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 a creative work of both the record company and the recording artists, 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 policynecessary to foster and protect creativity?

We believe that the performance rights amendment 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.

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 insures 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 93d 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 percent of their net advertising receipts to the publishers, lyricists, and composers of musical works. We are asked now to pay an additional 1 percent, subject to periodic review, for the play of records on radio and TV. And we are asked to pay that 1 percent to an industry that is growing faster than the industry that fuels its growth.

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

1 Daily Variety, Mar. 4, 1975.

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 isyou're advertising." i

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

There are several distinct groups of people who are involved in bringing about recorded music. There is the composer of the music, there is the publisher, there is the artist who records the music, and there is the record company that produces and distributes the record. Revenue comes from two sources-record sales and airplay 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 airplay of recorded music; the results of his research are enlightening and, I think, somewhat surprising.

Under present arrangements, all four parties-namely, composers, publishers, artists, and record companies--receive money from the sale of records, but only composers and publishers receive payment for broadcast performances, that is, airplay of records. Dr. Stuart estimated the revenues generated by a random sample of records; he found that the income was distributed as follows: To the composers, $2,570,000; to the publishers, $2,910,000; to the performing artists, $2,860,000; and to the record companies, after variable manufacturing costs, $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 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 that they also receive royalties from airplay of the records.

Refining his figures to take these factors into account, Dr. Stuart found that the distribution of money from this sample of records looked like this: Composers, $1,530,000; publishers, $1,200,000; performing artists, $4,200,000; and record companies, $10 million.

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 respect fully ask that you reject it.

1 Radio program "The Politics of Pop," June 5, 1975.

With me today, Mr. Chairman, as you have already indicated, is Mr. Krelstein, chairman of the Radio Board of Directors. He is Chairman of the Board of Blough Broadcasting Co. and operates six AM stations and six FM stations, and has been in the broadcasting profession for some 41 years. And also, Mr. Wayne Cornils, president and general manager of KFXD and KFXD-FM, Nampa, Idaho.

Mr. Krelstein does not have a prepared statement, but if it is within your time, he would like to make a few remarks.

Mr. KASTEN MEIER. Mr. Krelstein.

Mr. KRELSTEIN. Thank you, Mr. Chairman. Without dwelling on other areas that have come up this morning, I would like to: (1) Present my own experience in the broadcasting business and hopefully get to the heart of the matter; and (2) I would like to read into the record a story that appeared in last night's Washington Star, which I think is germane to the problem, and touch on this issue of time for a moment, if I may.

But first, I have been in the business long enough to remember when Paul Whiteman and, I believe, Fred Waring sued to prohibit the playing of their music on radio stations, and they both lost. I was a full-grown adult, trying to make a living in the broadcasting business. When we talk about musicians, I was a full participant when the broadcasting industry struck ASCAP because of the prohibitive fees they wanted to collect from broadcasters, which resulted in the creation of Broadcast Music, Inc., some 35 years ago. Interestingly enough, touching on one segment of the music industry, this story really gets to the heart of the matter, and I am not going to read it all, because it is too lengthy.

This writer for the Washington Star apparently attended a show last evening, called Stars of the Grand Old Opry, and he goes on

to say:

For decades, when country music was called "hillbilly music" and was relegated to the agricultural hours of radio programing, the "Grand Old Opry" was a significant institution. It was a radio program that was the center of a way of life, a show which was a place for musicians, singers, and songwriters to be heard. At the same time, membership in the Opry was a valuable thing to an artist. It meant he or she could travel under the Opry banner and get bookings that were otherwise unavailable, be heard by people who were lured by the Opry name, be sought out by potential listeners to country music who could not hear it on the radio because only a handful of country stations existed.

Now, all this has changed. Country music has become a major industry, and an enviably lucrative one as well. There are more than a thousand radio stations, north and south, that specialize in country music, and country musicians have no difficulty in getting bookings in places like the Capital Centre or Wolf Trap. They no longer need the Opry because they are making it on their own. They still perform at the Opry, at scale fees, because Opry membership requires it, but the big names aren't happy about it and tend to avoid the place as much as they can; the money is elsewhere.

The big question here is we have a picture of Mr. Elton John on the cover of the current issue of Time, with a five-page editorial about him. Among other things, it says in here that Music Corporation of America, for whom he records, guaranteed him $8 million in royalties against the albums that he produces in the next 5 years. The company says it could recoup its entire investment by the end of 1976. Elton has sold 43 million albums and 18 million singles, worldwide-9 of his 12 albums are over the million mark in the United States alone.

Two questions. Should Time magazine have paid Elton John a royalty for writing five pages about him and putting his picture on the cover? Or, should Elton John have paid Time magazine for writing about him, because this, combined with the exposure given him by the broadcasting stations, made him the popular artist he is today. In 1955, we changed the programing of our broadcasting in Memphis, Tenn., to a format of music and the music we played was determined by surveying the tastes and the desires of the consumer, who, after all, is the last judge and jury on the acceptability of a product or service. And in surveying the record retailers, the record distributors, and members of the public at large, we found a certain category of music that we felt would appeal to the listeners. Strangely enough, at the same time that we did this, the sale of recorded music skyrocketed in the city of Memphis. Why? Because we were advertising the wares of the record companies on our radio station with time, and time is money. It is the only commodity that a broadcaster has to sell. So, in an indirect way, we did pay for the use of that music by the time we devoted to it on our station.

In 1964, we surveyed the city of Chicago, because we wanted to change the programing of our station there. And we thought perhaps we would provide the rebirth of country music, which had somewhat fallen to the wayside in terms of exposure in the key markets of America, and certainly Chicago can't be considered otherwise. It is the No. 2 market in our country.

To our amazement, we found that in the city of Chicago, and we surveyed record dealers in every neighborhood, in every area of that city, the maximum sales of country music at that time in certain areas of the city of Chicago did not exceed 10 percent. In 1965, I went into New York City and visited with the recording companies who had country music and asked them how they felt about our programing in this station in Chicago with country music, and they welcomed me with open arms. They offered us—said no charge, more music than we could possibly handle, and interestingly enough, and I remember well, one of the tunes at the time was a recording by Johnny Cash of Columbia Records, and the sales were dismal. But, literally, within a short period of weeks, when we did go on the air with country, Columbia couldn't ship the albums into the market fast enough, and I say to you that we did provide a service not only to the recording companies, but to that artist.

For example, on this past July 4, the Rolling Stones gave a concert in Memphis, Tenn., and used the stadium which holds over 50,000 people, and they filled it and this 1-day stand resulted in the Rolling Stones taking over a half million dollars out of the city of Memphis in box-office receipts. And I say to you, were it not for the fact that the product of the Rolling Stones was exposed by radio in this country, nobody would have known and nobody would have known today who the Rolling Stones are.

There is no use talking about the Beatles, because they left this country with millions and millions of dollars because of the exposure that they got on broadcast stations around this country, which made them a household word.

Elvis Presley, who is reputed to have an income of royalties of over a million dollars a year from the music he recorded for RCA, started