hardware for recorded film that you can attach to your television set, that it would also cover a performance royalty for a dancer in visual performance.

Mr. KASTEN MEIER. Well, the language in the bill says reproduction of a copyrighted work which is a sound recording. That being the case, I wonder whether it would in fact, include visual reproductions? Mr. BIKEL. That is not specifically under the bill, but if the new audiovisual techniques can be developed, a future one can refer to this bill as a model for inclusion of the other. But, the bill itself envisions only sound recordings.

Mr. KASTENMEIER. I have only one other question and I ask this for the purpose of developing some sort of historical understanding of what can happen. It was pointed out that, and I will address this to Mr. Gortikov, that 10 years ago, more or less, the recording industry of America opposed performance rights for artists of this character, but now does not. What has happened, candidly speaking, what has happened in those years whereby you are able to be in agreement with the artists who seek this coverage?

Mr. GORTIKOV. May I defer to counsel on this, because I was not affiliated with the association at that time, and I would not want to be Mr. James Fitzpatrick of Arnold and Porter, general counsel for the association.

Mr. FITZPATRICK. If I could speak to that, in 1965, the RIAA presentation was directed to section 115, which was the mechanical royalty provision. The association took no position affirmatively or negatively, it is my recollection, on the performance royalty provision. However, individual companies within the Recording Industry Association very aggressively and assertively supported the performance rovalty provision. In the next-over the course of the next 2 years, the Recording Industry Association and the unions worked together for the first time in the whole history of this provision and came out with a package that both the recording industry and the unions fully supported from front to back, and that became the subject of an amendment on the Senate side that was incorporated in the Senate bill and stayed in the Senate bill as Mr. Golodner had indicated, until it got to the floor late last fall.

So, it was more a matter of evolution within the recording industry rather than a matter of an alteration or reversal of position.

Mr. GOLODNER. Mr. Chairman, if I may, I don't want to interrupt this line of questioning, but it occurs to me I would like to go back to a question you asked earlier about the cost of the production of a recording and the artists' share in some of those costs, because it occurs to me now we are talking about the unions and the recording industry, but the AFL-CIO statement also addresses itself to the consumer, who would benefit if this right was established.

Right now, the entire cost of the recording industry is borne on the backs of the average record purchaser, the average citizen who goes into a store and buys a record, and yet there is this broadcasting industry, the jukebox industry, background music people, who are exploiting these records for profit and they are disproportionately sharing quite a bit less than you and I, who have to support all of this, and the AFL-CIO statement does include it and it just occurred to me we are talking about in terms of the artists, in terms of the industry,

but we have another interest here. As you know, most of our members are not artists. They are consumers, and I just wanted to make that point.

Mr. KASTENMEIER. Well, on behalf of the committee, we thank you gentlemen for your presentation here this morning.

Now I would like to call Mr. Vincent Wasilewski, President of the National Association of Broadcasters, and also as a member of the panel, Mr. Harold Krelstein, chairman, Radio Board of Directors, also the National Association of Broadcasters, and Wayne Cornils, chairman, Small Market Radio Committee of the National Association of Broadcasters.

Mr. Wasilewski is accompanied by Mr. John Dimling.

We have allocated 15 minutes to Mr. Wasilewski, 72 minutes each to Mr. Krelstein and Mr. Cornils for their presentations. Welcome, gentlemen.

I will call on you, Mr. Wasilewski.

[The prepared statements of Mr. Wasilewski and Mr. Cornils follow:]

STATEMENT BY VINCENT T. WASILEWSKI, PRESIDENT OF THE NATIONAL ASSOCIATION OF BROADCASTERS

Mr. Chairman, my name is Vincent T. Wasilewski. I am President of the National Association of Broadcasters, which is located at 1771 N Street, N.W. Washington, D.C. The NAB is a non-profit trade association, which has a membership of 4,079 AM and FM radio stations, 540 television stations and all national radio and television networks.

Mr. Chairman, broadcasters regard themselves as partners in the business of bringing to America her citizens' artistic efforts in making phonograph records. We appear before you today as a partner who has unwittingly and we think unwisely and unjustifiably been forced to defend itself against a copyright scheme which has no place in the copyright law of the United States. And we are asked to defend ourselves against the payment of a fee which flies directly in the face of trade practices, economic realities and the Constitution of the United States.

The so-called "Performance Rights Amendment" would require, for the first time, that radio and television stations pay royalties to performing artists and record companies for the air play of their records. Record companies and recording artists argue that this assessment is justified by the fact that a record is the creative work of both the record company and the recording artist, that radio stations are able to use this work without compensating the artists, and that the "promotion of the useful arts and sciences" suffers thereby.

As the primary vehicle for the dissemination of the sounds on sound recordings, we are not here to denigrate the artistry of the recording industry. Anyone who has heard the Beatles singing on "Sgt. Pepper's Lonely Hearts Club Band" or Julie London singing the "Mickey Mouse Club Song" to a Congressional committee knows full well just how talented and creative the music industry can be. But talent and creativity do not a copyright make. And it is copyright that we are here to discuss.

A copyright is a governmentally-sanctioned monopoly. In a nation which traditionally abhors monopoly there must be some overriding reason to confer monopoly status on any endeavor. In the case of copyright, that overriding reason is provided by the desire to encourage creativity and once having encouraged it. to protect and nurture it. When we enact a copyright statute, one eye must therefore remain steadfastly on one question-is this copyright-this constitutionally mandated, yet radical, departure from the norm of national policy— necessary to foster and protect creativity?

We believe that the "Performance Rights Amendment of 1975" fails to meet the rigid test necessary to confer full copyright status upon any class of creative endeavor. We do so in a manner which we believe is not unmindful of the unique qualities of the recording industry. Indeed, we recognize that in our continuing support for the protection of sound recordings from unauthorized piracy.

57-786 76 pt.2 44

But we are also convinced that creativity in the recording industry is not solely the province of the record company and the record artist. There is a third partner in that process—another participant whose efforts are primarily responsible for huge increases in record sales and audiences at recording artists' concerts the radio industry. And the radio industry believes that it, too, serves the creative process, that it ensures broad exposure for creative works, that via the air play of records, it encourages and promotes the sale of original artistry, that it provides the compensatory spur to additional creative efforts by record companies and recording artists. For all of that, we seek no compensation from the recording companies, we ask for no promotional fee. We seek merely the continuation of a copyright law and an economic marketplace which has satisfied the spirit of the copyright provision of the Constitution.

The statutory grant of a copyright confers upon its recipient two fundamental rights the right to protect the integrity of his creation from unauthorized use and the right to demand compensation by one who seeks authorization to use it. And those rights are granted for one purpose alone.

Article I, Section 8 of the Constitution provides that the Congress shall have the power "to promote the progress of science and the useful arts by securing for limited time to authors and inventors the exclusive right to their respective writings and discoveries." The Constitution does not mandate copyright-it confers power upon the Congress to provide it. Indeed, in the construction of the language of the provision, the framers' intent is clear-it is not the paramount interest to secure "exclusive rights"—it is the goal of promoting the "progress of science and the useful arts" which is preeminent.

Mr. Chairman, the NAB believes that the "promotion of the useful arts and sciences" demanded a limited copyright for the purpose of preventing the unauthorized piracy of sound recordings. When such legislation was before the 93rd Congress we wrote every member of Congress indicating our support for the proposal. We felt then, as we do now, that the Copyright Law should not allow record pirates to steal the creative endeavors of the record industry. In passing that legislation, the Congress satisfied the artist's right to the protection of the integrity of his creation.

Having done that, however, Congress is now asked to give record companies and recording artists copyright compensation for the use of records by radio stations. We think it is unnecessary and unfair. We believe that they are compensated already, albeit indirectly, and that any additional assessment would represent an unfair burden on the broadcast industry and a windfall for the record industry.

Broadcasters currently pay copyright fees. Radio and television stations pay approximately 3.5% of their net advertising receipts to the publishers, lyricists and composers of musical works. We are asked now to pay an additional one percent, subject to periodic review, for the play of records on radio and TV. And we are asked to pay that one percent to an industry that is growing faster than the industry which fuels its growth.

Mr. Chairman, in the controversy of the "Performance Rights Amendment" there is no disagreement between the proponents and opponents on the fact that indirect compensation does flow to recording interests and record companies. The form of that compensation is the promotional benefit reaped by the artists and companies for air play of their work. And the amount of the compensation is staggering. Mr. Chairman, the evidence that there is no disagreement on the value of air play to the record industry comes not from the broadcasting industry but from the record companies themselves. Listen, for a moment, to their wordsto the words of Stan Cornyn of Warner Brothers Records:

"What would happen to our business if radio died? If it weren't for radio, half of us in the record business would have to give up our Mercedes leases. . . we at Warners won't even put an album out unless it will get airplay."1

Listen to the words of Bobby Colomby, the drummer of the rock group, "Blood. Sweat and Tears" (in answer to the question, How important is radio to you?) : "Well, that is it . . . what you're doing is . . . you're advertising." (Emphasis added) 2

That the revenue does flow to performing artists and record companies is selfevident. The amount of such revenue is not. A closer look reveals that additional revenues are not only unnecessary but unwarranted as well.

1 Daily Variety. Mar. 4. 1975.

2 Radio Program "The Politics of Pop", June 5, 1975.

There are several distinct groups of people who are involved in bringing about recorded music: the composer of the music, the publisher, the artist who records the music, and the record company that produces and distributes the record. Revenue comes from two sources- record sales and air play of the record. NAB retained Dr. Frederic Stuart of Hofstra University to estimate the relative amounts of money each of the four parties realized from the sale and air play of recorded music; the results of his research are enlightening and somewhat surprising.

Under present arrangements, all four parties-that is, composers, publishers, artists and record companies-receive money from the sale of records, but only composers and publishers receive payment for broadcast performances (air play of records). Dr. Stuart estimated the revenues generated by a random sample of records; he found that the income was distributed as follows:

Composers

Publishers

Performing artists

Record companies (after variable manufacturing costs).

$2,570, 000 2,910, 000

2, 860, 000 10, 720, 000

But these figures don't reflect two important factors: (1) the artists and recording companies must bear the cost of unsuccessful records (so that the amounts of money they receive should be reduced to take this into account); and (2) in many cases the performing artists are also the composer and/or publisher of the songs they record, so they also receive royalties from air play of the records.

Refining his figures to take these factors into account, Dr. Stuart found that the distribution of money from this same sample of records looked like this:

He concluded: "The foregoing analysis shows the performing artist to be . . . well ahead of composers and publishers in the distribution of income generated by the broadcasts and sales of records, but rather far behind the record companies, and none of these figures takes into account the substantial revenues generated by live concerts."

Mr. Chairman, I submit that the "Performance Rights Amendment" does not belong in this copyright bill. It is recommended neither by the constitutional guidelines nor the economic marketplace. It fails to "promote the progress of science," it imposes an unreasonable burden on a symbiotic partner in the music industry, and promises windfall profits for those for whom no need can be demonstrated. For all of these reasons, we ask that you reject it.

STATEMENT BY WAYNE C. CORNILS, PRESIDENT AND GENERAL MANAGER, KFXD AND KFXD/FM, NAMPA, IDAHO

Mr. Chairman, my name is Wayne C. Cornils. I own approximately 20% of the Idaho Broadcasting Company and serve as president and general manager of KFXD/AM and KFXD/FM, Nampa, Idaho.

I am also privileged to serve as Chairman of the Small Market Radio Committee of the National Association of Broadcasters. The other members of the Small Market Radio Committee operate broadcast properties in Deming, New Mexico; Indianola, Mississippi; Valdese, North Carolina; Brattleboro, Vermont; and Mankato, Minnesota. The Small Market Radio Committee represents radio broadcasters in markets of 100,000 population or less.

The small market broadcaster is a person totally involved with, completely dedicated to and an integral part of the community he serves.

Much of what is defined as entertainment programming on a small market radio station is provided in the playing of recorded music.

In addition to the numerous other expenses of operation, the small market broadcaster is required to pay monthly fees to several music licensing organizations, including BMI, ASCAP and SESAC. The monies thus paid are distributed by these organizations to the composers, lyricists and publishers.

Now, Mr. Chairman, we are faced with the so-called "performance rights amendment," which would require us, for the first time, to pay royalties to performing artists and record companies.

There can be no doubt in anyone's mind that the exposure given to recorded music by the broadcast industry encourages and promotes the sale of records. In turn, the sale of records obviously encourages and promotes additional creative efforts by record companies and recording artists. Mr. Chairman, radio sells records.

In Boise, Idaho, a community of approximately 90,000 and the adjacent city of Nampa, a community of approximately 20,000, there are 26 outlets where records may be purchased. All of these retailers would agree that exposure on radio provides the primary impetus for the purchase of records.

Last week, I spoke with Mr. Nelson Taylor, who is the manager of the Super Thrift Drug Stores in Nampa. Mr. Taylor told me, "If it were not for record exposure on radio, I would not have a record department."

And Bob Gordon, manager of the record departments of the Bon Marche Department Stores, told me that he has removed his record audition booths because the customers have already heard the records on radio.

And Gary Pratt, the owner of Gary's Stereo, sells 8-track tapes and cassette recordings, a business by the way, which has developed as an outgrowth of the record industry. At Mr. Pratt's request, each week I send him the KFXD-AM playlist. Mr. Pratt orders his tapes and cassettes directly from that list.

So, there can be no doubt in the minds of the managers in the 26 record outlets in the Nampa-Boise area about the important role played by radio in the sale of records. Radio sells records.

Attesting to the recording artists' popularity due to radio exposure are the large fees which these artists are able to command for personal appearances. I have a colleague in Omaha who tells me that 15-20 recording artists or groups appear in that city during the course of a year. In Omaha, the minimum fee for a single appearance is approximately $5,000-this for artists such as Jim Stafford, the Righteous Brothers and Dr. John. Others, like Alice Cooper and John Denver, receive $20-30,000, while some, like Elvis Presley, receive $100,000.

In Nampa/Boise the figures are very similar: $15,000 for the Carpenters; $25,000 for the Beach Boys; $18,000 for Chicago; and for Elton John, a rather staggering 80% of the gross, against a guarantee of $30,000. These fees are for a single performance or what is called “a one-night stand.”

Radio not only sells records, but provides the audiences for recording artists. In conclusion, Mr. Chairman, composers, publishers and lyricists receive compensation in the form of monies paid by broadcast stations to the music licensing organizations. The record companies, artists and composers receive monies from the sale of records-sales which are promoted by the exposure of their product on radio. In addition, the artist receives huge sums of money for personal appearances. As we have pointed out, the fees for personal appearances are determined by the artist's popularity and the artist's popularity is determined, to a large degree, by the exposure received on radio.

Mr. Chairman, to charge broadcasters an additional fee is unnecessary, unfair and unjust. It would place an extremely heavy burden on all broadcasters, certainly including those of us in America's smaller markets.

Thank you.

TESTIMONY OF VINCENT T. WASILEWSKI, PRESIDENT, NATIONAL ASSOCIATION OF BROADCASTERS, ACCOMPANIED BY HAROLD KRELSTEIN, CHAIRMAN, RADIO BOARD OF DIRECTORS, NATIONAL ASSOCIATION OF BROADCASTERS; WAYNE CORNILS, CHAIRMAN, SMALL MARKET RADIO COMMITTEE, NATIONAL ASSOCIATION OF BROADCASTERS; AND THOMAS H. WALL, ATTORNEY

Mr. WASILEWSKI. Thank you, Mr. Chairman. My name is Vincent Wasilewski.

I am president of the National Association of Broadcasters, which is located at 1771 N Street NW., Washington, D.C. The NAB is a nonprofit trade association, which has a membership of 4,079 AM and FM radio stations, 540 television stations and all national radio and television networks.