his copyright ownership of the film would be placed in jeopardy by the statutory recognition of the composer's authorship nor would he receive less from the composer than what he had bargained for; namely, the exclusive use of the music in films. He can, of course, as a result of bargaining obtain more, including an assignment of copyright and all exploitable rights in the music, but it seems far more equitable, particularly in view of the aforementioned constitutional directive, that the burden of such bargaining be placed upon the producer rather than upon the composer.

The memorandum submitted by the motion picture companies fails totally to justify their present favored position. On the one hand they have treated the act of 1909 as an anachronistic remnant and on the other as a venerable codification, taking a strong position for general revision of that statute but strongly urging the retention of their revered "works made for hire" provision. As pointed out in the Ringer studies (Copyright Law Revision, Study No. 31, Copyright Office, 1960), the drafters of the present statute attached to the expression “work made for hire" the narrow meaning of a “composite or cyclopedie work." It is the expanded meaning, however, that is intended in the proposed bill, a meaning which is historically doubtful if not inaccurate, may well be unconstitutional, and is certainly inequitable.

The Register's proposal we submit is faulty, since it extols expedience over fairness. No justification is to be found in the asserted convenience of assimilating the employer to the author for all purposes, including the vesting of all rights in him. Such questions as may arise here concerning divided ownership, for example, are common to all works under copyright, whether created under employment or otherwise. Nor does the use or the interpretation of statutory language of general import present any unique problem solely because the statute relates to copyright. Assuming even that fewer practical problems as to ownership would arise under the Register's proposal, it is pertinent to ask whether this should compromise the fairness which is the admitted purpose of the present revision. Should the authorship status of any class of creators be obliterated in favor of an employer because of expedience?

Mr. KASTENMEIER. Thank you very much.

Next we will hear from Mr. Philip B. Wattenberg, representing Music Publishers' Association.

STATEMENT OF PHILIP B. WATTENBERG, ON BEHALF OF MUSIC PUBLISHERS' ASSOCIATION OF THE UNITED STATES, INC.

Mr. WATTENBERG. Mr. Chairman, I have Mr. Ed Lorenz with me. He is a member of our association.

Mr. KASTEN MEIER. Welcome to the committee, Mr. Lorenz.

Mr. WATTENBERG. I am an attorney admitted to practice in the State of New York and my office address is 609 Fifth Avenue, New York, N.Y., 10017.

I have been specializing in copyright law since 1944 and am a member of Copyright Committee 304 of the American Bar Association.

I appear here for Music Publishers' Association of the United States, Inc., for which I act as general counsel.

This association is a trade association organized in 1895, consisting of 50 prominent publishers of educational, sacred, and standard musical compositions.

The association strongly favors passage of H.R. 4347.

I have been a member of the panel of consultants to the Register of Copyrights since 1958 and have participated in meetings of the panel throughout the drafting stage of the bill. H.R. 4347 represents the culmination of the combined efforts of the Copyright Office and the

panel of consultants whose members represent practically all industries based in whole or in part upon the existence of copyright protection. The bill also represents the most intensive and comprehensive effort to bring the archaic copyright law of 1909 up to date and to put it in step with both foreign and domestic practice.

The late Arthur Fisher, Register of Copyrights, said:

Since the law of 1909 was enacted there have been tremendous technical and organizational changes, which can even be said to be revolutionary. For example, there was no radio or television industry at that time. The motion picture industry was just a fragment. The recording industry had not developed. Many modern methods of mass reproduction were still unknown. So the copyright law of 1909, under which we operate in the United States, is out of date, archaic, and this is generally so recognized.

If the bill is enacted into law, it will accomplish at least the following results:

(1) Greatly stimulate creativity in all fields of art and increase activity in industries dependent upon copyright.

(2) Remove inequities which abound in the 1909 law.

(3) Increase the prestige of the United States in foreign countries which look upon our law of 1909 as antiquated.

(4) Afford copyright protection in this country equal to that afforded in most foreign countries.

(5) Modernize the copyright law to make it fit the vast technological changes and developments since 1909.

Considering the need for the new law, the effort which has gone into its creation, and the remote possibility of repeating that effort in our time, I sincerely believe it would be tragic if the bill were not enacted into law.

As a member of the panel of consultants, I have made many suggestions and was gratified to find that several were included in H.R. 4347. One such suggestion merits comment here. It is embodied in section 113, which provides the royalty payable under the compulsory license provision as follows:

With respect to each work embodied in the phonorecord, the royalty shall either be three cents, or one cent per minute of playing time or fraction thereof, whichever amount is larger.

The reasoning behind this provision is important. The royalty provided in the compulsory provision of the 1909 law, section 1(e), is 2 cents regardless of the type or length of the work. The 2-cent rate in the 1909 law is inequitable and deficient in two major respects: 1. The 2-cent rate established in 1909 is inequitable when considered from the viewpoint of currency valuation. The value of the dollar has depreciated so as to make the 1909 2 cents worth 0.64 cent, in other words, sixty-four one-hundredths of 1 cent, at the end of 1964. As a corollary the Consumer Price Index or cost of living index has risen from 34.5 in 1913, when it was begun, to 108.1 at the end of 1964, so that in order to purchase what 2 cents would have purchased in 1913, 6.3 cents is required now. This morning's paper reports the index is now 109.3. Thus my suggestion of an increase to 3 cents would result in a minimal increase and not the recovery of the entire loss from depreciation of the dollar. I am having additional economic information of this type prepared and I would like to submit it at a later date. if I may.

Mr. KASTENMEIER. When it is received it will be inserted at this point.

(Subsequently the following was received :)

SUPPLEMENTARY STATEMENT BY PHILIP B. WATTENBERG IN SUPPORT OF H.R. 4347

Reference to the report on the bill enacting the Copyright Act of 1909 reveals that with respect to section 1(e) the practical question before the congressional committee was to protect the composer "without establishing a great music monopoly." The report also stated, "Not only would there be a possibility of a great music trust in this country and abroad but arrangements are being actively made to bring it about."

At the time the music publishing industry was a strong, well-established industry and the phonograph record industry was in its infancy and its products consisted mainly of cylinders used on the Edison talking machine. Bargaining, accordingly, was favorable to the music publishing companies and the committee recognized that the phonograph record industry must be protected.

Now the pendulum has swung and the phonograph record industry is a giant with a strong, dominating bargaining position with the power of life or death over the music publishing industry. According to the statement of the Record Industry Association of America, Inc., in opposition to the recommendation of the Register of Copyrights that the compulsory license provision be eliminated (House committee print on copyright law revision No. 4, p. 418) sales for 1962 of the record industry show the substantial total of $570,250,000.

In the initial decision of the hearing examiner in the matter of the United States of America against Columbia Broadcasting System, Inc., et al, before the Federal Trade Commission (filed September 30, 1964, docket No. 8512, p. 9) the industry growth is described as follows: “Although opinions may vary as to the exact causes, it is undisputed that technological advances in the recording art, along with marketing innovations, have significantly broadened consumer interest in records as a medium of home entertainment, with the result that industry sales have grown by leaps and bounds." There follows these sales figures:

The report continues, "In the past decade, the rate of growth of record sales has outpaced the rate of growth of the economy, measured in terms of both gross national product and disposable personal income. Record sales have also exceeded the rate of growth of the Nation's population. Per capita record purchases almost tripled between 1954 and 1961."

Converse to the growth of the record industry has been the decline of the music publishing industry. Sales of sheet music which were the mainstay of the industry have diminished hugely. A hit ordinarily sold over 1 million copies prior to 1950; now a sale of 100,000 copies of a new song is rare. The music publisher's profit on the sale of a single copy of sheet music is 30 to 35 cents; the net mechanical royalty to the music publisher on a recording of a song after payment of the writers' 50 percent share of the mechanical royalty cannot exceed 1 cent under the 1909 law. The growth of sales of records has been a contributing cause to the decline in sales of sheet music. Regardless of the increase in mechanical royalty volume, mechanical royalties do not make up for the lost profits in sheet music. Thus the music publisher faces eventual extinction and can be saved only by improving its bargaining position vis-a-vis the record company.

The present bargaining position of a music publisher seeking to have a song recorded is poor indeed. The ceiling from which he bargains is 2 cents on each record manufactured (section 1(e) of 1909 law). For practically 100 percent of records there are written license agreements. The form of written license agreement which has become most widely used provides for payment of royalties on the basis of records manufactured and sold. Therefore, under this license agreement even if the rate is 2 cents the publisher does not get the statutory rate of 2 cents on each record manufactured. In addition the record manufacturer has been able to demand and get other concessions including the following:

First: A rate less than 2 cents on each record manufactured and sold. A survey by the office of Harry Fox who acts as agent and trustee for most publishers indicates that 22.82 percent of 68,886 license agreements surveyed contained rates lower than 2 cents on records manufactured and sold (also see p. 119, United States v. Columbia, supra).

Second: Record clubs have demanded and received a concession which permits them to pay three quarters of the written license agreement rate for club sales. Third: "Freebies" and "discount records" are records which the record manufacturer gives away as part of his particular sales plan. Record companies give from 1 to 3 records free in every 10 bought by their customers, and claim that they are not sold and are not entitled to royalties under the manufactured and sold written license agreement.

Fourth: Disk jockey and promotional records are records which are given away by the thousands and on which no royalty is paid.

Thus, the statutory rate is whittled away. Each audit of a record company's books disclose the ever widening extent of such whittling process.

By no shade of the imagination can the 1909 statutory rate be considered a floor. If the statutory rate is raised to the rate provided in H.R. 4347 the ceiling from which bargaining starts will be raised but not the floor. Such an increased ceiling will give the music publisher a little more breathing room to keep from being smothered but I predict that the number of popular songs which will receive 3 cents on each record manufactured will be few indeed.

Mr. WATTENBERG. The second major respect: the 2-cent rate, when applied to all works regardless of the type or length of work involved, is deficient in that it fails to give recognition to serious music and long continuous works such as are embodied on sound track albums taken from the sound track of motion pictures and television films. In other words, the immortal "Rhapsody in Blue," by George Gershwin, can be recorded under the 1909 law for a royalty of 2 cents in the same way as any rock-and-roll song, with a 60-day life span, can be recorded for 2 cents. My suggestion was designed to correct both defects.

As a matter of fact, almost universally the playing time of a popular musical composition whether recorded upon a 78 r.p.m. record, a 45 r.p.m. record, or a 3313 r.p.m. long-playing record is between 2 and 3 minutes. The vast majority of recordings are popular recordings in this category and the compulsory rate would be 3 cents instead of 2 cents. Since they are under 3 minutes, the 1 cent per minute of playing time or fraction thereof would have no application. The 1-cent per minute of playing time or fraction thereof would apply to all works over 3 minutes of playing time including works such as the "Rhapsody in Blue" and other symphonic works and records made from the sound track of motion pictures and television films. It is common practice to indicate the playing time on record labels or jackets.

Mr. KASTENMEIER. Are you suggesting that the playing time is correlated to the intrinsic, artistic value of the work?

Mr. WATTENBERG. I think it is.

Mr. KASTEN MEIER. If you had a 10-minute rock-and-roll record that would tend to disprove the point.

Mr. WATTENBERG. If it was worth doing 10 minutes, it would be worth the increased rate.

Also to be kept in mind is the fact that the great majority of recordings are made pursuant to written agreement and not pursuant to the compulsory license provision of the 1909 act. Accordingly, the 2-cent rate has served as a ceiling from which the agreed rate is negotiated. The rate provided for in the written agreement varies according to the bargaining position of the parties involved.

My suggestion was made after serious consideration had been given to the preliminary draft of this provision dated April 1, 1963, in which the rate was—

eight percent of the manufacturer's suggested or established retail price, as published in its catalogs, advertisements, or other trade media; * * * In the absence of any suggested or established price, the royalties with respect to each work embodied in the record shall be three-fourths cent per minute of playing time or fraction thereof.

The idea of a percentage royalty was modeled after the laws in Great Britain and certain European countries. The 1911 law in Great Britain provided for a royalty of 5 percent of the ordinary selling price. In addition, the law of Great Britain provided that if the rate were found to be inequitable, a public inquiry could be made to the board of trade to correct the inequity.

In 1928, as a result of such a public inquiry, the rate was increased to 64 percent of the ordinary selling price. There is presently in preparation in England a public inquiry designed to increase the rate to 9 percent. However, in England the selling price can be established without hindrance of antitrust laws such as prevail in the United States. Accordingly, all record manufacturers in England have the same ordinary selling price and the royalty can be determined readily and, as a result of the stability in the price and the royalty, there is no difficulty in collecting what is due. In the United States, the price of phonograph records is in a chaotic state. There is no stability and it would be impossible to determine and collect a royalty based upon a percentage of a price which fluctuates among all manufacturers and from day to day for each manufacturer. Reference to the Schwann Long Playing Record Catalog for March 1965 contains a "price list (subject to change)" setting forth 34 different prices for long-playing records of various manufacturers. The variations in prices of records other than long-playing records is even greater.

I have here a phonograph record of the 1909 vintage. Its jacket bears a 1910 patent date and indicates a 4-minute playing time. It contains one composition. With such a device in mind in 1909 Congress could not have foreseen or contemplated today's long-playing record containing a 1-hour symphony, nor a tape such as is now being manufactured which plays 24 hours straight.

In conclusion, I believe that considering the nature of the music industry in the United States and assuming the necessity for a compulsory licensing provision in the law, the fixed royalty scheme provided in H.R. 4347 is the most practicable and workable system available and I further believe that the 3-cent rate with flexibility for works of more than 3 minutes playing time provides an equitable compromise between the divergent demands of owners and users.

That concludes

my statement.

I would like Mr. Lorenz to have a few words.

Mr. KASTEN MEIER. Yes, Mr. Lorenz, do you want to give your entire statement or summarize it!

Mr. LORENZ. I am going to shorten my statement as presented. However, I would like to have my whole statement, as presented, in the record.