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their contributions this morning. If you get a copy of that survey, Mr. Lara, we would appreciate having it.
Mr. LARA. Be happy to provide it, Mr. Chairman.
Mr. KASTENMEIER. Thank you.
I also would like to put into the record a communication I received this morning from the Consumer Federation of America. It read:
At a Consumer Federation of America's annual meeting on Saturday, February 18, 1984, the CFA membership passed the following resolution:
"Consumer Federation of America strongly opposes any legislation to repeal or create exemptions to the first-sale provision of the Copyright Act, copyright owners deserve just compensation for their work products. However, by fixing prices and artificially limited supply pending legislation would abrogate important anti-trust protection that help to maintain competition in home entertainment. The first-sale doctrine should remain intact."
We urge the committee not to approve House Bill 1029, which is now pending. Al Luzi, President, Consumer Federation of America.
[The mailgram referred to follows:]
CONCERNED CONSUMERS LEAGUE 614 WEST NATIONAL AVE MILWAUKEE WI 53204 11AM
4-0107675102 04/11/84 ICS IPMBNGZ CSP WHSB
4146451808 MGM TDBN MILWAUKEE WI 112 04-11 1101A EST
REPRESENTATIVE ROBERT KASTENMEIER
AT CONSUMER FEDERATION OF AMERICA'S ANNUAL MEETING ON SATURDAY,
"CFA STRONGLY OPPOSES ANY LEGISLATION TO REPEAL OR CREATE EXEMPTIONS
WE URGE THE COMMITTEE NOT TO APPROVE HOUSE BILL 1029 WHICH IS NOW
AL LUZI, PRESIDENT, CONSUMER FEDERATION OF AMERICA
614 WEST NATIONAL AVE
MILWAUKEE WI 53204
TO REPLY BY MAILGRAM MESSAGE, SEE REVERSE SIDE FOR WESTERN UNION S TOLL FREE PHONE NUMBERS
Mr. KASTENMEIER. Thank you very much, gentlemen, for your contribution.
I would like to greet our last witness this morning. Actually, he is an old friend of the committee and has been before us on a number of issues. He is Mr. Jack Golodner.
Mr. Golodner is director of the Department for Professional Employees of the AFL-CIO. He is a graduate of the Yale Law School and Cornell University School of Industrial and Labor Relations, and he has been a member of a number of prestigious governmental advisory commissions.
Mr. Golodner, we are very pleased to welcome you and you may proceed as you wish.
TESTIMONY OF JACK GOLODNER, DIRECTOR, DEPARTMENT FOR PROFESSIONAL EMPLOYEES, AFL-CIO; ACCOMPANIED BY ROBERT F. GUTHRIE, ASSISTANT DIRECTOR, DEPARTMENT FOR PROFESSIONAL EMPLOYEES, AFL-CIO
Mr. GOLODNER. I don't know how one follows such a gracious introduction.
Thank you very much, Mr. Chairman, and once again, I extend my grateful thanks to you for making this hearing possible and for giving me the opportunity to participate.
With your permission, Mr. Chairman, I am joined by Robert Guthrie, who is assistant director of our Department for Professional Employees.
Mr. Chairman, as you know, I am here today to state our strong support for H.R. 1029. By way of background, I might explain that the Department for Professional Employees of the AFL-CIO comprises 26 national and international unions, which represent approximately 2.5 million people employed in virtually every professional field.
Now, among them are the performing artists, actors, musicians, singers, dancers, and the many craft and technical people who make up the majority of employees in the motion picture production-in the motion picture industry.
I can't help but comment, Mr. Chairman, that I believe the overwhelming number of these people are not too impressed with the alligator tears being shed in their behalf by the video cassette retail operators.
Also represented in our department are engineers, teachers, social workers, pharmacists, nurses, and others, many of whom, I am sure, buy and rent the prerecorded video cassettes, which are the subject of H.R. 1029, and many of whom know that there is no such thing as a free lunch; that they will not in the future get the best the performing arts of America have to offer unless the creators are amply rewarded and provided with the incentive to continue producing high-quality products.
The first-sale doctrine provides that a copyright owner's exclusive right to sell, or otherwise distribute a copy of a copyrighted work does not extend beyond its first sale. Now this doctrine is a judicial construct of the late 19th century. It was developed so as to allow libraries and individuals to loan, sell, or give away books which they had bought. As incorporated into the copyright law, the
first-sale doctrine now applies in this day of high tech to the sale of video cassettes. This is a result that was not originally intended, and which distorts the play of market forces on the sale and rental of video cassettes and substantially increases their sales price in most instances.
I understand that rentals today constitute over 90 percent of all end-user transactions with regard to video cassettes, while fewer than 10 percent are sales. Yet the copyright owner, and by extension, the artists and craft people who make it all possible, are prevented from participating in the profits flowing from those rentals because of the first-sale doctrine.
Since the doctrine permits any purchaser to sell, lease, rent, or otherwise distribute any video cassettes as he or she see fit, it has effectively prevented the development of a price system based on the realities of the marketplace, which in reality is two markets: a market for those who buy for personal use and a market for those who rent.
Thus, copyright owners are forced to realize their profits from video cassettes exclusively through sales with the sales price established to maximize those profits and ensure a return on their investment. The result has been a sales price at the retail level which in most cases is estimated to be about twice as high as it would be if not for the distortions caused by the first-sale doctrine.
Why is this so? We have heard much about the risks which the retailer or the renter of these products has to undergo. In previous hearings, however, you were told about the risks which the producer must undertake and they are very high. The producer in the entertainment business is in sort of a crap-shoot. There is a saying that "You can make a killing in this business, but you can't make a living."
Sure, it is possible to have a "Tootsie;" it is possible to have a "Star Wars." We don't hear about the millions and millions of dollars that are invested in productions which never even return the first dollar.
Because of fads, because of the tastes of the American public, which are very mercurial, the producer must undertake great risks. He is guaranteed nothing. We heard testimony this morning about the retailer who is worried about investing in an inventory that may not have a market. Well, Mr. Chairman, what about the producer who has to assemble the many, many people and many millions of dollars to make something which he is gambling the American public will like. And he is gambling really over nothing that can be scientifically estimated but rather over a matter of taste.
So he has to recoup his investment if he is going to keep producing these kinds of long shots; if he is going to keep experimenting; if he is going to keep being creative. It is the nature of a creator to challenge; to be out on the frontier; to dare to do new things. But he must get a return under present law strictly from the sale of that product.
It is a little like asking the first person in a box office line at the theater to pay for everybody else, because it is the person who first buys that product, that production on tape, who has to pay for everything that has gone before; has to ensure that future products
are going to become available. That is the situation under the present law.
In many of the art forms, to get around this, it is necessary to extend the risk throughout the marketplace so that those who use those who benefit from the product will pay a small share of the cost of making it possible. In this way, none of the consumers, none of the enjoyers of this product are unreasonably taxed.
But the first-sale doctrine places the entire burden on that one person or that individual or that store that buys it first. For the many purchasers of video cassettes-I am talking about the consumer here, those who want to own a particular movie for a particular reason, those who purchase for their video cassette libraries, those who live in remote or rural areas where video cassette rental outlets are not accessible, the effect of the first-sale doctrine is obvious: Substantially higher prices must be paid.
Less obvious, but nonetheless important for the subcommittee to consider is the impetus given by these high prices to video cassette piracy and both legal and illegal home taping. And yes, Mr. Chairman, it is only a matter of a few years before video taping, tape-totape, will be as prevalent as audio taping is today.
If you want assurances that the retail price will be lowered this legislation provides it. Certainly the enactment of H.R. 1029 could be justified on the basis of the effect it would have in lowering the retail price of video cassettes, but we have additional reasons for supporting enactment of the legislation.
În recent years, our department has engaged in a program designed to acquaint the officers and members of its affiliated unions with the predictable effects of technological change on professional and technical workers, including those who work in the arts, entertainment and media industry. I am speaking here of technological changes which are coming with great rapidity such as cable television, which we know about, the transition to fiber optics, program retransmission via satellite, direct satellite broadcasting to the home, the compact disk, and of course, the video cassette recorder. Insofar as American artists and supporting technical people are concerned, recent technological changes have been a mixed blessing at best. The advent of the sound recording, coupled with broadcasting, jukeboxes, and various wire services displaced tens of thousands of singers and musicians from restaurants, cabarets, dance halls, and broadcast stations. To a very limited extent, this loss was offset by the new recording industry.
But now relatively inexpensive, yet sophisticated copying devices are destroying the markets established by these artists and the other producers of filmed, taped, and other forms of recorded performances. Thus further exacerbating the uncertainty facing those who choose careers in the performing arts and related occupations. For these people, the new technologies have, over the years, come to mean greater unemployment and underemployment, declining incomes, the loss of important training grounds, fewer and less varied opportunities. Unfortunately, these effects have their consequences for the consumer in the form of less variety and diminished quality in the American-made product.
Compounding this problem is a Congress which too often is reluctant to bring our Nation's laws into tune with the changing times