Let me see, now, if I can summarize the situation which exists between the performance associations and your clients.

The performance associations insist upon a performance royalty, although they are willing that this royalty should be a blanket royalty in order to lend itself to a more expeditious and presumably more economical collection system.

On the other hand, the clients you represent feel that, if it should be necessary to increase the compensation which goes to the authors and composers, this should be accomplished by an increase in mechanical royalties.

Now if these two positions remain firm as they are now, then there is no likelihood at all that there will be a compromise in the industry. Isn't this true?

Mr. ALLEN. Well, it depends on what the committee does. Sure. Mr. POFF. What the committee does, the industry will have to conform to.

Mr. ALLEN. Right.

Mr. POFF. But I would think that both sides would want to assist the committee in arriving at some compromise position which would be equitable to both sides. And I say again, if the two sides remain absolutely inflexible and adamant, then you will not be able to give us this assistance, and the committee, will be compelled to make a decision which will be an unhappy decision for one side or the other.

Now when the witness for the other side testified, he suggested what he thought would be an appropriate blanket royalty, if it should be the final decision of this committee to remove the existing jukebox exemp

tion.

On the other hand, you have indicated that the performance royalties concept would be hurtful, among other reasons, because there would be no maximum imposed upon it.

Now if a maximum should be imposed upon it-and I say "if" a maximum should be imposed upon it-are your clients prepared to suggest what might be a fair and reasonable maximum?

Mr. ALLEN. Let me answer this way. I think I had better answer it very directly and very quickly. Our people, I do not believe, will ever voluntarily accept performance fees, Mr. Poff. We want to be helpful in arriving at compensation, but we think we are being helpful. We really do believe we are. That is our outlook on it.

Let me go on, however, to add an explanation. The moment the decision is made to go the performance fee route, we have lost our exemption, and with that exemption gone, we have lost the anchor that protects us against an escalation of fees, here.

It does not make any difference if you do put it into the law. I have talked to the chairman and other members about this. It does not make any difference if you do put it in the law. You can't bind the next Congress.

We just don't feel that there can be any assurance that these people who can out-bargain us, bargain us to death, are going to sit still for the first fee they get.

I think every time I have listened to the proponents, they have always said this is going to be for a limited period, or it is going to

have an escalation in it, and after a certain time we want to be free to come back.

If you really get down to it, they really do not want a ceiling, either. They just do not want a ceiling. I am not sure you are going to get an agreement on a ceiling from either side.

Mr. PoFF. Are you saying that if the decision of this subcommittee and this Congress is to follow what you call the "performance route," your hope for relief against any unfair royalty that may be imposed upon you would be in the next Congress? Is that what you are saying?

Mr. ALLEN. I am not really saying we would come back and try to get it. If you go that route, we have lost for keeps. We will never get our exemption back, once it is gone, nor would we get a reduction in royalties, once they are set.

Mr. POFF. Do you think your next Congress would be deaf to an entreaty for a maximum in the statute?

Mr. ALLEN. I do not want to try to forecast it, but I don't think the Congress would be deaf to a request for a different rate. I think they would always be open.

I would be doing my people a great injustice, Mr. Poff, if I created the impression that we are adamant, or are unwilling to accept the judgment of the Congress, but you are asking me what we would agree to, what we would voluntarily accept.

My people believe most sincerely that they are proposing the best and the only feasible solution. We believe in all sincerity that the performance fee is not a feasible solution to an industry that plays records on a large scale, as we do, and in the way that we do.

Mr. POFF. The witness will understand and recall from reading the previous testimony that I asked the same question of the other side.

Mr. ALLEN. Yes, sir.

Mr. POFF. So I am not trying to compel you to do anything you do not want to do. I am simply suggesting again that the most happy solution, and the one which would best promote the national interest, I think, would be one resulting from a compromise between the two opposing sides.

Mr. ALLEN. The difficulty that is posed, not only to us but to the other people, to both sides, is that we now live under a dual system. One side lives under one, and the other side lives under another.

The principal proponents-and I am speaking now of agencies rather than principals-see no advantage to them in anything but performance fees. That is the only business they are in.

I do not know why they are not in the other business. The law would permit them to go into it, if they wanted to. If they did, we could deal with them. We could deal with them in a meaningful way, and we would like to, we have tried to, and we believe that our proposal is so much better for all concerned that we earnestly hope that the committee will see it this way.

Mr. PoFF. It appears, then, that one side favors an increase in mechanical royalty fee, if any increase is justified. The other side prefers a performance royalty.

Are you prepared to suggest what would be a fair increase in the mechanical royalty fee?

Mr. ALLEN. I will answer it this way, yes, sir. In the last Congress we suggested a 2-cent add-on to our industry, 2 cents on top of the existing 2 cents.

As a starter, maybe the same proposal would be a proper proposal to make now, and that is an add-on that would result in a 4-cent per recording total mechanical type royalty to us.

I put it that way, Mr. Poff, because we have a change in our premise, here. In the present law it is 2 cents. In the bill it is 3 cents. I do not know how it is going to come out. I suppose no one knows how it will come out.

We feel we could live with that, if the committee sees it that way, however.

Mr. POFF. I want to try to be as clear as we can about it. The first sentence of your new section 113 suggests 3 cents.

Mr. ALLEN. Yes, sir.

Mr. POFF. This is the figure that would apply to the casual consumer who goes downtown, purchases a record, and plays it on his phonograph.

Then you have blanks in the second sentence. If the 2-cent add-on increases the mechanical royalty to 4 cents, it would be 1 cent in the blank. Is that correct?

Mr. ALLEN. Yes, sir.

If it looks like it is too small, again my thesis is, Mr. Poff, that we want a fair compensation. We think it is, but this is your judgment. Mr. POFF. This may be an unfair question, and if it is, say so, but is there any way reasonably you can translate the 1 cent per record figure into dollars and cents?

Mr. ALLEN. One cent translates to $1 million at the level of 50 million purchases a year, because 1 cent on each side is 2 cents.

Fifty million records would add $1 million on top of what we now pay. One cent per million is about the way it translates out.

Mr. POFF. Can you make an estimate of what dollar amount would be involved if the figure suggested by the witness for the performance societies was the figure arrived at by agreement?

Mr. ALLEN. Very readily. If we take 500,000 machines, roughly, to answer your question, at $20 a machine per year, this would be $10 million. At $30 year, it would be $15 million, and those were the figures he talked about.

I would like to drive home a point. That would be $20 or $30 million to ASCAP, against a present level of income from all sources of around $40 million, so they are talking about 50 to 75 percent add-on to what they are getting, just from our industry alone.

We say this is perfectly absurd and ridiculous.

Mr. POFF. Mr. Chairman, I believe that concludes my line of questioning.

Mr. KASTEN MEIER. Let me take this opportunity to thank the witness, Mr. Allen, and, indeed, all of the witnesses representing Music Operators of America, including its president, Mr. Pierce, for their testimony today.

Mr. Allen, I assume that should the subcommittee need you to testify further in this connection, you would be available.

Mr. ALLEN. I would be very happy to come at your call.

I would like to add one more thing. I would like to request permission of the committee, of the chairman, to file a brief at the conclusion of all of the testimony on this subject.

When it is all in, I would like to have the opportunity to put in a brief that will be responsive to whatever comes in.

Mr. TENZER. I don't know if there was any significance to the statement where one of your witnesses said, "We do not use hit songs, we use hit records." Is there a distinction there?

Mr. ALLEN. He made a distinction between the record and the song. He was referring to a particular rendition or arrangement.

Mr. TENZER. Mention that in your brief, if there is a difference.

Mr. KASTENMEIER. The brief you propose to submit will be acceptable to the committee. If Mr. Finkelstein and others on the other side desire to submit a brief relating to the same subject matter, their brief, too, will be accepted by the committee. They will be accorded the same privilege.

That, then, concludes your testimony, and we thank you for coming. With the record vote on the floor, we will again be required to recess temporarily, and we will return at 5 o'clock.

I hope, Mr. Patterson, and the others, we will be able to accommodate you today, and that we can conclude by hearing all of the witnesses. The committee stands recessed until 5 p.m.

(At 4:40 p.m., a recess was taken until 5:25 p.m.)

Mr. KASTENMEIER. The subcommittee will reconvene.

We apologize for the additional delay, but we were subjected to two votes rather than just one.

May the Chair urge the witnesses wherever possible to file their statements and summarize them.

Let me say to the witnesses that we will bear with you to the extent possible. Mr. Patterson, representing Seeburg Co., is now at the stand, and Mr. Raymond G. Larroca is accompanying Mr. Patterson. Do you, Mr. Miller, desire to testify separately?

Mr. MILLER. Yes, I do.

Mr. KASTEN MEIER. In that case, Mr. Patterson, I know you have been patiently waiting all day, and have been at other hearings as well. The committee will be pleased to hear from you.

STATEMENT OF PERRY S. PATTERSON, ACCOMPANIED BY RAYMOND G. LARROCA, REPRESENTING THE SEEBURG CORP.

Mr. PATTERSON. Thank you, Mr. Chairman, and members of the committee. I appreciate the committee's forbearance, also.

My name is Perry S. Patterson. I am a member of the firm of Kirkland, Ellis, Hodson, Chaffetz & Masters, with offices in Chicago, Ill., and Washington, D.C.

I represent the Seeburg Corp., of Chicago, Ill., a manufacturer of coin-operated phonographs, otherwise known as jukeboxes.

I am here today on behalf of Seeburg to oppose H.R. 18 and that part of H.R. 4347-section 114-which would create new rights in copyright owners in the area of performance of musical compositions on coin-operated phonographs.

Seeburg's basic position on the issue of performance royalties remains as it always has been-complete and total opposition to any

legislation which will expose music operators to unlimited performance fees to ASCAP, BMI, and SESAC.

I might add-and I will have more to say about this later-that we are not opposing general copyright revision, as charged by the Register of Copyrights.

This year, I appear separately at the request of Seeburg, for which our firm has been counsel for many years, not only to oppose section 114 of H.R. 4347, and H.R. 18, but in order to direct this subcommittee's attention to clear misstatements by ASCAP counsel concerning the purpose, significance, and effect of the Seeburg Coin Operated Phonograph Performance Society.

Here I might note parenthetically that the members of the committee will recall the emphasis that ASCAP counsel in particular placed upon certain aspects of Seeburg Coin Operated Phonograph Performance Society. In so doing, he said that this was a clear recognition of the entitlement of existing performance-rights societies to impose performance royalties upon jukebox play.

This is wholly incorrect.

Seeburg, in the last 2 years, has pioneered in the United States in the promotion and development of an institution called discotheque. Simply put, discotheque is dancing to specially programed, specially recorded, and specially reproduced music.

The idea of discothequeries has attracted a widespread response, and they are currently flourishing all over the country. Basic to the operation of the discothequeries is the effective presentation by high-fidelity reproduction of a continuous rendition of specially programed dance music. This overcomes the shortcomings, as far as dancing is concerned, of erratic or irregular dance music that results from haphazard selection of jukebox pieces.

Seeburg, however, presently offers to make available on a rental basis a Rec-O-Dance library. The operator who desires such a library rents it on a completely voluntary basis, on the expectation that it will enhance his business.

He is not only relieved of purchasing records by virtue of the rental payments, but he receives a specially selected and specially recorded sequence of music designed primarily for dancing.

An operator may decide because of the nature of his locations or because of considerations of cost that he is not interested in the discotheque library, in which event he is completely free to discontinue the rental arrangement at any time.

Under H.R. 4347, however, if section 114 is enacted, he will have no such alternative if he uses music subject to performance royalties. Seeburg's primary reason for establishing the Coin Operated Phonograph Performance Society was to give the industry-that is, the operators an effective defense against the potentially destructive effect of unlimited performance fees, and to obviate the hazards of exposure to the statutory damage provisions of the copyright law.

ASCAP counsel, however, has misinterpreted the facts and represented to this committee that each of the three-in fact there are fourjukebox manufacturers will be imposing a $60 annual charge per box upon the jukebox operators, and that this is indistinguishable from performance royalties.