waiting to vote, and are not present here at this moment. I make this announcement, too, to suggest that we may be interrupted this afternoon from time to time, but I hope that witnesses and others will bear with the committee in this respect.

We do want to conclude the scheduled testimony today, so we will do the best we can, under the circumstances.

At this time, the committee would like to call as the third witness for the day Music Operators of America, represented by its president, and by its counsel, Nicholas E. Allen, and accompanied by a number of other individuals; and, with the indulgence of the committee, I would like to introduce and present to the committee the president of the Music Operators of America, Mr. Clinton S. Pierce.

Mr. Pierce is from my district. He is chairman of the Green County Board. He lives in Brodhead, where he is a well-known, distinguished businessman.

He and I this morning, seated in this committee room, observed in the back of the room some 30-odd high school students from Albany, Wis., which is only 2 miles from Mr. Pierce's Brodhead.

So with that as an introduction, let me say you are most welcome to the committee, Mr. Pierce, and Mr. Allen, and the other witnesses accompanying you.

Mr. PIERCE. Thank you, Mr. Chairman.

STATEMENTS OF CLINTON S. PIERCE, PRESIDENT, AND NICHOLAS E. ALLEN, COUNSEL, MUSIC OPERATORS OF AMERICA; ACCOMPANIED BY HENRY J. LEYSER, OAKLAND, CALIF.; MOSES J. PROFFITT, CHICAGO, ILL.; JACK G. BESS, RICHMOND, VA.; MAX HURVICH, BIRMINGHAM, ALA.; A. L. PTACEK, JR., MANHATTAN, KANS.; AND WILLIAM CANNON, HADDONFIELD, N.J.

Mr. KASTENMEIER. Mr. Pierce, you succeed a long-time president of your organization, Mr. George Miller, not the Congressman who testified this morning, but the gentleman who headed your organization for many years.

Mr. PIERCE. Right.

Mr. KASTENMEIER. I understand you were elected last year to succeed him.

Mr. PIERCE. Right. Mr. Miller, I might say, was a very fine gentleman, and appeared before this committee a number of times on similar legislation.

Members of the subcommittee, and Honorable Chairman Kastenmeier, it gives me a lot of pleasure to be here today. At the present time, I am in the seat, and Mr. Kastenmeier is chairman. Mr. Kastenmeier mentioned a short time ago he visited our county board, in which case I was chairman.

Mr. KASTENMEIER. That is correct. I remember the event very clearly, and I appreciated your hospitality then.

Mr. PIERCE. Thank you.

Shall I proceed?

Mr. KASTENMEIER. Proceed, Mr. Pierce.

Mr. PIERCE. My name is C. S. Pierce. I reside at Brodhead, Wis. I am a past mayor of Brodhead.

I am at present chairman of the Green County Board of Supervisors. I was one of the original founders of Music Operators of America, and have served this organization as vice president, chairman of the board, and am, at present, its president. I am also president of the Wisconsin Music Merchants Association, Inc., a nonprofit organization of over 75 Wisconsin music operators.

First I would like to clearly make the statement that Music Operators of America are opposed to a change in the copyright laws of 1909 removing the jukebox exemption. Over the years I have had the opportunity to become acquainted with the problems of automatic phonograph operators, both locally and, through my association with the Music Operators of America, nationally.

One of the operators' most serious problems is an economic one. In the last decade, however, the inflationary pressures which have taken control of our national economy have greatly increased our costs of operation. These include not only employees' salaries, insurance, cost of records, and taxes, but also cost of equipment. Whereas, a phonograph would sell for $350 years ago, a new phonograph today sells anywhere from $1,200 to $2,800. This price depends on the number of records the machine will hold, the number of speakers, and type of cabinet.

Caught between a fixed price and a tremendous cost increase, the phonograph operator has seen his margin of profit dwindle to the point where many operators have left the business and new operators have found it impossible to establish themselves.

The best information available clearly proves that the income from the operation of phonographs continues to decline. Our industry consists of small businessmen, many of whom have had to diversify their operations with vending machines and coin-operated amusement equipment.

We feel the operator furnishes a valuable service to the community by providing top entertainment at the lowest possible price. Phonographs are often given to charitable and youth organizations outright. We like to feel that we are doing our part to help the youth in our community enjoy wholesome entertainment.

The operators would like to continue all these services, and expand them, as it gives all of us genuine pleasure to be able to do these things, but this requires a healthy industry. This requires an industry that is willing to carry its load, but one that is not overburdened. Our industry is burdened with Federal, State, sales taxes, county and city taxes, and license fees, which have a wide variance in the amounts in different States. Every time an operator buys a record he is paying a royalty to the songwriter and publisher at the authorized rate of 4 cents per record.

BMI, ASCAP, SESAC, and others are seeking a free hand to impose performance fees upon us. If the exemption in the copyright laws of 1909 should be eliminated, it would create an impossible situation, because our industry cannot stand the added load which would be placed upon us.

First, we would be liable for performance fees for playing any record, regardless whether the author or composer belonged to BMI, ASCAP, or SESAC.

Second, the individual songwriter, or any group, could demand performance fees providing they had their song recorded on records and they showed no affiliation with any performance society.

It is my understanding that ASCAP at this hearing has asked for a fee of from $20 to $30 per machine for the first 5 years and $30 to $60 per year for the next 5 years. If BMI and SEŠAC should ask for similar amounts, the operator could be confronted with payment of from $60 to $100, or possibly more, per machine, per year.

This would clearly create a situation similar to the European situation in England, Germany, and France, where coin-operated phonographs are not profitable to be operated on a large scale due to the exorbitant performance fees which have reached approximately $100 to $400 per year, per machine.

An exorbitant performance fee would drive many of the small businessmen out of the line of operation of automatic phonographs. This would result in adversely affecting the storekeepers, the record com. panies, the performing artists and the composers themselves.

It is estimated that a performance fee of $50 or more per machine per year would eliminate 25 percent of the automatic phonographs on location in the United States at the present time. This would also create a loss of employment to thousands of people, plus depriving many small locations the opportunity of enjoying coin-operated phonograph music.

At this time, I would like to refer to a statement of George A. Miller, legislative representative of Music Operators of America, made to this committee on May 9, 1963. Miller stated:

There are approximately 450,000 jukeboxes in America; there are about 7,000 music operators in America. The average gross income to the music operator is approximately $9.25 per week per phonograph, or in round figures, about $40 a month.

I would like to state that, from the best records available, in a 2-year period, there has been some reduction in these figures. First, in the number of phonographs;

Second, in the number of operators; and

Third, in the weekly income to the operator.

Every music operator has many marginal locations that would only gross him from $4 to $6 a week. Deduct the cost of service, records, depreciation, taxes, and so forth, and the operator is very lucky to break even on this type of location.

The above-mentioned locations would definitely be without music if the copyright exemption should be eliminated. I don't think there is a State in the United States that does not have a large number of marginal locations.

I grant you that every State has different conditions; but most areas have a peak season, which is rather short; however, the phonograph equipment must be operating 52 weeks a year to amortize its original

cost.

I have been engaged in the automatic phonograph business for over 35 years, and I am a partner in the firm of C. S. Pierce Music Co., together with my wife, Marie Pierce.

The Pierce Music Co. owns and operates approximately 300 automatic phonographs, plus a like number of cigarette machines and coin

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operated amusement games, in an area covering a 75-mile radius of Brodhead. Our phonographs are placed in restaurants, taverns, schools, youth centers, and many small highway country stands and drive-ins. This includes cities with a population of 40,000 to 50,000 down to the smaller towns and villages of 1,000 or less.

The Pierce Music Co.'s gross income per phonograph for the last 6 months averaged $7.27 per week. The estimated average gross per phonograph to the music operator in the State of Wisconsin is slightly under $8 per week. Again we have the condition in Wisconsin of the northern part of the State being a recreational area, with much heavier phonograph play in the summer months.

I personally cannot conceive of this committee, or the U.S. Congress, eliminating this exemption in the copyright laws of 1909 which have been in effect for over 50 years.

I wish to thank the committee for the privilege of appearing before them, and I hope that they will consider, in their recommendation, the small businessman in their final decision.

Thank you.

Mr. KASTENMEIER. Thank you, Mr. Pierce. Because we have a rollcall on now, we will defer any questions we may have for you and any further testimony from the Music Operators of America, Mr. Allen and others, until a recess is over.

Iwould like to make it, with the committee's indulgence, not more than 25 minutes. It is now 2:10.

The subcommittee stands recessed until 2:35.

(Whereupon, at 2:10 p.m. a short recess was taken.)

Mr. KASTENMEIER. The subcommittee will come to order.

When we recessed for the vote on the House floor, we had just concluded hearing from Mr. C. S. Pierce.

The next witness in the order of witnesses is Max Hurvich. Would you care to introduce him, Mr. Pierce or Mr. Allen?

Mr. ALLEN. Yes, Mr. Chairman, Mr. Max Hurvich of Birmingham, Ala.

Mr. KASTEN MEIER. May I suggest that, since we are also going to hear from you, Mr. Allen, concluding the presentation for the Music Operators of America, those witnesses who appear between Mr. Pierce and Mr. Allen may, if they desire, abridge their statements, that is, shorten them; and if you want your entire statements put in the record, the committee would be pleased to entertain that. However, you may proceed as you wish in any event.

STATEMENT OF MAX HURVICH, BIRMINGHAM, ALA.

Mr. HURVICH. I think that in the interest of time I will not read mine, and just submit it as you have it already, and put it in the record. Mr. KASTEN MEIER. Without objection, your statement will be received and be part of the record.

(Statement referred to follows:)

STATEMENT OF MAX HURVICH IN OPPOSITION TO SECTION 114 OF H.R. 4347

My name is Max Hurvich. I live in Birmingham, Ala. Together with my brother and our wives we operate the Birmingham Vending Co. and have been in this business for more than 34 years.

We operate coin-operated music machines and other types of coin-operated equipment. In addition, we operate a distributing business, representing most of the vending machine and game machine manufacturers throughout the territory.

In our division of responsibilities, my brother has handled the operation of the machines, primarily, and I have concentrated on the distributing business. In my travels throughout the territory, most of the time my wife has accompanied me on most of the trips. In this way we have become personally acquainted with most of the operators and visited many of them in their homes. We have found these people average citizens in their communities, participating in local activities such as PTA, charitable work, luncheon clubs, etc. Several of the wives of our customers are public school teachers and most of them assist their husbands in their work.

I have been particularly impressed by the fact that the greatest majority of these men do their work themselves, having only one or two helpers. Many of them make their own service calls. Despite this hard work they have difficulty meeting their payments. Currently, music operators in Alabama are suffering from the loss of many locations due to slum clearance and urban renewal projects and new highway developments.

In selling these operators equipment, we discount our loan paper at the First National Bank of Birmingham, Ala., and other finance companies. Despite the fact that we endorse the paper the bank and finance companies check their credit standing before they make the loan. While it is rare that they turn down any of the operators' loan applications, it is a fact that the operators have difficulty making their payments because of expenses they have that other small businessmen do not have. In addition to the usual expenses, we in Alabama have to pay a per machine license in every city, as well as a State and county and Federal tax on each machine. Cities' taxes range from $7 to $25 per machine per year, with one city charging an additional 5 percent on all collections. The State and county tax is $12.50 per machine per year. The Federal tax is $10 per machine per year. In addition we have to pay a sales tax on all our collections. In addition we pay a sales tax on all records and all parts purchased for our machines and a use tax for the purchase of the machines themselves. Furthermore, we pay an ad valorem tax on all our inventory and equipment.

Gentlemen, you can readily understand that our operators in Alabama need relief from taxes and that any additional copyright assessment would be disastrous to many operators.

Our company operates approximately 350 phonograph machines in Jefferson County, which includes the city of Birmingham. Our gross share from the operation of the machines averages from $5 to $6 a machine per week. We have continually tried to change our machines from 5 to 10 cents per play but there still are at least 25 percent on 5-cent play.

Our record purchases are at the rate of about $900 a month and $11,000 to $12,000 a year, and so provide up to approximately $750 in mechanical fees each year.

Knowing your interest in the small businessman, I appreciate the time you are giving me and other members of Music Operators of America. I sincerely hope that in the interest of the small businessman competing with the great monopolies you will reject section 114 of H.R. 4347 in its present form so as to save the business of the many small music operators from a repeal of the law which is the legal foundation for their business.

Mr. HURVICH. For the record, my name is Max Hurvich, partner of the Birmingham Vending Co., Birmingham, Ala.

We operate phonographs, games, and vending machines, and have been in business for a little over 34 years, in addition to which we are distributing wholesale machines to operators in our territory.

In our operation of music, we have found, as Mr. Pierce said a while ago, our revenue has been declining regularly. We have lost locations. We have found that many of the marginal locations, while they don't pay much, we have had to retain them in order to keep going.

We have dropped our average down to less than $6 per week, per machine. We continue to buy records, approximately $10,000 a year,