to note that CATV systems to date have not sought to obtain license's, either from the networks or from other copyright proprietors or licensees, apparently pursuant to policies laid down by their national association.

12

As another possible anti-competitive effect, the Department suggests that if CATV systems are allowed by the Congress or by the FCC to originate programs, they should be allowed to compete with networks and that under the circumstances of such competition it would be "clearly undesirable to allow networks to use their ownership or control of program copyrights to extend their power into ownership of CATV facilities, or to limit the independents of CATV operators." CBS has never asked to be protected against fair competition from another medium and, indeed, filed comments in FCC Docket 15971 opposing CATV regulation on the ground, among others, that broadcasters were not entitled to erect "electronic tariff walls" against CATV competition.13 But the competition must be fair competition. No television station in any community is allowed the privilege of competing with any other station in that community by utilizing the other station's programs, without compensation, to build circulation for its own programs. There is no copyright question as to whether or not CATV systems should be allowed to originate programming. No copyright legislation should prohibit them from doing so. The question is under what circumstances they shall be allowed a copyright exemption. If they desire an exemption so as to be free of the obligation of compensating a copyright proprietor for programs retransmitted by them, it seems to us reasonable that they should not use the savings so realized in order to compensate another copyright proprietor for programs originated by them which compete for audience attention.

The Department also argues that copyright liability for CATV systems is not essential to the legitimate interests of copyright proprietors. It states that CATV transmission should increase royalties paid for programs even if CATV systems pay no royalty, and urges that the imposition of liability would force CATV viewers, in effect, to pay authors twice for the same programs. To the extent that this statement has any validity, we think its underlying objectives are adequately met by the copyright exemption proposal which we advanced in our principal testimony. The argument has little validity, however, with respect to the local programming of television stations. It must be borne in mind that the most characteristic type of program which CATV systems seek to import from distant communities, is the programming of independent (non-network) stations, as well as the non-network local programming of distanst network affiliates." In this situation, where the signals of a station are imported by a CATV which is 50, 100 or more miles away, the local sponsor often does not desire or pay for circulation in the distant CATV community. A Los Angeles automobile dealer gets no advantage from having his program seen on a CATV system in New Mexico. Nor does the author's royalty, deriving from such automobile dealer's sponsorship, take into account the circulation achieved in a New Mexico community. Indeed, the author anticipates that his work will subsequently be licensed to a television station in the New Mexico area and he may even anticipate licensing it directly for CATV system origination there if no local stations are available.

CBS recognizes that the licensing of CATV systems to retransmit copyrighted material is not free from antitrust problems. But it does not believe that an amendment of the copyright law is needed in order to effectively enforce the antitrust laws in this area of activity, any more than such is required in any other area of activity dealing with the licensing of copyrights to entertainment and information media. In this connection, we note that the 100 UHF television stations as a group, according to the recent official compilation released by the FCC, showed a net loss in 1965, nor do all VHF stations yet show a profit from their operations. If a CATV system in such a market is to be permitted free use of copyrighted material imported from distant stations, it is difficult to see why, on the same reasoning, stations in such a market, particularly those which are economically marginal, should not have a similar privilege.

12 Many CATV systems now originate programs and some license feature motion pictures and other copyrighted material direct from copyright proprietors for such origination. 18 CBS also stated that "it is an unwise policy for the Federal government to intervene and abort the normal processes of the free competitive marketplace to protect one group of businesses against the competition of another group." Comments of CBS in FCC Docket No. 15971, July 22, 1965.

14 The great majority of communities where CATV systems are located receive some local service, usually including network service from local network affiliates. CBS' pro

posal for CATV copyright exemption would free CATV systems of any copyright liability for retransmission of the signals of local stations.

In essence, the Department recommends that CATV systems should be treated as unique, that they should obtain a complete exemption from the copyright law and that any maladjustment resulting from this should be corrected by FCC rules "finely tailored to meet particular situations," not by operation of the marketplace.

We would like to suggest that a free market in copyrighted material has contributed greatly to the strength and growth of the entertainment and informational media in this country generally. In the broadcast industry in particular, it has served to furnish more than 800 television stations and more than 5,700 radio stations with copyrighted material without any prior suggestion, so far as we know, that copyright proprietors serving this field were abusing the copyright monopoly-save only in the case of small performing rights in music where the Department of Justice sought and obtained a consent order under which a unique copyright pool concerned with music rights has been regulated by the courts. There is nothing in this experience to suggest that the Department of Justice is or would be helpless to prevent abuses of the copyright monopoly.

In any event, we believe that the proposal which CBS has made in these hearings for a limited copyright exemption for CATV systems meets the basic requirement, advanced by the Justice Department, that copyright revision should "take account of communications policy and distinguish between different CATV operations for the purpose of copyright liability."

Sincerely,

R. W. JENCKS.

Senator BURDICK. Miss Evelyn F. Burkey of the Writers Guild of America.

STATEMENT OF MISS EVELYN F. BURKEY OF THE WRITERS GUILD OF AMERICA

Miss BURKEY. My name is Evelyn F. Burkey. I am the executive director of the Writers Guild of America, East, Inc. The Writers Guild of America, East, Inc., and the Writers Guild of America, West, Inc., are separate membership corporations but for other than administrative purposes they act together nationally as the collective bargaining representative for writers in the fields of motion pictures, television, and radio. They have been jointly certified by the National Labor Relations Board.

The guild has negotiated minimum basic agreements with motion picture and television producers which establish the framework for the relationship between the writer and the producer. Individual contracts are negotiated by the writer or his agent with representatives of the producer.

A writer must have copyright protection for the works which he creates if he is to earn a living as a writer. He needs copyright protection even when he writes a script for motion pictures or television under the "for hire" provisions of the act.

The compensation which the writer receives, whether at the minimum rate or a higher rate because of his talent and professional standing, bears a direct relationship to the producer's expected return from the exploitation of the property resulting from the motion picture or television production of the writer's script. The writer receives a specified initial payment at the time he performs his writing services. He is also entitled to receive deferred payments which are contingent on additional or different uses of the material which he created. The professional writer counts on the probability of receiving these deferred payments as part of his expected annual income. For example, for a script for a motion picture costing $250,000 or more, the writer's minimum initial compensation would be $4,504.50.

He would also expect to receive additional compensation if there were uses other than theatrical exhibition. Thus if a motion picture were released for television use, an additional payment would be due to the writer amounting to 2 percent of the producer's accountable receipts (as defined in the basic agreement).

With respect to a script written for television, the writer's minimum initial payment would be $2,402 for a 1-hour film costing $50,250 or more. There would also be additional compensation for television re-runs, geared to subsequent uses on the same station or in the same city, with specified amounts payable for each of these subsequent uses. These payments could reach a total of 150 percent of the intial pay

ment.

Writers depend on rerun payments in order to arrive at an overall total of compensation which would make it possible for them to continue writing in this medium.

It is not economically feasible for producers to make initial payments which would take into consideration all possible contingent uses. It is a practical approach to make these payments as the additional uses occur and the producer thus has additional income resulting from such uses.

A producer's ability to grant exclusive licenses and to control exhibitions in market areas determines to a most important extent the amount of income which he may expect to receive. As noted, the amount of income received by a producer affects the amount received by the writer.

To permit CATV companies to operate outside the restrictions of either the present Copyright Act or as originally proposed in H.R. 4347, would be to undermine the financial structure of motion picture and television productions. It is our belief that the proposed amendments to H.R. 4347, which would divide CATV activities into three broad categories with differing copyright provisions, would create many problems of enforcement in addition to diminishing the copyright protection afforded writers.

On behalf of the Writers Guild of America and its members, I wish to express our appreciation for being given the opportunity to be heard here today.

I should also like to ask for permission to submit a reply or comment on some of the statements made by Mr. Zimmerman. At the risk of being too facetious, I might state that for a while I felt like I was Alice in Wonderland.

Senator BURDICK. Thank you for your testimony. As I stated before, the record will remain open for 10 days for your statement and other statements.

Miss BURKEY. Thank you.

Senator BURDICK. What would you recommend this committee do? Miss BURKEY. Our recommendation is to continue the copyright protection. Going back to the early days of CATV, the authors have granted all the incidental rights necessary for the public to be able to receive the programs which are broadcast or exhibited. There is no reason to believe that they would change that position.

We do differentiate between reception in the home and rebroadcast or retransmission by persons who are receiving money for carrying programs in areas other than those for which they were intended. And I believe that our collective bargaining agreements indicate this.

We have granted this incidental use to the stations and the networks to be able to use the supplemental means of affording programs to the public.

Senator BURDICK. Could I characterize your answer by saying that you want no exemption?

Miss BURKEY. We do not believe a formal exemption is necessary. We believe that the networks, the stations, anyone else who is transmitting, will try to get as wide an audience as possible consistent with the market area they are serving and with reference to the sponsors, they definitely are interested in market areas and in exclusivity within market areas.

Senator BURDICK. Mr. Zimmerman of the Justice Department made the case substantially as follows, as I recall it, that since station X has a viewing area that it fills, that it has paid for all copyrighted material and that any rebroadcast within that area by CATV would be a double payment. Would you care to comment on that?

Miss BURKEY. I do not believe it would be a double payment because the station itself may not have paid for the program. It may be getting some share of proceeds which someone else is receiving based on that operation or that broadcast.

I think also you have to distinguish, as Mr. Jencks did, between a CATV operation which is picking up and retransmitting for physical reasons or otherwise within exactly the same area and carrying the program to people who would not otherwise be able to receive it. There is no direct cost attributed to a sponsor's product that is being paid by the consumer which is a statement that was made in this sense, because you may have regional sponsors, you may have local sponsors, you may have no sponsor for many of the programs for which the writer gets paid.

Senator BURDICK. Let us take the hypothetical case here right down to station X again, where station X has paid for a copyright.

Miss BURKEY. Yes.

Senator BURDICK. They show a movie, for example. And they show that movie in their regular viewing area. Z, as CATV, picks up that signal on rebroadcast. The contention of Mr. Zimmerman is that station X has already paid for the use of that copyright, and it should not be paid for another time by Z.

Miss BURKEY. The amount which the station paid would have been relative to its own broadcast and the number of persons reached by its own broadcast.

Senator BURDICK. Well, station X has the right to broadcast in, we call it contour B, for example, a certain physical area. They have the right to place their signal in that area.

Miss BURKEY. But they also would know how many homes they are able to reach in that area, and if the CATV people are duplicating their facilities, you are not reaching a different audience. You are reaching the same audience.

Senator BURDICK. In other words, then, you disagree with Mr. Zimmerman on that point?

Miss BURKEY. Yes, Senator; I do.

Senator BURDICK. Even though station X has the right to reach every person in that area.

Miss BURKEY. Yes; they do, but if the listeners, the viewers in that area are going to the cable system instead, they are not watching the station that is paying for the right to perform.

Senator BURDICK. This is just for the purpose of getting information.

Miss BURKEY. And sponsors are interested in how many people are watching the station where they are paying for the product, not some other station.

Senator BURDICK. Is it not station X's responsibility to see that they cover their viewers in that area?

Miss BURKEY. It might well be. Perhaps

Senator BURDICK. That is why they have a license to broadcast, is it not?

Miss BURKEY. That is why they were licensed to broadcast, but the premise, Senator, was that CATV is reaching other people or different people than the station's facilities made it possible for them to reach. If not, you have a duplication of services for which there would appear to be no need.

Senator BURDICK. Well, it is not quite that clear. As I understand the testimony before this committee there are many areas in this specific territory that do not receive good signals and that it is an improvement of signals rather than new service.

Miss BURKEY. But that should be an extension of services in some way, it seems to me, of the station if the station is supposed to be paying for those viewers.

Senator BURDICK. In other words, you do not agree with Mr. Zimmerman that the copyright has already been paid for.

Miss BURKEY. The copyright has been paid for for certain uses at certain times in certain areas but not indefinitely and not forever and not everywhere.

Senator BURDICK. Thank you for your testimony.

This concludes the scheduled witnesses. I want to inform you that the chairman of the subcommittee, Senator McClellan, has received a letter from Mr. Herman Finkelstein, general counsel of ASCAP, requesting the opportunity to respond to certain testimony.

Although Mr. Finkelstein has already appeared in these proceedings, it is agreeable to Chairman McClellan and myself that he be allowed this opportunity.

I have been informed by the committee counsel that the opportunity of making a rebuttal statement has been offered to the CATV representatives but they did not desire at this time to add to their previous testimony.

Is Mr. Finkelstein present?

STATEMENT OF HERMAN FINKELSTEIN, GENERAL COUNSEL OF ASCAP

Mr. FINKELSTEIN. Mr. Chairman, I greatly appreciate this opportunity to appear here in rebuttal. I felt that it was necessary to appear because I think ASCAP (the writers and publishers whom I represent) is in a unique position of having its rates regulated under Federal antitrust decrees.

If I may, Mr. Chairman, I should like to attempt to answer some of the specific points made in Mr. Zimmerman's statement this morning. First, he argued that the networks or other large copyright holders might withhold permission to rebroadcast their programs and thereby seek to reserve the CATV market for themselves.