of an author' in the constitutional sense, and are as fully worthy of protection as any of the many different kinds of 'derivative works' accorded protection under the Federal copyright statute." Since record performances are constitutionally capable of copyright, the sole issue is one of policy. We support the principle of legislation to protect record performances, but remain concerned over the possible adverse effect such legislation may have on the program for general revision. H.R. 5345 has been proposed as separate legislation, but it presumably could be incorporated in the general revision program at some point. As a separate bill, certain technical adjustments would probably be necessary to make the proposal workable. While the bill is patterned after section 114 of the revision bill in the 93rd Congress, no agency is designated in H.R. 5345 to receive compulsory license fees for distribution; also, there is no anti-trust exemption to facilitate voluntary royalty agreements or agreements about distribution of the fees. The Copyright Office and the Library of Congress endorses the general principle which H.R. 5345 seeks to advance. If it becomes apparent that legislation for this purpose cannot, as a practical matter, be included in the bill for general revision of the copyright law. we hope that it will be given favorable consideration as separate legislation in the future. Sincerely yours, Hon. ROBERT KASTEN MEIER, JOHN G. LORENZ, Acting Librarian of Congress. NATIONAL ENDOWMENT FOR THE ARTS, Chairman, Subcommittee on Courts, Civil Liberties and the Administration of Justice, Committee on the Judiciary, U.S. House of Representatives, Washington, D.C. DEAR MR. CHAIRMAN: This is in response to the request of Herbert Fuchs, Counsel to the Subcommittee, for our views and comments on H.R. 5345 to amend the Copyright Act of 1909 by providing a performance right in copyrighted sound recordings. The National Endowment for the Arts is aware that the Sound Recording Amendment of 1971 provides for a statutory copyright in sound recordings and for the first time extends copyright protection to the original performances of recording artists and musicians, and the creative technical expertise of record companies. We note, however, that the Amendment, while recognizing the talent, originality, and value of the creative efforts of these individuals, includes no provision for compensating them when others use the copyrighted sound recordings for profit making purposes. Undoubtedly, it is a performing artist's personal rendition that brings to "life" the work of music composers and lyricists; and, a record producer's ability to creatively capture, electronically process, compile, and edit sounds that enables broadcasters to utilize recording artists' unique performances again and again to fill their commercially available time. We therefore wholeheartedly support H.R. 5345 which, by subjecting the public performance of sound recordings to a compulsory license, would require radio and television broadcasters, jukebox owners, and other transmitters of copyrighted sound recordings to pay a performance royalty in the form of an annual licensing fee to the performer and copyright owner of the recording. It would not appear that paying such a performance royalty to recording artists. musicians and record companies (as copyright owners of the sound recording) would impose a financial burden on the broadcast industry. As proposed in Section 3 of H.R. 5345, royalty fees would vary according to the amount of gross receipts received by a broadcast station from commercial sponsors. The stations, in turn, could pass on the additional expense to advertisers who are the ultimate financial beneficiaries of the recording artist's contribution to a station's programming. Further, according to Section 3 (c) of the proposed bill, royalty fees are to be divided equally between the performers and copyright owners of the sound recording and neither may assign his right to royalties to the other. We favorably note that this language will preclude the performer or copyright owner from obtaining all of the benefits intended to be divided between them. Although we support the general concepts of H.R. 5345, we would like to see it incorporated into the general legislation on copyright revision. If it becomes apparent that legislation of this type cannot be included in the general bill, we recommend favorable consideration of separate legislation. In conclusion, the National Endowment for the Arts strongly believes that musicians and record companies who contribute their creative efforts to the production of copyrighted sound recordings should share in the income enjoyed by radio and television stations and other commercial organizations who use the recordings for profit. The Office of Management and Budget has advised us that it has no objection to the submission of this report from the standpoint of the Administration's program. Sincerely, 4 NANCY HANKS, Chairman. AMERICAN BROADCASTING COMPANIES, INC., Hon. ROBERT W. KASTEN MEIER, DEAR MR. KASTENMEIER: American Broadcasting Companies, Inc. (ABC) wishes to provide your Subcommittee with its comments on H.R. 5345, a bill to extend to record companies and performers a public performance right in sound recordings parallel to existing federal copyright provisions granting public performance rights to composers. ABC believes that H.R. 5345 would be an unwise and unnecessary extension of the copyright laws. ABC is a major user of sound recordings; ABC's stations, and radio stations in general, are important outlets for the dissemination to the general public of recordings. It is a known fact that broadcasters greatly stimulate record sales by exposing new releases, and particularly those of relatively unknown artists, to potential buyers. Radio stations contribute immeasurably to the popularity of recordings and therefore to the profits enjoyed by record manufacturers and performers alike. As radio play provides effective advertising and creates consumer demand, it is not surprising that record companies expend considerable efforts promoting the use of their material on the air. Unlike most advertising, which can only be descriptive of a given product, radio broadcast provides the potential buyer with a precise appraisal of the product. Composers, record companies, and performers pay nothing for this valuable promotional effort. Legal and business considerations preclude broadcasters from charging for their use of such material. H.R. 5345, however, would compel broadcasters to pay those for whom air play already provides, directly or indirectly, major benefits. In addition, ABC, like all broadcast users, pays substantial amounts for performance rights to the music rights groups such as ASCAP and BMI, Inc. It is argued that record companies and performers do not share equitably in the revenues generated either by broadcast or payments to the music rights groups. Uncompensated public performance of records produced jointly by record companies and performers, it is said, respresents an expropriation by certain record users, principally broadcasters, of economic benefits to which record producers have a legitimate claim. ABC finds this argument unconvincing and doubts that the proposed statute would even achieve its intended purpose of allocating a greater share of revenues to record companies and performers. Professors Robert L. Bard and Lewis S. Kurlantzick recently published an article evaluating the issue of public performance rights for record producers in terms of economic theory and equitable and legal consequences.' They find no convincing argument for granting record producers such rights. Record public performance rights, they conclude, will not redress alleged injustices to musical artists whose records continue to be broadcast long after the exhaustion of their sales potential. Composers, rather than record companies and performers, would be the most likely beneficiaries of such a revision. Any benefits that accrued would not fall equally to performers and record companies, as many 1 Bard and Kurlantzick. A Public Performance Right in Recordings: How to Alter the Copyright System Without Improving It, 43 Geo. Wash. L. Rev. 152 (1974). believe, but would be divided according to the relative bargaining powers of the parties involved, and according to a complex set of economic and legal factors which statutory mechanisms cannot adequately comprehend. ABC concurs in this opinion and believes the following excerpts from the Bard and Kurlantzick article aptly summarizes the difficulties confronting proponents of H.R. 5345: "Amending the Copyright Act confronts an important principle which also is relevant to the formulation of copyright policy generally, indeed, to all economic regulation. At times there are desires to restructure the benefits of copyright law to favor creators-authors, composers, and performers-more, and the commercial participants in the creative and distribution process, such as publishers, record companies and broadcasters, less. It may be that authors and artists "deserve" a larger share of the revenues generated by the exploitation of their work, but it may not be possible to achieve this through changes in the copyright law. Whatever the initial allocation of rights in creative work under the law, a large part of these rights must be assigned to others in order to render them capable of returning significant income to their original holders. The author must usually deal with a publisher, the performer with a record company, etc. The author's success will depend less on the statutory rights which he initially possesses than on the variety of economic factors which determine his relative bargaining strength. In most circumstances, attempts to strengthen a weak bargaining position through granting an author or artist additional legal rights which affect one part of the economic relationship with a publisher or record company may be frustrated by a compensating adjustment in the remaining relationship." 2 Under H.R. 5345 income attributable to the sale and performance of recorded music would be transferred from broadcasters to record companies and popular performers. Yet both these groups are prospering under the existing copyright regime. Record companies presently enjoy sufficient incentives to produce a very large output of new recordings. Performers are already compensated for their ability to produce records attractive to broadcasters. As the National Broadcasting Company points out in its Statement to the Subcommittee of July 23, 1975, many successful recording artists, those most likely to benefit by the proposed statute, have their own recording companies and record under their own labels. These artists would reap an additional benefit in their dual capacity as performers and record company proprietors. Furthermore, lesser known performers who are in the employ of recording companies are unlikely to gain measurable benefits from H.R. 5345. Although an equal division of performance right royalties is contemplated, experience dictates that legal and economic factors existing outside the statutory framework may effect a distinctly different ultimate allocation of revenues. Such has been the practice in the area of mechanical reproduction rights, whereby record companies usually obtain voluntary licenses from composers which permit them to avoid compulsory licensing provisions (17 U.S.C. §1(e) (1970)). There is little reason to doubt that similar arrangements would result in practice as between performers and record companies. The situation as to classical music is somewhat different from that of popular music. The argument has been made that the less popular arts, which by definition, do not have the ability to generate mass sales, ought to enjoy the augmented royalties which H.R. 5345 theoretically would provide. It is conceivable that a certain negligible benefit would flow to makers of classical records. Most classical music is uncopyrighted; therefore, there is no music copyright holder to whom record producers must pay mechanical reproduction right royalties. Thus the classical record makers could retain all earnings from public performances. Bard and Kurlantzick conclude upon analysis of the peculiarities of this specialized market that classical records will not earn sufficient revenues from public performance fees to have any appreciable impact upon the production of classical records. Classical music may need and deserve financial support as an independent matter, but establishing a record public performance right of wide applicability to producers of records of all types and tastes will only produce limited benefits, too small to affect classical record production and too small to justify wholesale legislation. Moreover, considerations bearing on the desirability of encouraging the production of classical records ought to be addressed in more appropriate legislation with narrower focus. 2 Id. at p. 160, footnote omitted. In sum, ABC opposes creation of a public performance right for record companies and performers as inconsistent with practical realities and as an unwise and unfair burden on broadcasters. Such a newly imposed obligation would also undermine the existing mutually beneficial relationships among record companies, performers and broadcasters. Thank you for the opportunity of presenting these comments. EVERETT H. ERLICK. STATEMENT OF NATIONAL BROADCASTING CO., INC. National Broadcasting Company, Inc. (“NBC") respectfully makes this statement concerning H.R. 5345, a bill which would create a “performance right" in the use of copyrighted sound recordings for the benefit of record companies and performers. We question both the logic and public benefit of the proposed statute and therefore do not support its passage. Proponents of H.R. 5345 argue that the creation of a performance right is necessary to create a new source of revenue for lesser-known performers and musicians who work for record companies. We doubt that the proposed statute will have that effect, even assuming that such an objective is a valid subject for national legislative policy. In the first place, 50 percent of the performance fees provided for in the statute would go to record companies, not performers. Nothing would compel these companies to use this money to pay performers. Secondly, only those musicians and performers whose sound recordings are actually broadcast can benefit from or be compensated under the proposed legislation. Since the records that are most often played on radio and television are those of the most popular and well-known performers, lesser-known musicians and artists will benefit very little. The more popular performers-most of whom are already highly paid-will undoubtedly get the lion's share of the remaining 50 percent of the proposed performers' fees. In this regard, it should also be noted that many successful recording artists today own their own recording companies and record under their own labels. The proposed statute would give these artists the double benefit of receiving royalties in their dual capacity as performers as well as record company owners. The record industry is a multi-billion dollar enterprise. It grew to this size without subsidization from the broadcasting industry, and it is clearly able to survive without the imposition of these additional fees. Broadcasters already pay substantial sums for the right to play music on the air. In 1973, for example, broadcasters paid over $80 million in music license fees.1 These payments remunerate the people who create artistic property and thus serve the policies of the copyright laws. H.R. 5345, on the other hand, does not square with the underlying objectives of copyright. The Constitutional purpose of copyright is to protect the "writings" of "Authors". Requiring such payments to performers will neither encourage them to be "Authors" nor result in their creating new "writings". This is not what the Constitutional copyright mandate was intended to achieve. Singling out, in effect, the broadcast industry to shoulder the burden of these additional performance fees is unwarranted. It is an economic reality that a good deal of the monies received by record companies and performers through record sales are directly attributable to the broadcasting of records. For years, record companies have supplied records to broadcasters without charge in recognition of the incalculable promotional value of having their records played on the air. H.R. 5345 would compel broadcasters to pay record companies for the "privilege" of increasing such companies' profits from record sales. This neither makes sense economically nor comports with the Constitutional purpose of copyright. NBC believes that the compensation of performers should be left to private negotiation. If the Congress truly believes that the public interest is served by increasing the compensation of undiscovered or lesser-known talent, it should not impose that burden on the broadcasting industry. We believe this area is better left to free negotiation between the representatives of the performers 1 FCC 1973 Financial Data; 1974 data not yet available. and the record companies who are, properly, the parties at issue on the question of compensation of performers. We thank this Subcommittee for the opportunity to state our views on H.R. 5345. STATEMENT OF RUSSELL MAWDSLEY, IMMEDIATE PAST PRESIDENT AND CHAIRMAN OF THE LEGISLATIVE COMMITTEE OF MUSIC OPERATORS OF AMERICA, INC. Mr. Chairman, I am Russell Mawdsley of Holyoke, Massachusetts. I submit this statement in behalf of Music Operators of America, Inc., in opposition to H.R. 5345, which is referred to as the Performance Rights Amendment of 1975. Music Operators of America, Inc. (MOA), is the national organization of jukebox operators which has members in every state of the Union. I am the immediate past president of the organization and presently serve as chairman of its national legislative committee. I am president of Russell-Hall, Inc., a firm which operates jukebox, amusement machines, and a full line of vending machines in the greater western Massachusetts area, an area which is centered around the city of Springfield, Massachusetts. My firm operates about 100 jukebox, 150 amusement machines, and 700 vending machines, in about 450 locations in this area. I am also active in local associations of jukebox operators and in business and civic organizations in my home city of Holyoke, Massachusetts. I wish to register the strong opposition of Music Operators of America to H.R. 5345, the provisions of which are substantially similar to provisions for performance royalties for record manufacturers and performers which were deleted from the Copyright Revision Bill (S. 1361, 93rd Congress) when the Senate considered and passed that Bill and referred it to the House of Representatives in September 1974. H.R. 5345 would add $1.00 per jukebox per year to the new jukebox royalty of $8.00 per machine per year that would be created by the pending Copyright Revision Bill, H.R. 2223, 94th Congress. That new $8.00 royalty was adopted as a compromise when the House of Representatives considered and passed a copyright revision bill several years ago. Later, the Copyright Subcommittee of the Senate Judiciary Committee also adopted the $8.00 royalty out of a desire to conform to the rate provided in the copyright legislation passed by the House of Representatives (Senate Report 93-983 on S. 1361, 93rd Congress, page 152). Music Operators of America, Inc., opposes H.R. 5434 for the following reasons: 1. It would upset the compromise agreement by which the proposed $8.00 jukebox royalty was first established. That proposal, I should add, was intended to replace the existing exemption of coin-operated musical performances from performance fees, by a fixed statutory royalty, that wou'd serve as a maximum limit on jukebox royalties. Before that $8.00 royalty can become fixed in our statutory law, however, we are now seeing new efforts to increase jukebox operators' liabilities under the copyright law. 2. The proposed new royalty would add a new burden of at least $450,000 a year ($1X450,000 machines) to an industry of small businessmen, who already will be burdened by some $3.600,000 ($8×450.000 machines) in new jukebox royalties and by at least $4.500.000 (6 cents×75,000,000 records) in mechanical royalties, under Sections 115 and 116 of H.R. 2223, the pending Copyright Revision Bill. 3. We wish to impress upon the Committee the fact that the jukebox industry is an economically depressed industry. Like most other industries, the costs of our equipment and materials have been rising drastically. Our singles records now cost on an average 75 cents per record, which is a marked increase from the 60 cents which a typical operator reported to the House Judiciary Committee at its hearings in 1965 (Hearings on H.R. 4347, 89th Congress, Part I, page 570). Wages of our electronic and mechanical technicians and our other costs of operations have risen even more drastically, and are continuing to rise. On the other hand, jukebox operators are unable to increase prices per play so as to keep abreast of their increasing costs of operations. In some businesses, prices can be increased merely by changing the price tag, and the change may not be noticed. In our industry, it is a matter of reducing the number of songs a customer can play for a quarter, and also of changing the coin receiving mechanism on every one of the operators' machines. Also, the location owner must be consulted and his consent obtained, for he may object that a raise in the cost to play music will be detrimental to his business. Prices of two plays per quarter |