The CHAIRMAN. How do they arrange their charges?

Mr. McDONALD. So much per hour for various concerns to put on programs and thereby get the publicity. That is the only station doing that.

Senator BROUSSARD. That is not a charge to the public, but it is a charge to the individual who uses it?

Mr. McDONALD. To the individual who uses it. The only station that is endeavoring to collect from the public now is the one owned by the Sweeny Automobile School in Kansas City.

Senator DILL. Do I understand, then, that some people are paying for the right to put their production out and others are charging for the permission to put it out?

Mr. McDONALD. Yes; that is correct.

Senator BRANDEGEE. Of what does a broadcasting station consist? I do not mean to go into the technical detail of it, but perhaps you could answer by stating whether or not there is a standard price for one or are there all prices?

Mr. McDONALD. There are all prices. The Western Electric Co. sells a 500-watt station for $11,000. By the time you get that station installed with a proper sound-proof, echo-proof studio it will cost at least $20,000. If the situation is erected patterned after many of stations throughout the United States, such as the Drake Hotel station in Chicago and the Kansas City Star station, the Chicago Daily News station, and the Chicago Tribune station, I do not believe they could get out under $50,000.

Senator BRANDEGEE. It does not necessarily involve a separate building, does it?

Mr. McDONALD. No, not necessarily; but most stations have their master control, that is their actual station will be located in one point, and it will have remote controls all over the city. For instance, if some one comes here to Poli's Theater, they can take that up and broadcast it.

Senator BRANDEGEE. Do the manufacturers of these stations sell as many of them in a particular section of the country or a particular city as anybody wants to buy, or do they restrict the number in a particular city or section?

Mr. McDONALD. I do not know whether they actually restrict them, but it has been very difficult to buy stations in certain localities.

Senator BRANDEGEE. I did not know whether there was any attempt on their part to divide or apportion or limit a territory. Mr. McDONALD. I do not believe they have done that.

Senator BRANDEGEE. You say that the original price of the outfit proper is about $11,000, but after it is installed it gets up around $50,000.

Mr. McDONALD. Yes, sir.

Senator BRANDEGEE. Then, they are practically all about the same cost?

Mr. McDONALD. Oh, approximately.

Senator BRANDEGEE. What does it cost to operate? That may be a question that is difficult to answer. Of course, it would depend upon how much you operate and what kind of talent you get, but can you give us any idea?

Mr. McDONALD. The lowest cost would be $20,000 a year, and I believe it goes up to $200,000 a year.

Senator BRANDEGEE. If you give that service free, what is your object in doing it?

Mr. McDONALD. As I told you, our object is pretty much because I have the fever and like to continue it. We could discontinue it to-morrow.

Senator BRANDEGEE. Then, it is no profit to you?

Mr. McDONALD. Absolutely not.

Senator BRANDEGEE. You are not in it for gain?
Mr. McDONALD. No.

Senator BRANDEGEE. Are there broadcasting companies that are in it on a commercial basis for making profit?

Mr. McDONALD. None except this one station that is charging, the American Telephone & Telegraph Co.

Senator BRANDEGEE. Do you think that most of the broadcasting stations are in the business at this expense simply because, as you express it, they like it or they have the fever?

Mr. McDONALD. No; there is also possibly that asset of building good will.

Senator BRANDEGEE. If they get an equivalent in good will instead of money, that is a profit, and it is to their advantage to do it. That is the reason they do it, is it not? They do not do it for the mere love of handling the instruments?

Mr. McDONALD. I do not think they all do, but there are many of them that do.

Senator BRANDEGEE. The professional broadcasting stations, you mean?

Mr. McDONALD. Yes.

Senator STANLEY. The more broadcasting stations there are the more people there are who buy these sets to catch this music and information.

Mr. McDONALD. I really think there would be more radio apparatus sold if there were less broadcasting stations in certain localities. Senator BRANDEGEE. Of course, I can see that a radio manufacturer might be interested in maintaining a free broadcasting service to popularize and hence increase the number of stations that he could self; but are there many men who are not radio manufacturers who maintain broadcasting stations, paying as much as $50,000 therefor, rendering service free, who are not connected with any business relating to the radio business?

Mr. McDONALD. Yes; there are a great many of them.

Senator BRANDEGEE. What is their purpose? What is their motive?

Mr. McDONALD. I can not tell you that.

Senator BRANDEGEE. Is it purely philanthropic?

Mr. McDONALD. We have just outside of Chicago a station owned by one Mr. Erbstein. Mr. Erbstein is a criminal lawyer. His name is never mentioned over the air. Still he continues this broadcasting. Why, I do not know. He is receiving no remuneration for it, as far as I know. Then, there is the Zion Church, north of Chicago. There is a school for chiropractors in Davenport.

The CHAIRMAN. Outside of the question of good will, in what manner could a broadcasting station make commercial profit?

Mr. McDONALD. In no way except by selling their services, and just the moment they started selling their services and put obvious

advertising on the air that station would be killed. The public would take care of that. There would be nobody listening to it.

Senator BRANDEGEE. There is no way by which they could collect from those who receive it over their private radio apparatus, is there?

Mr. McDONALD. There have been advanced probably two or three methods, none of them practical. I do not believe it can be done and we do not want to do it.

Senator BRANDEGEE. And when you say that nobody was in it for profit, you mean the only way to make a profit would be to sell it to somebody who wanted to advertise? Sell his services, I mean.

Mr. McDONALD. That is correct.

Senator BRANDEGEE. You say that the public would immediately recognize that that was advertising matter. Could it not be so disguised as to deceive the public?

Mr. McDONALD. Well, it is hard to draw a line there, Senator, where advertising starts and where it stops. We can take a front page of a morning paper and point out several ads. It is called publicity. There is not any pay for it, but it is better advertising than the back page of the paper. That is obviously advertising.

Senator BRANDEGEE. You can not always tell. If a paper really wanted to disguise advertising as news service, it could be done so that you could not identify a single specimen of it, I suppose, or, at least, everybody would not agree that it was for advertising purposes.

Mr. McDONALD. I think I can best answer you in this way: Every time we put on an artist, what does that artist receive? We advertise that artist. We mention the name of the artist. Now, that is advertising. If a program is supplied to us through the courtesy of some music company, that you may call advertising for that music company. That is the only reason they do it.

Senator BRANDEGEE. I would say that would be perfectly legitimate, if you are willing and the artist is willing to sing and let the public hear it for nothing. That is a matter between you and the opera singers.

Mr. McDONALD. On the other hand, were we to accept a commission from a department store to advertise one of their sales, the public would not listen to it.

Senator BRANDEGEE. Senator Dill, may I inquire if there is a corresponding bill to this in the House?

Senator DILL. Senator, there is a bill in the House, I think, introduced by Congressman Newton, that covered theaters and the use of phonographs in different places, and I modeled this bill after that. Senator BRANDEGEE. This is not a duplicate, though?

Senator DILL. It is, except that I added radio.

Senator BRANDEGEE. It does not touch this question of radio, then, the House bill?

Senator DILL. No.

Senator BRANDEGEE. Have there been any hearings on this proposal in Congress at all, or is it entirely a new matter?

Mr. McDONALD. It is entirely a new thing, so far as radio is concerned.

Senator DILL. Mr. Chairman, with your permission, I will now call on Mr. Klugh.

Senator BRANDEGEE. Mr. Chairman, has there been any understanding or arrangement about the division of time of the hearing of this matter?

The CHAIRMAN. None for this reason: Those who are opposed to the bill have requested a hearing next Thursday, to-morrow one week, and if that time suits you and also Senator Broussard the hearing will be set for that time. We will not hear those who are opposed to the bill to-day.

Senator BRANDEGEE. It is only the proponents of the bill who are to be heard to-day?

The CHAIRMAN. Yes; unless some one here wishes to be heard.

OF

STATEMENT OF MR. PAUL B. KLUGH, EXECUTIVE CHAIRMAN THE NATIONAL ASSOCIATION BROADCASTERS, 1265 BROADWAY, NEW YORK CITY

Mr. KLUGH. Mr. Chairman and gentlemen, I would like to say with respect to these telegrams, that we have been somewhat surprised ourselves by the responses, and we feel that perhaps they placed upon the gentlemen of this committee a burden of answering or a feeling of obligation to answer that does not set so well.

The CHAIRMAN. If you will lend us your radio, we will answer in that way.

Mr. KLUGH. I feel that we can try to cure the trouble that we have made by offering to have an announcement made from those stations that made the original announcement, saying that their telegrams were received, so that they will feel that they have not been slighted.

The CHAIRMAN. Suppose you attend to that for us.

Mr. KLUGH. We will do that. Unless there are some personal messages that you want to take care of you may assume that we have taken care of the answering from the same source from which they were generated.

This controversy over the copyrighted music has been one that has annoyed broadcasters considerably. They are not men who are in the habit of quibbling over the payment of a few dollars, but they are men who are interested, I believe, in the principle involved, and I can say from my own knowledge that these men, when the controversy or question first arose, approached it with an open mind and an honest manner to find out just exactly what their position was or is with respect to copyright music. They employed the best counsel they could obtain, and they asked that counsel to review the matter impartially and give their opinions. In seeking to find out just what was the genesis of the argument they not only made a careful study of the copyright act of 1909, but they went back into the records surrounding the passage and the formation of that act with the view of finding out what was the intent in the minds of the men who framed and passed the measure and put it upon the statute books.

As far as they were able to determine, there was a desire to protect a copyright owner against a public performance of his property for profit, and the whole question seemed to revolve around that phrase 'a public performance for profit."

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Anyone could quite readily see, and there could be no question, but that upon the fundamental question after a man composed an opera and produced it in the theater, no one should have the right to open up across the street and confiscate the idea of his brain and what he had produced. In other words, the fundamental intention of that copyright act is perfectly apparent, and as we pursued the matter further we could quite readily understand the decision which has been quoted so frequently in the case of Herbert v. Shanley in New York, wherein Judge Holmes pointed out that the use of a copyrighted number there was a public performance for profit within the meaning of the copyright act, because obviously the cost of the entertainment was in the price of the food.

Senator DILL. That was not a broadcasting station?

Mr. KLUGH. No; this was some years prior to broadcasting. It had no reference to it.

We can see that if, for instance, a theater, or a moving-picture show, or a circus, or any type of public performer who uses copyrighted music is required to pay a license fee for the use of that copyrighted music, he can load it on to the price of the admission ticket and that very day collect what he is required to collect to pay for that expense.

But in the case of broadcasters, when that theory was applied it was difficult to follow through with the same line of reasoning, because, as has already been pointed out here by President McDonald, there is no way of loading this tax, if we may call it that-if this situation is not cured there is no way of directly loading it onto the public.

A boy can go into a Woolworth store and buy the component parts of a receiving set for a few dollars. He can put it in operation and can listen to all of this broadcasting without any payment or any method of collecting from him. So that broadcasting has in reality and with few exceptions assumed the position of a public service.

The people who own these sets and reach up into the air for this entertainment, this diversion, and this culture which may come from the intellignece conveyed by radio treat it as a public service.

If you were to sit in the office of a typical producing station and review the correspondence of one day, I dare say you would be amazed, gentlemen, by the type of letters coming in. I refer not only to people in isolated districts, such as President McDonald has referred to, but invalids, shut-ins, to whom radio brings certainly great relief from their physical and mental worries. I refer to the blind, who are certainly much benefited by hearing things going on in the world, and I also refer to a great class of people, larger than I had any knowledge of, the people called deafened people as distinguished from deaf. It seems that deafened people can through radio hear what they can not hear with even these devices provided for hearing.

We had a letter from the president of the New York League for Deafened People-and I am not sure that is the correct title, but that is descriptive of it, at any rate-in which he stated that from the age of 10 years he had never heard music played nor a public speaker. He had heard nothing from a platform. In other words, he had been shut out, and he had crawled into his shell and had made up his mind to end his days obtaining what he could through his eyes from reading, but when radio came along he found that he could hear music and he could hear lectures, and he could obtain what he had never heard since the age of 10 years.