If television stations should elect to pass the new royalty on to advertisers in higher rates, the increase in rates would be so slight that it would be unlikely to affect television ad sales or to have any appreciable effect on advertisers' budgets or on consumer prices. The proposed royalty will not affect composers and publishing companies No suggestion is currently being made that the performance fees radio and TV broadcasting stations now pay to composers and publishing companies should be reduced if the stations should be required to begin paying performance fees to performers and record makers. The new performance fee would simply increase the total payments that stations already make for the use of recordings. The performance fees paid composers and publishing companies have been growing rapidly. Between 1963 and 1973, the performance fees collected by U.S. composers and publishing companies nearly tripled, rising from $40.5 million to $114.4 million. (See Exhibit 9 on the next page.) These performance royalties are almost 4% of broadcasters's revenues, and, as broadcasters' revenues have grown, the royalties have escalated. The U.S. Commerce Department predicts that both radio and television revenues will grow by about 9% a year between now and 1980. Because the performance royalties earned by composers and publishing companies are tied to revenues, these interested parties may be expected to enjoy an expanding royalty base in the years to come. 70 EXHIBIT 9.-Income to composers and publishers from recordings, Sources: 1963 figures are from the 1965 Glover report before the Subcommittee on Patents, Trademarks, and Copyrights of the Committee on the Judiciary, U.S. House of Representatives, 89th Congress, 1st Session. The 1973 figure for mechanical fees paid by U.S. record companies was calculated from statistics supplied to RIAA by 34 record companies representing about 98 percent of the industry's sales. The actual 1973 mechanical fee payments reported by these companies was $80,400,000, but the figure for the entire industry is estimated to be $82,100,000 (80,400,000 divided by 96 percent). The 1973 figure on foreign mechanical fees was estimated from "Billboard" reports about sales abroad of recordings of U.S. music. 1973 performance fees were calculated as follows: $37,500,000 in music license fees paid by radio stations and networks (FCC figures); $47,800,000 in music license fees paid by TV stations and networks (FCC figures); $19,400,000 in ASCAP receipts from: general and background music; symphonic and concert music; and royalties from foreign societies (ASCAP figures); $9,700,000 estimated BMI and SESAC receipts from these 3 sources (estimated to be roughly half ASCAP receipts). CONCLUSIONS: PERFORMANCE RIGHTS SHOULD BE GRANTED TO RECORD MAKERS AND PERFORMERS The general Copyright Revision Bill grants performance rights to every performable copyrighted work except sound recordings. Both record makers and performers make a major creative contribution to recordings and their creative contribution merits full copyright protection. Almost every other Western nation pays performance royalties to performers and record companies. Broadcasters should pay performers and record makers for the commercial value they extract from sound recordings. The broadcasting industry enjoys high profits, in part because of its use of recordings at little cost, and the industry could pay the small performance royalty proposed without seriously impairing its profitability. Because they do not now make such payment, advertisers, in turn, are indirectly benefiting from music programming on radio and television at rates 70 U.S. Department of Commerce figures cited in "Government Report Plots Good Growth Through 1980 for Radio, TV, Cable," Broadcasting, November 11, 1974, p. 48. which do not reflect the true costs of the talent and money invested in recordings by performers and record companies. The profit position of the broadcasting corporations could be preserved by passing forward the costs of the proposed new performance royalty to their advertisers who are the ultimate beneficiaries, without decreasing the attractiveness of the media. If advertisers in turn passed on the costs of a performance royalty to the consumer, the impact would be imperceptible. Mr. GORTIKOV. It is a traditional copyright concept that one who uses another's creative work for profit must pay the creator of that work. A sound recording is a copyrightable, creative work. It is the product of the creative efforts of vocalists, musicians, composers, and recording companies. Under the 1909 copyright law, only the publisher/composer is paid a performance royalty when a broadcaster plays a record containing that composer's tune. The rest of the creative team, however, that is, the performing artists and recording company, are paid nothing when the product of their creativity-that is, the sound recording itself—is used for gain by another. This makes no sense. Congress has already recognized on two separate occasions—once in 1971 and again in 1974-that the sound recording does bear all the elements of a copyrightable product. Yet, as the general revision bill now stands, the sound recording is the only copyrighted creative work for which a royalty will not be paid when it is performed by others. Significantly, the revision bill does grant new performance royalties to broadcasters from cable TV. And the bill grants new performance royalties to composers when sound recordings are played by jukeboxes. The performing artists and recording companies deserve to be included too, and for the very same reasons. Ironically, our strongest allies in advocating this principle to Congress are the very same broadcasters who oppose this legislation. Only last month, broadcasting spokesmen appeared before this subcommittee to support this same principle. The broadcasters seek payments from cable television whenever cable uses broadcasters' copyrighted program material for profit. One of the broadcaster representatives testified: "It is unreasonable and unfair to let the cable industry ride on our backs, as it were, to take our product, resell it, and not pay us a dime. That offends my sense of the way things ought to work in America." So spoke the broadcaster. We of the recording industry maintain that it is likewise unreasonable and unfair to let the broadcasting industry ride on our backs, as it were, to take our product, resell it, and not pay us a dime. Broadcasters expect payment when their copyrighted programs are used for another's profit. So do we. Broadcasters aggressively seek copyright payments when they take risks and make investments. We do, too. And the recording industry, like the broadcasting industry, wants equitable payment when its product is used by broadcasters to build audiences, sell commercial time, and build station equity values. When it is in their economic interest, the broadcasters support the principle of rewarding creators. When it is not in their economic interest, the broadcasters oppose it, as they do now. This is neither logical nor fair. We respectfully suggest that Congress not allow the broadcasters to have it both ways. The broadcasters will tell you that they should not have to pay a performance royalty, because airplay helps sell records. They will remind you that record companies actively seek airplay of new recordings. As you may know, a few record promoters may not have used good sense in seeking airplay, and may have been in violation of the law. Their alleged misdeeds, however, are certainly not representative of the business behavior of the thousands of persons in the recording industry. Certainly, record companies do seek airplay on new recordings, so the broadcaster argument may sound good. It is a hollow and deceptive argument, however, if you examine all the facts that I now offer. Fact No. 1.-Radio stations do not use recordings for their programing to do record companies a favor. They use recordings because that is the best way, in their judgment-in their judgment-to build audiences, advertisers, profits, and station equity. Fact No. 2.-Sound recordings are the mainstay of most radio programing. More than 75 percent of radio program time is devoted to recordings. Fact No. 3.-Most recordings get zero sales benefit from airplay. The vast majority of recordings never get airplay at all. A "Top Hits" radio station usually adds only five or six new songs a week to its play list-out of more than 900 new recorded tunes released weekly. Fact No. 4. More than 75 percent of all recordings released fail to recover their costs. Only about 6 percent make any real profits, and they must carry the load for all the rest. Classical recordings fare even worse. Over 95 percent of classics lose money. Fact No. 5. Some 56 percent of all recordings played on the radio are older recordings which do little or nothing to generate more record sales, though they help radio's own goals. Fact No. 6.-Although recording companies want their new product airplayed, they certainly are not out for a free ride. Recording companies today are among the major purchasers of commercial advertising over radio and TV. In 1972, for example, recording companies paid out to radio stations over $32 million for commercial advertising. And in 1974, the recording industry spent nearly $65 million for television advertising. By way of contrast, the estimated annual yield to recording companies from performance royalties would be about $5 million, even less than that in early stages. Fact No. 7.-Broadcasters pay for virtually every other form of programing they employ, except for sound recordings. That includes news services, dramatic shows, disc jockeys, personalities, sports shows, game shows, syndicated features, weather, commentators, financial and business services. Yet, they pay nothing for the recordings which furnish 75 percent of their programing. Mr. KASTEN MEIER. Mr. Gortikov, you have exceeded your 6-minute allocation and apparently you do have a long statement which will take many, many more minutes to complete. So I Mr. GORTIKOv. Sir, I wasn't aware of the 6-minute allocation. I have about 11 minutes in my presentation. Mr. KASTEN MEIER. I'm sorry. Whoever is coordinating this on your side apparently is not on the job. Mr. GORTIKOVv. And I also, if I may Mr. KASTEN MEIER. Let me indicate this. My counsel has been in touch with Mr. Fitzpatrick. I think it is understood that you are allotted 30 minutes as a panel. The following allocation of time is indicated: Mr. Sanford Wolff, 15 minutes; Mr. Stanley Gortikov, 6 minutes; Robert McGlotten, or anyone else for the purpose of a presentation or statement by the AFL-CIO, 3 minutes; Mr. Hightower, 3 minutes; and Mr. Bikel, 3 minutes, totaling 30 minutes. If you are not well coordinated, for that I am sorry. I make that announcement for the other side, too, the allocation of time so that you can measure your statements accordingly. Is there someone there on the panel who desires to make a presentation? Is Mr. McGlotten here this morning? Mr. GOLODNER. No, he is not, Mr. Chairman, and I will be happy to submit the statement for the AFL-CIO. Mr. KASTEN MEIER. Would you do so. Mr. WOLFF. Mr. Chairman, is it out of order for me to suggest that perhaps I had not utilized my entire 15 minutes? I don't believe I did. Perhaps Mr. Gortikov could utilize them. Mr. KASTEN MEIER. All I know is that you were alloted 15 minutes, Mr. Wolff, and I am not sure whether you consumed all 15 minutes. Perhaps counsel could tell me? Mr. Fuchs. It was close to that. Mr. WOLFF. Sorry. If it was out of order, please forgive me. Mr. KASTENMEIER. Do you wish to read the statement from Mr. GOLODNER. No, Mr. Chairman. To save time I have tried to merely hit the highlights. You have a letter from Mr. Andrew Biemiller, legislative director of the AFL-CIO, who unfortunately is committed to appear before another committee at this time and regrets that he can't be here personally. Mr. KASTEN MEIER. Without objection, that letter will be received. Mr. GOLODNER. If I can do that, Mr. Chairman, I think it will save time. Mr. KASTEN MEIER. And the Chair will observe that the letter-the basic point of the letter is that the AFL-CIO strongly supports efforts of America's performing artists to achieve, through our copyright laws, proper recognition of the immense contributions they make. [The material referred to above follows:] AMERICAN FEDERATION OF LABOR Hon. ROBERT W. KASTEN MEIER, DEAR CONGRESSMAN KASTEN MEIER: The AFL-CIO strongly supports the efforts of America's performing artists to achieve, through our copyright laws, proper recognition of the immense contributions they make to the culture of our nation and the profits of those who utilize their recorded work for commercial exploitation. The basic principles underlying H.R. 5345, if embodied in H.R. 2223, would provide such recognition and we urge this committee to amend H.R. 2223 accordingly. The legal, moral and economic arguments martialed by these artists and their unions have been well documented in extensive hearings conducted during the last decade by this committee and by its counterpart in the Senate. Indeed, in its 1966 report, this subcommittee specifically noted the arguments of the American Federation of Musicians and others in behalf of the performers' rights to remuneration from the exploitation of their sound recordings and commented that "there was little direct response to these arguments". There can be even less of a valid response today. The Congress and the courts have now clearly established that a sound recording can be the subject of copyright protection. Expert testimony from some of the world's leading artists, the National Endowment for the Arts, and the Register of Copyrights support the contention that the artist is, indeed, a creator or "author" of such recordings and, as such, is entitled to the consideration provided for in the Constitution. And, in recent months, even the broadcast industry has echoed the artist's arguments for equity, though it appropriates them solely for its own interests. On July 8, Mr. Arthur Taylor, President of CBS, told the Senate Subcommittee on Antitrust and Monopoly that he was "concerned” about cable television "because it operates outside the copyright structure, profiting from attractions of free television, but not paying for them". Similarly, America's performing artists and their unions are concerned that the broadcasters and their advertising sponsors, juke box operators and background music organizations are profiting from the commercial use of recordings but are not paying appropriately for them. Mr. Taylor also told the Senate Committee that 85% of what cable television provides its viewers is what is received at no cost from the broadcasters. Because of this, he labeled CATV "a parasitic medium". Similarly, 75% of radio programming consists of recordings without payment to those who made the recorded works possible and this practice, too, must be condemned. H.R. 2223 addressed the problem of the broadcaster vis-a-vis CATV while it ignores the comparable problems of the recording artist. Such a discriminatory approach is inexplicable and is a serious flaw in the legislation. The overwhelming number of performers who make possible the recorded works we enjoy and take for granted almost every day of our lives are not famous and wealthy. Quite the contrary, they pursue professions that are among the lowest paid and highly unemployed in the country. According to the 1970 census, America's musicians earned a median annual income of $4,668. The unions representing these professional people indicate that more than 80% of their membership is generally unemployed. Only the few, very famous stars achieve notoriety and economic security while the thousands of supporting artists who contribute so much to a recorded performance remain unknown and confront an uncertain future. In part, the severe unemployment they face can be attributed to the fact that their own recordings have been used to displace them from broadcasting, cafes, restaurants, and other places where their work is employed but, thanks to recordings, they, themselves, are not. While the right to royalties being discussed here will not create new job opportunties, it will insure that these people are justly rewarded for their labor and encouraged to continue in their creative professions. The record buyer, too, would benefit. At present, almost the entire cost for developing, producing and distributing recorded programs, as well as paying the artists, is borne by the millions of individuals who buy records for their own personal enjoyment. The broadcaster, who turns around and sells these programs for profit, and the commercial sponsor, who uses them as a vehicle to promote his business, contribute no more, and sometimes less, than the individual consumer. We believe this current practice is not only unfair to the artist, who is offered no compensation from the profits earned by his labor, but unfair, as well, to the average record buyer, who now bears the total cost of making recorded programs. We have discovered that it comes as a surprise to most people that the performers receive absolutely nothing from the profitable uses made by broadcasters, juke box operators and other purveyors of their recorded work. It is inconceivable to many of them that anyone should be permitted to profit from the work of others without making some form of payment. They are shocked to learn that not one dime of the many millions spent by commercial advertisers, juke box patrons and office building managements to provide musical programming is received by the artists who make the music possible. In a resolution adopted by the 8th Constitutional Convention of the AFL-CIO, it was pointed out that "through the media of films, television and recordings, the art of the performer can now be carried to huge masses of people. There is a danger that the middle men-those who control the media-will reap all of the |