it is $10, that would be the amount.

Senator BURDICK. Is it not a fact that when you made the original contract with X for $100 that that was to include all the population in contour B?

Mr. FINKELSTEIN. No, Mr. Chairman, quite the contrary. The contract expressly provides-and this is the contract worked out with the broadcasters-he buys and pays for only his own transmission, and the contract expressly provides that he does not buy or pay for the right to authorize anybody else to make a new transmission. He could buy them.

Senator BURDICK. I know. But X got the right from FCC to have exclusive jurisdiction in this area of, say, a 40-mile radius, they have got the exclusive right to do this. And you sold them these rights that you have in certain music productions to broadcast in that area. And when they made that contract did they not have the whole area? Mr. FINKELSTEIN. You see, the area is the same. The basis of the charge is only what they get from advertisers. That is the basis. That is how the charge is computed. And then the contract says that all you buy for this particular rate is the right to transmit the program yourself over your own wavelength and nothing else. Now, the broad

casters

Senator BURDICK. The basis of your charge is not area or people, it is based upon business?

Mr. FINKELSTEIN. Based on business, but not people, because if the broadcaster wants to give a bargain to the advertiser, that is his privilege. In one place the rate may be lower for a greater number of people, and in another one higher for a smaller number of people. Now, if Congress were to say that the broadcaster, in consideration of having this exclusive license to use a certain wavelength, must ac

quire not only the right for himself but for these community antenna people under given circumstances, that would be quite a different thing. Then when the broadcaster comes in to bargain for a license, or applies to the Federal court for the determination of a rate, the amount that the community antenna operator takes in could be a factor in determining what a reasonable rate is.

You see, Mr. Chairman, I think your question is premised on this, that the only way to determine a rate is by what advertisers pay. But that is just a yardstick that we have adopted, because that has been the only source of income. If there have been other sources of income for this performance, then I submit that the composer ought to be able to get an amount that is related to whatever the public pays and to whomever the public pays that money when the money is paid for the performance, public performance for profit.

Senator BURDICK. Is that the rule you use in your negotiations? Mr. FINKELSTEIN. Yes, exactly. In the Federal court proceedings there are proceedings now pending to determine how much the radio industry and how much the television industry shall pay for the use of music. And in that proceeding the broadcasters could apply for a license that would include community antenna. But if you should-if Congress would pass a law that says that that is exempt, then they would not have to apply for that, and nobody would be paying for it. And that is really the bone of contention.

Senator BURDICK. Well, to summarize your testimony-and we appreciate it all areas are black.

Mr. FINKELSTEIN. Well, I think all areas should be paid for. Senator BURDICK. The same thing.

Mr. FINKELSTEIN. When property rights are used.

Senator BURDICK. Thank you.

The next witness is Mr. Albert F. Ciancimino.

STATEMENT OF ALBERT F. CIANCIMINO, HOUSE COUNSEL, SESAC, INC.

Mr. CIANCIMINO. Mr. Chairman and members of the committee, my name is Albert F. Ciancimino. I am an attorney admitted to the bar of the State of New York and appear here as house counsel of SESAC, Inc., of New York City.

SESAC, Inc., was founded in 1931 by Mr. Paul Heinecke and is a music rights licensing organization duly organized and incorporated under the laws of the State of New York. We are the second oldest music rights organization in the United States representing more than 300 publisher catalogs whose names and addresses are listed in the schedule A which is herewith submitted to the committee as part of this statement.1 The SESAC repertory consists of approximately 100,000 musical compositions representing just about every type of music performed by the music industry.

The value of the SESAC repertory to the music industry is reflected in the more than 6,000 performance licenses issued by SEŠAC to AM, FM, and TV stations, representing a licensing factor of about 98 percent of the entire broadcast industry in the United States. In addition, thousands of performance licenses have been issued to hotels,

1 The schedule A referred to is contained in the committee's files.

nightclubs, professional athletic teams, symphony orchestras, ballet companies, background music service companies, foreign performance rights organizations, and others. Moreover, a great many licenses have been issued free of charge by SESAC to governmental, religious, and charitable organizations such as the Veterans' Administration, the U.S. Information Agency, U.S. Marine Band, the U.S. Armed Forces, the Heart Fund, Salvation Army, et cetera.

We are also proud of the fact that during World War II, the U.S. Treasury Department designated SESAC as the official liaison organization between the radio industry and the Treasury Department in promoting the War Savings Radio Campaign. SESAC enthusiastically accepted this opportunity to serve the public and made the services of its entire field staff available to the Government as a contribution to the war effort.

We now come before this committee specifically to state our views with regard to the use of copyrighted musical compositions by a particular segment of the music industry; namely, the community antenna television systems. I believe it is a historical fact that every segment of the music industry initially resisted the concept of paying for the right to profitably use music which has been created and is owned by another. Somehow, the intangibility of the right to perform music creates, in the mind of the user, an entirely different concept than, for example, paying rent for the use of a home or apartment. It should, however, be quite self-evident that the right to own and perform music is just as valuable a right as the right to own any other type of personal property. And here, Mr. Chairman, I might add that this portion of my testimony, I believe, answers one of the questions that you have asked previous witnesses as to whether or not it is a property right. This initial reluctance on the part of the various segments in the industry has, to be sure, been overcome by the passage of legislation and judicial decisions interpreting the law's applicability to the various music users. Therefore, the resistance on the part of the community antenna television systems to the payment of copyright royalties follows a clearly defined historical pattern. It should also be noted that the segment of S. 1006 which includes the right of transmission within the meaning of "perform or exhibit a work publicly" also follows a traditional historical pattern by legislating in effect, compensation to the copyright proprietor for the right to perform his copyrighted music in public. SESAC fully supports this concept that the community antenna television systems should be required to pay for the use of their stock in trade which includes this right to publicly perform musical compositions.

We see no justification in placing the community antenna television systems in a position different from that which presently applies to the radio and television broadcaster. It is the current practice of SESAC to offer the broadcaster a choice of either a blanket license or a per-piece license. Under the former, the broadcaster, for a flat annual fee, is authorized to use as much music contained in the SESAC repertory as he wishes. And here, Mr. Chairman, I would like to interject that the fee is based upon what SESAC considers to be the profit potential of the user, which includes consideration of the station's power, their hours of operation, advertising rates, and then the