Mr. MAZZOLI. So to that extent, if this additional money is not just ripoff money, which is sort of greedy and avariciously acquired, but if it goes into the normal pursuits of Hollywood in the sense of the creative side of this thing, that may be a benefit which then, of course, would overcome the difficulties of handling all these transactions and the difficulties of maybe tampering with first sale and this sort of thing.

Mr. FRIEDMAN. I see in Dorothy Schrader's-she's the Associate Register of Copyright, and she reports in pages 24 and 25 of her prepared statement that members of creative guilds and unions receive 12.4 percent of the gross royalties for video cassette sales. Guild and union members receive nothing from rental income that flows only to retailers.

Mr. KASTENMEIER. Then they do get money of the royalty.

Mr. FRIEDMAN. Of the royalty, but I guess that's not gross. I guess those figures have to be looked at a little more. That's a bargaining position between the two, but I don't think that alters anything that we've said in terms of who really is getting this money. Mr. KASTENMEIER. Thank you very much for your contribution this morning, Professor Friedman. Obviously, the committee is indebted to you. I hope that you have been able to explain your position on the first amendment and that you've had freedom of speech in that regard, notwithstanding some examination. We have already gone over an hour which I think attests to the committee's interest in your statement. Thank you very much. Mr. FRIEDMAN. Thank you.

Mr. KASTENMEIER. The Chair would like to call Mr. Jack Copeland, president of National Educational Media, Inc., on behalf of the Training Media Distributors Association, who will testify in support of this bill. Incidentally, Mr. Copeland is currently a vice president and chairman of the Copyright Committee of that Association, and has 30 years of experience in producing and distributing audio visual work for education and training, and he himself is the president of the National Educational Media, Inc., a California based company he founded 18 years ago.

We'd like to welcome you, Mr. Copeland.

TESTIMONY OF JACK COPELAND, PRESIDENT, NATIONAL EDUCATIONAL MEDIA, INC., ON BEHALF OF THE TRAINING MEDIA DISTRIBUTORS ASSOCIATION

Mr. COPELAND. Thank you very much, Mr. Chairman.

The Training Media Distributors Association represents 26 companies, mostly small business. We provide a significant portion of all off-the-shelf audio visual programs for training and education. We play a role vital to the productivity of the American economy. Every area of useful knowledge is within the scope of our work, from medicine and public health to computers, food service, and management training for business.

I am here today to testify in support of H.R. 1029. There are about 500 companies in our field typically doing between 1 and 2 million in sales. We provide 15,000 off-the-shelf programs, primarily motion picture films, video cassettes, and film strips. Our total revenues from these programs were $700 million in 1982, figure

36-592 O 85 14

which has grown 20 to 25 percent annually, and should reach $1 billion this year.

By comparison, we are told that video dealer revenues were $400 million in 1982, a surprisingly small figure in view of the substantial publicity they have received.

The truth is, our industry is more affected by H.R. 1029 than any other copyright owners and we strongly support it. The reason? We depend solely on two things: sales and rentals of copies of our programs for training. We have no theaters or theatrical income. Our programs are rarely, if ever, shown on television. The copies we sell normally number in the hundreds rather than the tens of thousands we associate with home video.

With severe piracy estimated at a shocking 30 percent of sales, with competition growing faster than the market, many of us have had a difficult year and that's important to everyone in this country because it's we who make the multimillion dollar investment in new programs at our own financial risk.

We're thus shaken by the expensive, misleading propaganda campaign launched against this legislation by rich electronic manufacturers and some video dealers. Their constant reference to Hollywood's big profits which we've heard a lot about this morning doesn't change the facts. As copyright owners, it's we who suffer most if H.R. 1029 isn't passed.

The problem is this. Currently because of first sale, any AV program can be purchased and then rented without compensating the copyright owner. That is, unless burdensome contractual restrictions are interposed. We lose not only the rental royalties, but also a substantial portion of the potential sales market.

As you've heard before, it's a catch-22 situation. Resulting higher sales prices drive people to choose ever more rental usage of a product. If in our market a program costs $60,000 to produce, not untypical, and an equal amount to bring to market, the costs may have to be recovered from fewer than 500 sales over several years. In fact, I can tell you there are valuable programs where the sales may have been 100 or 200, programs dealing with vital medical procedures or management techniques. Any important subject can thus be greatly endangered.

In this regard, I would like to say that we take serious exception with Professor Friedman's economic analysis, particularly as applied to our industry.

There are 8,000 video retailers nationwide, in addition to the untold thousands of businesses, industries and government agencies to which we now sell our products. It's impossible for us to ensure that our contracts are being honored.

In addition, the cost of litigating every breach of contract case in 50 State courts is really impossible.

This legislation, H.R. 1029, corrects that problem by providing a Federal cause of action for copyright infringement, something we believe is a very great deterrent. It closes a legal gap which will protect the highly dedicated group of creative people, educators, artists, producers. It encourages making new educational and training programs, something our society urgently needs. It will make possible lower sales prices as well as reasonable rentals.

STATEMENT OF JACK COPELAND

PRESIDENT OF

NATIONAL EDUCATIONAL MEDIA, INC.

ON BEHALF OF

THE TRAINING MEDIA DISTRIBUTORS ASSOCIATION

IN SUPPORT OF

H.R. 1029, THE CONSUMER VIDEO SALES/RENTAL AMENDMENT OF 1983

BEFORE THE

SUBCOMMITTEE ON COURTS, CIVIL LIBERTIES, AND THE ADMINISTRATION OF JUSTICE OF THE HOUSE JUDICIARY COMMITTEE

FEBRUARY 23, 1984

I

am Jack Copeland, Chairman of the Copyright Committee of the

Chatsworth, California. I am here today to testify in support of H.R. 1029. A number of other members of our industry are here with me today.

In

preparing my testimony I have also consulted with the Instructional Systems Association which represents 60 other major

companies in our industry.

I am pleased that you have allowed me the opportunity to explain why members of the training media industry consider passage of H.R. 1029 importance. We presently conduct business in an environment that threatens our ability to continue producing educational and training programs that the people of our country

of vital

need.

There are approximately 500 companies in our field typically doing between 1 and 2 million in sales. We provide 15,000 off-the-shelf

programs

primarily motion picture films,

videocassettes, and

filmstrips. We are not concentrated in any specific region but