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It was testified that the Harry Fox office represents "approximately 70 percent of all music publishers" (p. 1029), which is conceded, and that 19 companies (20 in 1964) did 70 percent of the total record industry business (p. 1017, later corrected to 60 percent). Exhibit 12 reflects royalty payments to publishers in 1964 of $25.2 million. If $25.2 million was paid by these companies and this represents 60 percent of the total payments, of which the Harry Fox office collected 70 percent, his office should have collected $29.4 million thereof. The amount actually collected by his office in 1964 was $20.4 million. Likewise, if $25.2 million was paid by these 20 companies and the Harry Fox office received approximately 70 percent, this would amount to $17.6 million. The total payments actually made in 1964 to the Harry Fox office by these companies was $15.3 million.

Goddard Lieberson stated, "Today a record company receives between $1.50 and $1.80 from its distributor for a record bearing a suggested list price of $3.98 (p. 1026)." He failed to state that all of the major record companies, and 90 percent of all record companies, have their own distribution units. He did not indicate that this constitutes an intercompany transaction, so that the profit of both is the profit of the organization. This likewise applies to the computations in the chart exhibits of the appendix to Professor Glover's statement (exhibits 2, 18, 19, and 20). Furthermore, all of the major record companies are units of large diversified organizations. Accordingly, such units are operated in conjunction with such other activities, as an essential element thereof.

In his appendix Professor Glover lists 20 companies under the heading "The 20 record companies providing financial data shown in this section of the presentation are listed below," which he terms the "19 principal companies" (p. 986, one having been added in the calculations). The fallacy of the total of such "financial data" provided by these companies, upon which such calculations are based, is illustrated by reference to the following listed companies:

Continental Record Co., Inc.-Some years ago one Donald H. Gabor was con. ducting a record company under the then corporate name of Remington Records, Inc. Having accounted and paid royalties to the music publishers in only a trivial amount, I brought an action on behalf of a number of publishers against both him and his company, in the U.S. District Court, Southern District of New York. Upon the hearings before the special master, appointed by the court, he only produced data indicating an insignificant amount of records manufactured and of the returns therefrom, and testified that there was no other available data. I thereupon offered expert testimony to the effect that, for an operation of this size, proof of the activities thereof had been stultified by the purported insignificant returns therefrom. I likewise offered such testimony to establish the approximate true extent of such activities and of royalties owing. The special master, while expressing sympathy for the publishers' predicament, determined that he could not legally admit such testimony. The district court likewise expressed sympathy for their predicament, but affirmed the master's report. The court of appeals, second circuit, in 265 F. 2d 263, reversed the determination of the district court and held that under such circumstances the expert testimony was admissible, saying "Perhaps it will also serve as a guide, if not a deterrent, to such members of the industry who engage in what has been described as 'piracy,' but which might better be described by the other terms connoting larceny; historically, at least, piracy was characterized by frontal attack with unmistakable notice to the victim who could then take such means as were available to defend himself. * * * We will not permit commercial piracy to produce illegal gains immune from recovery. While the law cannot prevent all sin and wrongdoing it can take some of the profit out of it." In view of this denunciation, Mr. Gabor obviously deemed it expedient to forego such operations under said corporate title, and subsequently renewed the same under the aforesaid corporate title of Continental Record Co., Inc. Again, having failed to render accountings and make payment to the publishers of the requisite royalties, it became essential for my firm to institute proceedings against his present company. There are now such pending actions on behalf of 46 plaintiffs. Nevertheless, this is one of the companies, the "financial data" of which has been relied upon by Professor Glover to illustrate the purported nominal returns and profits of the record companies.

Premier Albums of New Jersey, Inc.-In 1960, this company having repeatedly failed to render accountings and make royalty payments to the publishers, we wrote advising that unless the matter was given their attention, legal proceed

ings would ensue. Under date of September 21, 1960, we obtained a certified check for $25,000 and an agreement to pay a balance of $9,478.76, within a specified time. In 1963, we again sent a communication to the same effect, and under date of February 21, 1963, it executed a confession of judgment for $75,000. This year we again sent a communication to the same effect and under date of May 10, 1965, it executed a confession of judgment for $15,028.41. This is another example of the source and nature of the "financial data," upon which Professor Glover's analysis is based.

Folkways Record & Service Co.-The royalty payments to the Harry Fox office by this record company, have averaged approximately only $100 yearly. Another example.

As a member of the subcommittee observed:

"Mr. EDWARDS. But I do think that you can see a little difficulty when we are asked to base our whole judgment on a grouping of 19 companies, where maybe 15 or 20, or 30 or 40 percent of these companies might be doing a very bad job, and yet they are bringing the average down" (p. 1045).

As he further observed:

"Mr. EDWARDS. Professor Glover, the chart, and shall we take 1964 for the moment, 'Record Companies' Net Profit.' Then the red is the amount paid to the copyright people. That is the gross paid, not the net profits of the copyright holders" (p. 976).

Goddard Lieberson, president of Columbia Records, testified that, as the major record companies do not have separately published profit and loss statements, the only information available is through an independent survey of "store sales" made by Billboard magazine, and his calculations were based solely upon such survey. He specifically conceded, "As I say we don't have access to the figures, unfortunately" (pp. 1044, 1078, 1080). However, in a recently published report of Radio Corp. of America, it is stated "The RCA Victor Record Division, another longtime member of the RCA family, is currently enjoying the greatest acceptance in history. First-quarter sales were at an all-time high, and earnings for the first quarter were substantially greater than last year. This trend is expected to continue throughout the remainder of 1965." In the July 24, 1965, issue of the trade publication Cash Box, there appeared an article under the heading "RIAA: Disk Sales Set Mark," in which it was stated "Manufacturers sales of phonograph records in 1964 set a new all-time high of $275,530,000, the Record Industry Association Of America (RIAA) announced last week." Likewise, Alan W. Livingston, president of Capitol Records, Inc., one of the three major companies, testified "Mechanical license fees paid by Capitol Records alone, for example, increased from $1,256,052 in 1955 to $4,612,376 in 1964.” This establishes a 357 percent increase in their record output during said period. This is, accordingly, radically at variance with Professor Glover's analysis and calculations.

The publishers must have regular audits made of the books and records of the numerous record companies throughout the United States. Such audits, in many instances, establish that the business activities of the companies are substantially in excess of that reported to the publishers, whereby the obligation for royalty payments is substantially increased. Furthermore, numerous actions must be brought on behalf of the publishers against record companies throughout the United States who either refuse to account and make payment to the publishers or account and make payment of only a minor part of their obligations. The foregoing illustrates additional substantial expenditures that must be made by the publishers, for them and the writers to realize the fees to which they are entitled. Of course, in many such instances the record company thereupon discontinues its business operations, and there is no recovery. Professor Glover would have it appear that the music publisher realizes a greater percentage today of the record returns than in 1909, when the present act was enacted. On the contrary in 1909 the publisher only paid the writers 25 percent of its receipts therefrom, while today the uniform percentage is 50 percent.

Professor Glover advances the contention that, if the statutory fee were raised to 3 cents, it would be unlawful for the publisher to exact a lesser fee from one record company than from another, so that "a 3-cent fee would become not a ceiling, not a floor" for negotation "it would likewise become the fee" (pp. 1006, 1007). There is no basis whatsoever for such a contention. This very argument has been advanced in a number of cases we have brought and in each

the court, in rejecting such a defense, has cited the uniform holding of the courts to the contrary. In fact it has been uniformly held, (a) that the pertinent provision of the Clayton Act only applies to price discrimination between "purchasers of commodities" that are sold, and can have no application to the granting of a license, and (b) that a statute cannot be altered or controlled, and the legal rights and liabilities of the parties as thereby fixed cannot be changed, by a custom or usage in the industry.

The Register of Copyrights, after a thorough consideration of the respective interests of the record companies and music publishers and the purport of the royalty increase, justifies such increase in the following pertinent statement (supplemental report, p. 58):

"It should be borne in mind that exercise of the compulsory license is entirely optional with the record producer, being compulsory only on the copyright owner. The alternative of bargaining with the copyright owner for a negotiated license is always open to the record producer. Consequently the statutory royalty rate operates as 8 iling: the record producer can bargain for a lower rate, but the copyright owner can never bargain for a higher one. The vast majority of recording licenses in the United States have been negotiated and, at various times in the past, record producers have obtained negotiated licenses at less than the existing statutory rate of 2 cents. If the present 2-cent ceiling is raised, licenses could still be negotiated at 2 cents or less if current market conditions did not justify more; and if a higher ceiling resulted in negotiated licenses at more than 2 cents, it could well be argued that a 2-cent ceiling has proved to be too low. As we see it, the statutory rate should be at the high end of a range within which the parties can negotiate, now and in the future, for actual payment of a rate that reflects market values at that time. It should not be so high, however, as to make it economically impractical for record producers to invoke the compulsory license if negotiations fail."

Goddard Lieberson, president of Columbia Records, made the following statement with respect to the existing compulsory license provision of the act: "Not only were record companies against the repeal, but so were many publishers and writers who recognized the benefits which they have received from this provision through the years" (p. 1029). On the contrary, the publishers and writers uniformly sought a repeal thereof, so that all licenses could be negotiated apart from any statutory requirement. This was the original recommendation of the Register. The subsequent retention by the Register of the compulsory license provision and the increase of the ceiling to the 3-cent rate was a compromise. This took into consideration the desire of the record companies to retain such provision, and the essential requirement of the publishers and writers to increase the ceiling, as stated by the Register, so that "the statutory rate should be at the high end of a range within which the parties can negotiate, now and in the future, for actual payment of a rate that reflects market values at that time."

Mr. KASTENMEIER. You may proceed.

Mr. ABELES. Over the years I have been counsel in copyright litigation for many leading motion picture companies and companies in allied fields. For a number of years I was chairman of the board and general counsel of the National Association of Orchestra Directors, the membership of which comprised every leading orchestra leader in popular music in the United States.

I appear primarily as general counsel for the Music Publishers Protective Association, Inc., the membership of which comprises practically every leading popular music publisher in the United States.

I also appear as general counsel for Harry Fox, agent and trustee for over 900 music publishers in the licensing and enforcement of rights to their musical works, in the manufacture of electrical transcriptions for radio broadcasting, phonograph records, and recordings for motion picture and television productions.

I am a member of the Panel of Consultants to the Register of Copyrights and I attended the various meetings that were held.

I must say that in view of the diverse interests concerned, I think the Register and his staff did a remarkable piece of work in preparation of this bill and should be highly commended therefor and accordingly I want to support the bill as drafted with only nominal changes. A few of those have been referred to by the speakers on behalf of ASCAP and BMI. There is one particular provision I would like to refer to which did not appear in any prior draft, and accordingly was not the subject matter of any discussion in the hearings conducted by the Register. That is 110, wherein it says:

Notwithstanding the provisions of section 106, it is not an infringement of copyright for an organization lawfully entitled to transmit a performance or exhibition of a copyrighted work to the public to make no more than one copy or phonorecord of the work solely for purposes of the organization's own lawful transmissions or for archival preservation—

and so forth.

I can't understand the use of the word "organization." This deprives the copyright proprietor of valuable rights. An organization may comprehend an unlimited number. I respectfully submit that it should be limited to the original transmitter and for the purpose only of delayed or repeated broadcasting and certainly within a limited period of no more than 30 days.

Now with reference to subsection (c) (2) of 113 regarding which Mr. Wattenberg spoke, the increase in royalties, of course 2 cents today was not the same 2 cents in 1909. I recall, going back to those days, there were very few music publishers in the United States and they had the benefit of all the recordings. Today I would say there are about 1,500 music publishers.

As I mentioned before, Harry Fox as agent and trustee represents over 900. Today it is very rare for one to see more than one work of any particular music publisher on any of the charts, because there are so many of them, as I have said before.

Now on the other hand, the record company, as you can appreciate, can record any composition they desire by obtaining an agreement or serving notice under the act. Accordingly, for every song that becomes a hit any number of record companies can make their own recordings while the publisher is limited to the recordings of the particular composition that he has succeeded in creating a demand therefor, in competition with all the other publishers.

Now section 113, subsections (b) (2) and (c) (4), were included for the purpose of giving the music publisher, and the author of course through the publisher, the same recourse under the general damage provision of the act as in the case of all other copyright infringements, which they do not have under the present act, against what is known in the trade as record bootlegging or piracy.

As the Court of Appeals in the Second Circuit said in one case I had, it should not be described as "piracy" because the pirate faces his intended victim. It should be called larceny.

Furthermore, the court went on to say, if we can't stop all evil we can take some of the profit out of it, and under the present act the sum is very trivial.

Now these bootleggers, might I say, disseminate a most attractive product. They are albums containing 12 compositions, with distinctive

artwork. They usually copy the original recordings. In other instances, they extol their arrangements. They go to every extreme to convince the prospective purchaser that their product is far more desirable than the legitimate recordings. Unfortunately, these are advertised and publicized to every extreme by the retail dealers and chainstores. They feature them, because they can be sold at substantially less than the legitimate records, in that no license fees are paid and other costs of the legitimate record manufacturer are not incurred. We have instituted innumerable suits throughout the United States against these outfits. They are like mushrooms. The minute you stamp out one another one crops up. When we assert a claim, the party in interest discontinues operating and the assets disappear. We then have to go after the individual if we can find him. Then what happens? We obtain a court order requiring him to produce his books and records. In every case, he invariably asserts, they say they mysteriously disappeared or were inadvertently destroyed. So what do they produce? A few invoices. We recover about $200; when the true obligation is more likely about $20,000.

Now in section 113, subsection (b) (2) it is provided:

Failure to serve or file the notice required in clause (1) forecloses the possibility of a compulsory license and, in the absence of a negotiated license, renders the making and distribution of phonorecords fully actionable as acts of infringement under section 501.

Subdivision (c) (4) of the same section provides:

If the copyright owner does not receive the quarterly payment and statement of account when due, he may give written notice to the licensee that, unless the default is remedied within 30 days from the date of the notice, the compulsory license will be automatically terminated. Such termination renders the making and distribution of all phonorecords, for which the royalty had not been paid, fully actionable as acts of infringement under section 501.

Under such provisions, as in every other type of infringement, where the profits or the damages cannot be established, the court can assess such damages as it may deem to be just, within the statutory limitations. That is the purpose of these two provisions, to provide some recourse against such illegal operators. We don't have to incur the cost of litigation with only a trivial, if any, recovery.

I therefore respectfully submit, it is essential that these two provisions be incorporated in this act.

The Court of Appeals in the Second Circuit has gone to every extent, to enable us to enforce the rights against these pirates, but of course always within the limitations of the present act.

As Judge Irving Kaufman, now of the U.S. Court of Appeals, Second Circuit, said in an action I brought on behalf of the music publishers, involving such record piracy, "The act is crying out to be amended."

Some question was asked about the purport of subsection (a)(1) of section 113, wherein it says:

A person may obtain a compulsory license only if his primary purpose in making phonorecords is to distribute them to the public for private use.

This provision has reference to a situation today, which I also brought to the attention of the Register. That is where some company will be licensed to make tape recordings for public performance for profit. They will account for about 500 at 2 cents each. Then

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