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MULTIPLE INCOME SOURCES ARE VALID FOR ALL

Broadcasters say that performers and record companies should be satisfied with their income from the sales of recordings alone. That should be enough, they say. Broadcasters protest that performance royalties would be an unwarranted additional income source.

But no one is questioning the right of music publishers and composers to separate income from performance royalties as well as mechanical royalties and music sales and foreign royalties and motion picture royalties. And we all acknowledge that book authors and publishers gain separate income from hardbacks, paperbacks, television, motion pictures, foreign rights, and magazine and newspaper reproduction.

In support of the efort to make cable pay copyright fees for use of televised programming, Jack Valenti, president of the Motion Picture Producers Association, acknowledged in Congressional testimony that "a basic concept of copyright includes separate payments for multiple uses." Thus, the broadcasters seek supplemental income from program syndication and from cable TV's new uses of their programs-different payments for different uses. So much for the broadcaster arguments against multiple income.

A MODEST FEE SCHEDULE FOR BROADCASTERS

Broadcasters may also suggest that they cannot afford to pay a performance royalty. Or that the fee schedule would hurt smaller stations. In fact, the payment of a performance royalty by broadcasters for use of sound recordings would be just a tiny drop in a very large bucket.

The radio and television industries are growing and prosperous. Their reve nues, profits, and equity values over the years all have been increasing.

The fee schedule established in this legislation is quite modest, especially when you remember that 75% of radio programming is based on sound recordings: 1. Radio stations with net advertising revenues below $25,000 a year would pay nothing.

2. Radio stations with revenues between $25,000 and $100,000 would pay $250 a year, or about 75 cents a day.

3. For stations between $100,000 to $200,000, the anuual fee would be only $750, or about $2 a day.

4. Stations with revenues of more than $200,000 would pay a maximum of 1% of their annual net income from advertisers, or some lesser percentage based on their actual usage of recordings.

Under this fee schedule, 62% of all radio stations would pay either nothing, or token fees, ranging from 75 cents to $2 a day. And 38% of stations, with advertising revenues of more than $200,000 a year, would pay the full performance fee of up to 1%. This 1% is a small sum indeed compared with the 3.7% that the radio stations voluntarily agree to pay publishers and composers through ASCAP, BMI and SESAC.

For television stations, the fees are more modest, ranging from no payment at all for those with revenues of less than $1,000,000 a year, to $1,500 annually for those with revenues of more than $4,000,000.

On the basis of these fee schedules, the Senate Judiciary Committee in 1974 concluded that, "The committee's analysis of the economics . . . of the broadcasting industry, indicates an ability to pay the royalty fees specified."

Remember, too, that if a station considers its fee to be unfair, that station has full discretion as to what it broadcasts. It need not play any records if it does not want to make the payment. It has the unilateral right to turn to any other programming form of its choice.

CREATION OF MUSIC CULTURAL FUND

While you may think of recording companies most often in terms of the popular music they produce, our companies serve a number of other cultural interests. They record classical music, folk music, ethnic music, country music, and experimental music, plays, poetry and educational material. They help find and develop young artists, musicians and composers, and bring much-needed income to some symphony orchestras.

The recording companies take seriously the responsibility to provide all types of music on sound recordings, and to foster and encourage the creation, performance and enjoyment of music.

For this reason, some member companies of our Association have suggested creation of a special Recording Industry Music Cultural Fund, to foster serious music projects throughout the United States. This Fund might be financed by the contribution of 5% of the performance royalties received by participating recording companies, if this legislation is enacted. While no procedures have been established, the Fund conceivably might be administered through the National Endowment for the Arts, perhaps in cooperation with States Arts Councils.

PERFORMANCE RIGHT SHOULD BE INCORPORATED IN REVISION BILL

Finally, we urge you to make this legislation part of the general Copyright Revision Bill. That is where it was previously. That is where it belongs. As the Senate Judiciary Committee said last year, there is "no justification for not resolving this issue on the merits at the present time. All relevant and necessary information is available."

In conclusion:

SUMMARY

1. Vocalists, musicians and recording companies are entitled to a performance royalty, because a sound recording is a copyrightable, creative work, as Congress and the courts have recognized.

2. Those who use recordings for their profit should pay for the privilege, as they do for all other copyrighted works.

3. The sound recording is the only creative, copyrighted work performed that does not receive a performance royalty under the Copyright Revision Bill.

4. The broadcasting industry can afford to pay the modest fees established. 5. There is no valid or logical reason for not granting a performance royalty to the creators of sound recordings. Even the broadcasters support that basic principle, when it is in their economic interest.

6. We believe the time has come to correct the inequity which deprives performing artists and recording companies of income they deserve when their works are used for the profit of others.

STATEMENT OF RECORDING INDUSTRY ASSOCIATION OF AMERICA, INC., IN SUPPORT OF A PERFORMANCE RIGHT FOR SOUND RECORDINGS, AS REFLECTED IN S. 1111 AND H.R. 5345

This statement has been prepared by the Recording Industry Association of America. Much of the technical information contained in the statement, identified by footnotes, has been drawn from an objective analysis prepared by the Cambridge Research Institute, an independent management consulting and business research firm.

SUMMARY

It is a traditional copyright concept that one who uses another's creative work for profit must pay the creator of that work. The exclusive right of a copyright owner to authorize the public performance of his creative work is known as a "performance right." As the general copyright revision bill now stands, sound recordings are the only copyrighted works which can be performed that have not been granted a performance right.

The performance rights bills now pending in the Congress-S. 1111 and H.R. 5345-would remedy this inequity by establishing rights and royalties for the public performance of copyrighted sound recordings. Those bills require broadcasters and others who use sound recordings for their profit to compensate the vocalists, musicians and record companies for the commercial exploitation of their creative efforts. Half of the royalties would go to the performing artists, and the other half would go to the recording companies.

I. EQUITABLE AND ECONOMIC FACTORS OVERWHELMINGLY SUPPORT A PERFORMANCE RIGHT FOR SOUND RECORDINGS

1. Sound Recordings Account for Three-Fourths of Radio Programming. The basic staple of radio programming is recorded music. The Senate Judiciary Committee has noted that 75 percent of commercially available time is used to play sound recordings. Thus, recorded music accounts for roughly three-quarters of stations' advertising revenues-or about $900 million annually. Yet broadcasters-who must pay for all their other types of programming-pay no

copyright royalties to performers or record companies for the prime programming material they use to secure their audiences, revenues and equity values.

2. Recordings Have Replaced "Live" Performances. Broadcasters used to pay for "live" performers, but these artists have actually been replaced by their own recordings. It is inequitable for these recorded performances to be broadcast for profit without any payment being made to the performers.

3. Composers and Publishers Receive Performance Royalties. Under the existing Copyright Law, broadcasters pay the composer and publisher of the song that is played over the air in a sound recording. But the performers and record company whose artistry and skill brought that composition to life in a recorded performance, and whose creative contribution is at least equal to, if not greater than, that of the composer, are paid nothing.

4. No "Free Ride" for Record Companies. The record companies do not get · a "free ride" from broadcasters. Radio stations do not use recordings for their programming to do record companies a favor. They use recordings because that is the best way, in their judgment, to build audiences, which attracts advertisers, which leads to profits, and also increases station equity value. Further, about 56% of the records played are "oldies" that enjoy few current sales, if any. Record companies and performers derive little benefit from such air-play, but these recorded performances draw massive listening audiences for broadcasters and, in turn, advertising revenues for the stations. Finally, record companies purchase over $32 million of advertising time from radio stations annually-about three times the total projected performance royalties under the proposed legislation.

5. Broadcasting Industry Very Profitable. The broadcasting industry is exceedingly healthy. Between 1967 and 1973 (the last year for which data are available), the pre-tax profits of radio stations rose 39 percent, and advertising revenues rose 61 percent.

6. Royalty Fees Are Very Modest. The proposed performance royalty fee is not burdensome. About one-third of the nation's radio stations would pay 68¢ per day. Another third would pay $2.05 per day. The remaining third of the stations-large stations with more than $200,000 in annual advertising revenues-would make a modest payment of one percent of net advertising revenues. Thus, even a station earning revenues of $1 million annually would pay only $27.40 daily, or $1.14 per hour to compensate the vocalists, musicians and record companies for the exploitation of their creative efforts. Clearly, the performance royalties are fair and reasonable, particularly in light of the immense advertising revenues that recorded music produces.1

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Further, all-news stations or others which do not rely heavily on recorded music would pay only a pro rata share of the performance royalty percentage. 7. Performance Royalty Consistent with Cable TV Royalties. The principle underlying the performance rights bills is identical to that supported by the broadcasters in the general revision bill. Broadcasters assert that cable systems should be required to pay the broadcaster and copyright owners when cable TV picks up the broadcasters' over-the-air signal. In testimony before the House Copyright Subcommittee, they said "it is unreasonable and unfair to let (the cable TV) industry ride on our backs, as it were, to take our product, resell it, and not pay us a dime." But broadcasters, too, are "taking somebody else's product and . . . selling it for profit." In directly parallel fashion, therefore, they should be required to pay the creators of sound recordings when they use that programming material for their profit.

8. Performance Royalty Recognized Abroad. The principle of the bill is not at all radical. Almost all other Western nations require the payment of performance royalties to performers and recording companies. Some of these foreign payments are currently denied to U.S. artists and companies because our country offers no reciprocal right. The primary reason that the principle

1 A chart detailing, by state, the number of radio stations in each of the royalty rate categories is set forth after page 9, infra.

has not been established here is that the last revision of the copyright laws took place in 1909, long before sound recordings became a significant source of programming materials for commercial exploitation by broadcasters and others. II. THERE CAN BE NO "CONSTITUTIONAL DOUBT" THAT THE PRODUCTION OF A SOUND RECORDING IS A CREATIVE ACTIVITY DESERVING OF COPYRIGHT PROTECTION

1. Copyright Protection Covers Wide Variety of Creative or Intellectual Efforts. Copyright protection has never been limited to the "Writings" of "Authors" in the literal words of the Constitution. To the contrary, Congress has granted a copyright to a wide variety of works embodying creative or intellectual effort, including such "Writings" as musical compositions, maps, works of art, drawings or plastic works of a scientific or technical character, photographs, motion pictures, printed and pictorial illustrations, merchandise labels, and so on.

2. Constitutionality of Copyright for Sound Recordings Upheld. Both Congress and the Courts have recognized that sound recordings may be granted copyright protection under the Constitution. In the Anti-piracy Act of 1971, where Congress conferred limited copyright protection upon sound recordings, the Senate Judiciary Committee concluded that "sound recordings are clearly within the scope of 'writings of an author' capable of protection under the Constitution."; The Committee rejected the constitutional objection once again only last year.' The Courts have expressly upheld the constitutionality of legislation according copyright protection to sound recordings. In Capitol Records, Inc. v. Mercury Records Corp.,* the Court said that

"there can be no doubt that, under the Constitution, Congress could give to one who performs a . . . musical composition the exclusive right to make and vend phonograph records of that rendition."

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A three-judge federal Court has likewise concluded that the activities of sound recording firms "satisfy the requirements of authorship found in the copyright clause. The United States Supreme Court, too, has indicated that the copyright clause can extend to "recordings of artistic performances.” Finally, the Copyright Office has advised that it is within Congress' constitutional power to grant copyright protection to sound recordings.'

3. Creativity in Production of Sound Recording. Performers and record companies engage in creative activity when they use their artistic skills, talents, instruments and engineering to produce and record a unique arrangement and performance of a musical composition. The Senate Judiciary Committee has found creative copyrightable elements in the "performer whose performance is captured and . . . the record producer responsible for setting up the recording session and electronically processing the sound and compiling and editing them to make the final sound recording."

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S. Rep. No. 92-72. 92d Cong., 1st Sess., pp. 4-5.

3 S. Rep. No. 93–983, 93d Cong., 2d Sess., pp. 139-40.

4221 F. 2d 656, 657 (2d Cir. 1955).

5 Shaab v. Kliendienst, 345 F. Supp. 589. 590 (D.D.C. 1972).

Goldstein v. California, 412 U.S. 546, 562 (1973).

120 Cong. Rec. S14565 (daily ed. Aug. 8, 1974).

S. Rep. No. 92-72, 92d Cong., 1st Sess., pp. 4-5.

S. 1111 AND H.R. 5345-NUMBER OF RADIO STATIONS, BY STATE, IN EACH ROYALTY RATE CATEGORY

[Categories are annual revenues of reporting stations, in thousands of dollars]

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