Most of the promotional material finds its way into the retail stores and is offered for sale. I actually paid $30.00 for a promotional display of the Beatles a few years back.. ADVERTISING This is another wasteland in the record industry. Record companies use advertising dollars as a wedge to keep the sheep in line. In fifteen years I have never received funds to advertise any recording. One Pittsburgh retailer recently was warned if he continued renting records his co-op money would be eliminated, he quit. I spend over $1000.00 per month on advertising out of my own pocket. I had a signed contract with two major radio stations for advertising record rentals, within two days my ads were pulled from the air and my contract cancelled on one station and totally refused by the other. My sales representative told me the reason the ads were cancelled was one of the major labels threatened to pull their entire annual advertising budget for the year. The Pittsburgh Press covered this incident with a full page story on October 17, 1982. Recently one of my suppliers suggested that I could write my own ticket in advertising dollars if I discontinued record rentals. Pittsburgh has been dominated by a single chain store operation since the invention of the LP. Most of the money spent in this market for the sale or promotion of recordings is money from the major labels. They dictate what gets advertised, when and where and ultimately who gets the money. This is hardly an environment for creative merchandising of sound recordings. When the bottom dropped business in 1981 and 1982 there was no help from the industry. I started renting records from my own self financed inventory of 250,000 albums and 1,500,000 45's in order to survive. I gave record rentals much thought before I implemented my rental program. In the end it was an easy decision. I asked myself who cared about the independent record merchant, who was there to help advertise, market, merchandise, and sell sound recordings. The answer was always no one. As an entrepreneur I had to protect my own interest and investment. I received threats from some of the record people like "you better watch yourself." In reply to that I always said, “Where have you been during the fifteen years that I've tried to make a living selling sound recordings?" MARKETING This is a strange no man's land of corporate paralysis. Decisions in marketing rarely if ever take the retailer into consideration. As an example, on December 12, 1983, Atlantic Records increased three top ten albums from $8.98 to $9.98 without advance notice. That's two weeks before Christmas and more than a month after they were released at $8.98 list. This illustrates the basic disregard the industry has for their artists, the retailers, and the consumers. Another unbelievable part of the marketing story is in most markets including Pittsburgh, the biggest competition is from your local supplier. All three major one stop distributors in the Pittsburgh area operate retail stores in direct competition with their customers. The same people are responsible for co-op advertising and allocation of the funds. This is like hiring a wolf to manage your chicken coop. Another example of marketing expertise is their management of catalog product. Once I inquired at a major label for a recording that was out of print. I was willing to pay a license fee to lease the master or have them repress the record and sell them to me at the regular dealer price for 1,000 copies. This would have provided royalty income for some artist. The reply to my request was, "Bootleg it, we have no record of this recording and no longer have the master.' MANAGEMENT This falls under the label of AR (artist relations), I had a personal experience in the career of a major superstar. In 1972, David Bowie's career was stalled. He had a contract with RCA that included all his previous material recorded for Mercury, but he just couldn't get that hit record he needed to establish himself at the retail level. The record originally released in 1969 on the Mercury label was by David Bowie, titled "Space Oddity". It soared up the national charts and launched Bowie's career on RCA. Three months later, after the record was a hit, I received 100 copies of the 45 RPM record as compensation. To this date, RCA and David Bowie have never recognized my part in this historical event. COMMITMENT I wonder about the future of this industry when I discover facts like Warner Brothers Records did not have any historic information on their own releases prior to 1974 for the Elektra label. I sold them a print-out of the label in numerical sequence from my MUSICMASTER database. While working on my MUSICMASTER database, I sent a letter to every major label outlining my efforts in documenting the history of 45 RPM recordings. I also requested updated catalogs and if possible, copies of each new release to insure correct information being entered into the database on every record issued. In addition, this would give future generations a permanent sound archive for research purposes. I never received an answer from a single record company. Record-Rama Sound Archives is presently the largest single holding of 45 RPM recordings in the world. It also is the only accessible one, since it is totally computerized. Gerald D. Gibson, Head Curator of the Motion Picture, Broadcasting and Recorded Sound Division of the Library of Congress, has visited my archive and is interested in acquiring it for the Library of Congress. Sam Brylawski in charge of the reference section at the Library of Congress, is working on getting the MUSICMASTER database on-line there. SALES AND DISTRIBUTION Most independent merchants are completely shut out of buying direct from the record companies. Their sales policies are so restrictive with large minimum orders, impossible credit requirements, unreasonable return privileges, and prohibitive paper work. A large percentage of record sales personnel have been converted to order and inventory clerks for large record chains. This is in reality a subsidy provided by the record companies. No independent retailer ever sees a record salesman. CONCLUSIONS 1. Record rentals have a positive impact on retail record sales. 2. Less than 20% of record buyers tape their records. 3. The two out of every ten that tape have a substantial impact on their peers. This is the best tool ever devised for breaking new artists and creating new record purchasers. 4. Record companies are not doing the things they claim to be doing for the recording artists as outlined in this paper under the following categories: A. Royalties B. Promotion D. Marketing F. Commitment G. Sales/Distribution 5. With a track record like this how can the industry be responsible for collecting and distributing a rental fee from the forgotten independent record merchant? 6. Record companies are upset with record rental because they can no longer dictate to the independent merchant. This gives every independent record dealer the chance to compete against the monopolistic practices now controlling the record industry today. 7. Once again, the entrepreneur has an opportunity to open his own business, buy the product he feels will sell, create his own marketing plan, place his advertising anywhere he wants, and then let the consumer decide what is best. It's the American way and rightly so. 8. Since the record industry has called upon Congress to help it collect unearned royalties, Congress should demand an accounting of all past practices including management of all artist royalties, record distribution, promotion, and advertising policies. 9. A compulsory royalty on every blank tape and recorder sold in this country as proposed by Senator Mathias of Maryland is really a tax. Because recorders and blank tapes are used for other things like writing a computer program, recording a lecture or sales meeting and even recording your wedding or special event, it would be impossible to determine how the tape or equipment was being used. It's no mystery why the record companies support the Mathias bill, it would give them a new source of revenue to fatten their profits, but the government would be the collector. Somehow I can't see the copyright office collecting taxes for distribution to private enterprise. 10. Who would get this windfall of millions of unearned dollars? Only artists who have current hit recordings? What about the 60% of artists whose records are no longer available from any record company but yet account for more than half of all rental revenues? 11. Record companies could use the rental stores as the only real test market for their new product. This direct link with consumers could be used to break a new act. Radio and MTV are limited by pay lists and demographics. Record rental outlets have no such limits. The record company could even subsidize the rental to assure that the consumer would take it home and at least listen to it. It does not take long to figure out the benefits of reaching a large audience in a short time, in key cities around the country. If every renter can influence ten people and eight out of ten are not taping records, the market would explode with the demand for airplay and record availability. Thus a hit would be born. The record companies should do their homework. 12. Another part of the problem is radio airplay. If record rental is outlawed home taping will continue. Radio is available in every home for taping purposes. This means no sale will ever be made from the radio taped recordings. The distributor loses the sale, the artist loses the royalty, and the record store has lost needed income. Recently a rental customer of mine came in with a new album he had taped from a local FM station without any commercials or interruptions. The album was not even available in any record store. As a matter of fact the album had not even been released yet. The radio station had received an advance promotion copy and immediately played it on the air. In this case everybody lost. The other way people tape is borrowing from a local library or from a friend. Nothing will stop this, but I have discovered that most of my customers would prefer to rent from a rental shop because of the selection and condition of the recordings. This gives the rental rollover program we use a vast library of used records to sell at reasonable prices. This creates a chain of profits for everyone. The artist, record company, distributor, retailer, all share in this revenue as the recordings are sold off and replaced. That is why Record-Rama Sound Archives has an increse of 44% in record purchases in 1983. 13. Judging from the comments of my customers, the quality of home recorded music is much better than that of pre-recorded tapes made by the record companies. This may account for a substantial number of home tapers. New technology in playback equipment has exceeded the outdated specifications still used by most record manufacturers on pre-recorded tapes. 14. This paper suggests that the record companies are their own worst enemies. With a little concern and a return to basic business principles the industry can develop new techniques to market recordings to a very informed consumer. Rentals can be a very important part of that future. APPENDIXES APPENDIX 1 MS. DEBORAH LEAVY, EDUCATORS' AD HOC COMMITTEE ON COPYRight Law, Assistant Counsel, Subcommittee on Courts, Civil Liberties, and the Administration of Justice, RHOB 2137B. Dear Ms. Leavy: I have enclosed for you five copies of my corrected addendum to my statement on Copyright Law Before the Subcommittee on Courts, Civil Liberties and the Administration of Justice of the Committee on the Judiciary, House of Representatives on H.R. 1027 and H.R. 1029. Please see paragraph six of the addendum for the correction. Thank you. Enclosures. AUGUST W. STEINHILBER, Chairman. ADDENDUM TO Statement of August W. STEINHILBER FOR THE EDUCATORS' AD Hoc COMMITTEE ON COPYRIGHT Law Before THE SUBCOMMITTEE ON COURTS, CIVIL LIBERTIES AND THE ADMINISTRATION OF JUSTICE OF THE COMMITTEE ON THE JUDICIARY, HOUSE OF REPRESENTATIVES ON H.R. 1027 AND H.R. 1029 The Educators' Ad Hoc Committee on Copyright Law met all morning in an effort to negotiate language on H.R. 1027 and H.R. 1029 which would remove our objection to these bills. I am pleased to announce that we have reached an agreement with the music industry (The Coalition to Save Americas' Music) on the following language: "Nothing in the foregoing proviso shall apply to the rental, lease or lending of a phonorecord for nonprofit purposes by a nonprofit library or nonprofit educational institution." By agreeing with this language as part of H.R. 1027 we obtain the complete exemptions and would no longer oppose the bill. However, as in nearly every commercial copyright issue, we do not support the proposed legislation-on the issue we become neutral. We have also met with a representative of the Motion Picture Association of America on H.R. 1029. And I am pleased to say that we have agreed on the following language: "Nothing in the foregoing proviso shall apply to the rental, lease or lending of a copy of a motion picture or other audiovisual work for nonprofit purposes by or to a nonprofit library or nonprofit educational institution." The slight difference in language was necessary to protect the current lawful distribution arrangements which education institutions enjoy with firms such as Films Inc. and to guarantee our exemption from the rest of H.R. 1029. As is the case with H.R. 1027, we no longer object to H.R. 1029, however, under our general rules of not supporting commercial interests we do not support H.R. 1029. STATEMENT OF WILL ESPIN IN OPPOSITION TO H.R. 1029, THE CONSUMER VIDEO SALES RENTAL AMENDMENT OF 1983 Mr. Chairman and distinguished members of this Subcommittee, I am appreciative of this opportunity to offer my views in opposition to H.R. 1029. My name is Will Espin and I currently am the President of Multi-Video, Inc., a North Carolina (704) corporation. My experience in the video industry for the past four years has allowed me to closely witness the growth of the pre-recorded tape industry and to come to know the video consumer. My interest lies in the pursuit of a fair and just resolve to this issue. You may, of course, discount my comments since I am part owner of a video store in North Carolina and may have a slanted view of this issue. Please look past my involvement in this business and instead evaluate the points I make on their own merit. This morning I attended the hearing in Rayburn 2226 and felt compelled to submit this testimony. As an eyewitness to the proceedings it seemed to me that the Subcommittee members had some difficulty in maintaining a high interest level in the testimony being presented. Please understand that I am not criticizing the distinguished members of the Subcommittee. I too had trouble concentrating on the proceedings. There is an explanation and it has a great deal of relevance to the discussion surrounding H.R. 1029. It is my opinion that the Subcommittee is faced with what may appear to be two greedy factions at odds over the money being generated by video cassette rentals. In the spirit of justice and fairness it seems almost ludicrous to hear so much ado about money. This distraction has caused many people to overlook the underlying issues and principles involved. The main question should be, "Is it fair and just to extend to the owners of copyrights of video cassettes the protection they seek under H.R. 1029?” There are several reasons why I feel it is unjustified. 1. The enactment of H.R. 1029 would be no more than a patchwork remedy. We as a nation would be amending our copyright laws to cover just one aspect and one product that has evolved in modern day technology. It is simply not feasible to amend our laws each time a new product or product form is introduced to the marketplace. Would the Subcommittee be eager to hear proposals for amendments to the law to cover copyright provisions for computer programs, for cable t.v. services, for telecommunication developments for microprocessor applications? I think not. The problem that needs to be addressed is how to amend our copyright laws so that broad definitions can be enacted to bring our legislation up to date with advancing technology. The principle of the first sale doctrine has stood the test of time and has served as a foundation for the way business is conducted in America. There is no justification in running the risk of judicial chaos as would be inevitable following the weakening of first sale. If H.R. 1029 is passed, many copyright owners will petition for equal protection under the law-as guaranteed in the first section of the Fourteenth Amendment-seeking to share in after sale revenues whenever their products are used to generate profits. I must agree with the argument that actors and other creative people involved in the movie industry deserve to be fairly compensated for their talents and efforts. However, there is no basis for the assumption that this compensation is not possible without H.R. 1029. Any actor or creative talent becoming involved in the production of movies and video cassettes is well aware of the rental industry that exists today and should take this into consideration when signing their contract. Anyone involved has a freedom of choice in agreeing to produce a film or not. The consumer should not be compelled by law to relinquish any of his ownership rights to guarantee a more lucrative atmosphere for those involved specifically with the movie industry. The concept of justice is difficult to measure and define. A simple test for fairness might be to pose the question, "Is the person or group seeking privilege willing to concede the same privilege to others?" For example, is the motion picture industry also willing to become liable to reimburse the copyright and patent holders on the cameras they use for movie production? After all, the creative talents that went toward the develoment of sophisticated camera equipment may argue that their ef forts are not being rewarded and the movie industry is taking advantage of their inventions for commercial gain. The same would apply for the copyright and patent holders on typewriters, copiers, clothing used on screen, etc. I tend to think that the movie industry would oppose such an arrangement. 2. The passage of H.R. 1029 would result in an increase in crime. The incidence of movie piracy and copyright infringement will drastically increase. The consumer will not pay higher prices for the acquisition of video tapes. Their budgets are limited but their appetites for video cassettes are not. As it becomes more expensive to rent tapes consumers will be enticed to make illegal copies and circulate them among friends and relatives. Bootlegging will flourish as the cost of obtaining legitimate rental video cassettes increases. Drawn to bootleg tapes by |