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I believe that, from a public policy standpoint, members of Congress must seriously consider the views of the training media industry. Our industry is more centrally affected by H.R. 1029 than any other group of copyright owners, and we strongly support it! The reason: Most of us depend completely on two things sales and rentals of We have no theatrical income;
copies of our programs for training. our programs are rarely ever shown on television or by cable. We normally sell copies in the hundreds per program rather than the tens of thousands we associate with home video.
With severe piracy, estimated at 30% of sales, and with competition growing even faster than the market for our products, many of us have had a difficult year.
We are therefore alarmed by the expensive, misleading propaganda campaign launched against this legislation by electronic equipment manufacturers and some video dealers. Their constant reference to "Hollywood's big profits" doesn't change the facts: As copyright owners, it is we who suffer most if H.R. 1029 is not passed.
Soon we will commence offering products designed exclusively for adult education in the home. We feel that, in this endeavor, we
shall be turning more and more to video dealers who established themselves in the marketplace.
We look forward to working with them. Together we can fully develop both the sale and rental markets for the education and training of all Americans in the home, as well as on the job. We are prepared to make the multimillion-dollar investment to make this possible so long as it can be done in an atmosphere of confidence. H.R. 1029 will help provide that confidence!
The problem is this: Currently, because of the first sale doctrine,
prerecorded videocassette any audiovisual purchased and then rented without compensating the copyright owner. That is, unless burdensome contractual restrictions are interposed. When video dealers and other organizations are allowed to do this, our companies lose not only the rental royalty money but also a substantial portion of the potential sales market. Loss of rentals forces us to raise sales prices to include the present value of all future rental income. Higher sales prices then cause a potentially significant sales market to choose rental instead.
In terms of a business decision on how much money to invest in producing a product, or even whether it is feasible to invest at all, this situation must be considered. Production costs for our programs normally range from $40,000 to $100,000 and this amount at least doubles with the initial promotion, advertising, and marketing. The risk connected with these large investments is increasing because of the market uncertainties caused by the first
If a program costs $60,000 to produce and an equal amount to market, then those costs may have to be recovered from possibly fewer than 500 sales over a period of several years plus whatever rental income there may be. Programs dealing with vital medical procedures or management techniques in business and government can thus be greatly endangered or made prohibitively expensive to buy in the atmosphere of uncertainty that uncontrolled rental activity permits.
While we have attempted to address the problems created by the first sale doctrine by contract, there are many horror stories concerning the unauthorized distribution of our products. A common scenario involves a TMDA member company that produces a valuable training program and then sells it to an organization for internal training purposes. However, the organization decides that it can gain, either directly or indirectly, by loaning or renting the program. Through advertising the availability of the program, the organization is able to reach a significant percentage of our customers because the audience may be highly limited. The organization has taken no risk, spent no development money, and has stolen the potential market from the producer. We live with the constant threat of this possibility and have had to contend with it occasions. When you consider that certain of our members derive over half their income from rentals, you can important this issue is.
There are over 8,000 video retailers nationwide, in addition to the wide variety of businesses, industries, and government agencies to which we sell our products. It is thus impossible for us to ensure that our contracts are being honored. In addition, the cost of litigating every breach of contract case in 50 different state courts would be prohibitive. It would surely lead to unacceptably
high prices for the consumer. Moreover, if a copy falls into the hands of someone who has not signed a contract, no remedy exists.
TMDA members believe that enactment of the Consumer Video Sales/Rental Amendments of 1983 is vital to the future of our industry. No adequate remedy at law now exists to protect us. This legislation will provide a federal cause of action for copyright infringement against those who engage in the unauthorized rental of copies of our programs. With a federal standard, we will not be forced to pursue our rights in various state jurisdictions.
the new federal law would deter whose who are tempted to use Our products in an unauthorized manner, we will have less need for detailed contracts to protect our interests.
Most importantly, this legislation closes a legal gap which will protect the creative community from unauthorized use of their products. It will encourage production of new educational training programs offering the consumer a greater choice. addition, with H.R. 1029 we foresee lower sales prices than would be possible otherwise, as well as reasonable rental pricing.