U.S. SENATE COMMITTEE ON THE JUDICIARY, SUBCOMMITTEE On Patents, HON. DEAN BURCH, (Pursuant to Sec. 13, S. Res. 32, 92d Congress) Washington, D.C. 20510 January 31, 1972 Chairman, Federal Communications Commission, Washington, D.C. DEAR MR. CHAIRMAN: I have your letter of January 26, 1972, requesting my advice on the effect of the consensus agreement reached by the principal parties involved in the cable television controversy on the passage of legislation for general revision of the copyright law. I concur in the judgment set forth in your letter that implementation of the agreement will markedly facilitate passage of such legislation. As I have stated in several reports to the Senate in recent years, the CATV question is the only significant obstacle to final action by the Congress on a copyright bill. I urged the parties to negotiate in good faith to determine if they could reach agreement on both the communications and copyright aspects of the CATV question. I commend the parties for the efforts they have made, and believe that the agreement that has been reached is in the public interest and reflects a reasonable compromise of the positions of the various parties. The Chief Counsel of the Subcommittee on Patents, Trademarks and Copyrights in a letter of December 15, 1971 has notified all the parties that it is the intention of the Subcommittee to immediately resume active consideration of the copyright legislation upon the implementation of the Commission's new cable rules. I hope that the foregoing is helpful to the Commission in its disposition of this important matter. With kindest regards, I am Sincerely, JOHN L. MCCLELLAN, Chairman. VI. TEXT OF PROPOSED AMENDMENTS TO H.R. 2223 A. The "Stevens Amendment" On page 17, line 29, beginning with "or nonsimultaneously", strike out through "Commission" in line 38. On page 18, line 3, strike out "or programs broadcast". On page 18, line 5, immediately after "Commission and”, insert “simultaneously". On page 18, line 6, strike out "or programs". B. Increasing the Initial Fee Schedule On page 16, line 20, strike out "1⁄2" and insert in lieu thereof “1”. On page 16, line 21, strike out "1" and insert in lieu thereof “2”. On page 16, line 21, strike out "11⁄2" and insert in lieu thereof “3”. On page 16, line 25, strike out "2" and insert in lieu thereof "4". On page 16, line 28, strike out "212" and insert in lieu thereof "5", C. Administrative Provisions Relating to the Royalty Tribunal 1. Compensation of Tribunal; Library of Congress Furnishing Facilities and Staff On page 60, strike out lines 33 through 37 and insert in lieu thereof the following: "(c) Each member of a panel of the Tribunal shall be paid compensation only for each day (including travel time) he is performing his duties as a member of that panel. "(d) The Library of Congress shall furnish facilities, equipment, supplies, services, and personnel to the Tribunal. The Library shall also procure for the Tribunal temporary and intermittent services in accordance with section 3109 of title 5." 2. Providing Initial Tribunal Staff Promptly On page 62, line 8, insert "(a)" immediately after "102". On page 62, line 9, immediately after "provided by", insert "sub-section (b) of this section and". On page 62, between lines 10 and 11, insert the following: "(b) Section 805 (d) of title 17, United States Code, as provided by section 101 of this Act, is effective on the date of enactment of this Act. Not later than 60 days after such date of enactment, the Library shall provide for a staff, facilities, equipment, supplies, and services for the Royalty Tribunal so that data and other information necessary to conduct expeditiously the first review of the royalty adjustments contained in section 111 of such title 17, as provided by section 101 of this Act, may be available to the first panel of the Tribunal appointed under section 802 (a) of such title 17 immediately upon its certification. 3. Prompt Review of Section 111 Royalty Rates and Adjustments On page 59, line 11, strike out "July 1" and insert in lieu thereof "January 1". On page 59, line 15, strike out "1984" and insert in lieu thereof "1982". 4. Expeditious Decisions by the Tribunal On page 60, line 22, strike out "one year from the certification of the panel" and insert in lieu thereof the following: "90 days after the certification of the panel, except that if the panel determines, and publishes its determination in the Federal Register prior to the expiration of such 90 days, that it requires additional time to render its final decision, the panel shall have an additional 90-day period before it shall render its final decision." On page 60, beginning with "Upon" in line 22, strike out through line 25. D. Section 111(d)(1): Clarification of Cable Ownership Notice Requirements On page 15, line 28, strike out "of the secondary transmission" and insert in lieu thereof "it commences the transmission of secondary transmissions". On page 15, line 29, immediately after "is later.", insert "and thereafter within 30 days after each time the ownership or control of the cable system changes,”. On page 15, line 31, strike out "secondary transmission service" and insert in lieu thereof "cable system". E. Criminal Penalties for Piracy and False Labeling On page 49, line 38, strike out "one year" and insert in lieu thereof "three years". On page 49, line 39, strike out "two years" and insert in lieu thereof "seven years". On page 64, lines 23 and 24, strike out "one year" and insert in lieu thereof "three years". On page 64, line 25, strike out "two years" and insert in lieu thereof "seven years". VII. LIST OF MEMBERS OF MPAA, AMPTP, AND CCO The members of the Motion Picture Association of America, Inc., include Allied Artists Pictures Corporation, Avco Embassy Pictures Corp., Columbia Pictures Industries, Inc., Metro-Goldwyn-Mayer, Inc., Paramount Pictures Corporation, Twentieth Century-Fox Film Corp., United Artists Corporation, Universal Pictures, a division of Universal City Studios, Inc., and Warner Bros. Inc. The member companies represented in the Committee of Copyright Owners are: Avco Embassy Pictures Corp., Columbia Pictures Industries, Inc., Metro-GoldwynMayer, Inc., Metromedia Producers Corp., Paramount Pictures Corporation, Twentieth Century-Fox Film Corp., United Artists Corporation, Universal Pictures, a division of Universal City Studios, Inc., Warner Bros. Inc. The members of the Association of Motion Picture and Television Producers are: Aaron Spelling Productions, Inc. (The) Alpha Corporation American International Productions, a California Corporation Artanis Productions, Inc. Aubrey Schenck Enterprises, Inc. Charleston Enterprises Corporation 57-786-76-pt. 2 Cine Guarantors, Inc. Cinema Video Communications, Inc. Daisy Productions, Inc. Danny Thomas Productions Dubie-Do Productions, Inc. Four Star International, Inc. Hanna-Barbera Productions, Inc. Harold Hecht Company Herbert Leonard Enterprises, Inc. Paramount Pictures Corporation Pax Films, Inc. Rainbow Productions, Inc. Jack Rollins and Charles H. Joffee Pro- Rastar Enterprises, Inc. ductions (The) Kappa Corporation Legarla, Inc. Leonard Films, Inc. Levy-Gardner-Laven Productions, Inc. Max E. Youngstein Enterprises, Inc. Metro-Goldwyn-Mayer, Inc. Rastar Productions, Inc. Robert B. Radnitz Productions, Ltd. T & L Productions, Inc. Twentieth Century-Fox Film Corp. (The) Mirisch Corporation of Cali- United Artists Corporation fornia Mirisch Films, Inc. Mirisch Productions, Inc. Murakami Wolf Productions, Inc. NGC Television, Inc. Norlan Productions, Inc. Universal City Studios, Inc. Warner Bros. Inc. Wolper Pictures, Ltd. TESTIMONY OF JACK VALENTI, PRESIDENT, MOTION PICTURE ASSOCIATION OF AMERICA, INC., AND THE ASSOCIATION OF MOTION PICTURE AND TELEVISION PRODUCERS, INC. Mr. VALENTI. Mr. Chairman, my name is Jack Valenti, and I am president of the Motion Picture Association of America, and the Association of Motion Picture and Television Producers. Between Mr. Howard and myself, we represent motion picture and television producers of copyrighted material; labor unions of technicians and craftsmen; actors, writers, and directors-in short, all of those people who work in front of and behind the camera to produce copyrighted programing for this Nation. My plea to you is quite simple. We believe that cable television is a private business run for private profit and ought not be exempt from copyright, either in whole or in part. No private business should. Second, we believe that the fee schedule in the bill you are now considering is about as low as a fee schedule can get and still be called fees. Under this bill, cable television would pay more for the postage stamp it puts on its monthly invoice bill to each subscriber than it would pay for copyright. That is how low it gets. All the copyright owner wants is fair treatment. So far, cable has gotten everything it has wanted, with no relation to equity or fair treatment or the searching out of facts or truth. That is the way we see it. Cable is coming back to you and asking you for more. I come before this committee to implore you to bring back fair judgment and equity into this debate before this bill is raped and tortured by cable interests who do not want to pay any copyright fees, who want to be set above the marketplace as if they were some divinely created enterprise, high above the traffic of where other people engage in sordid bargains and marketplace operations. They want the Congress to insulate them from risk. You heard yesterday that their complaint was that they wanted to look into the future and know precisely what their expenses were going to be. I must tell you that I do not know of any other business that is free from risk. They say investors do not want to invest because there is that risk. Is there another business in this Nation that can tell you, 1, 2, 3 years from now what interest rates are going to be? As Congressman Badillo pointed out yesterday, what the labor costs are going to be, how many cancellations they might have, these are all part of the marketplace risk factor. And every man who invests money in the free enterprise system today understands it is a dicey forum. I might add, when one of you gentlemen asked how many cable systems had gone bankrupt, there was rather a blank stare in return. Let me point out to you that in 1973-74, 189,513 businesses went bankrupt in this Nation. The first 10 months of 1974-75, 210,532 businesses have gone bankrupt Not one of them was free from risk; not one of them asked the Congress to give them a risk-free future; not one of them got anything from the Congress in the way of exemption or a risk-free future. If my plea seems passionate, it seems so because it is. We have huge reason to be concerned. What is cable television's aim? Let us make that, as some are wont to say, perfectly clear. First, cable wants to keep from paying a copyright fee to anybody; and second, to exempt, either by revenue or some device, a portion of cable television from paying copyright fees. Cable interests say we are not liable for copyright which would make cable television the business counterpart to Stonehenge or the Easter Island relics: a one-of-a-kind species in the American marketplace. To exempt all of cable television or a portion of cable television would be to confer a special privilege on a private industry, and I think it is arrogant of them to demand that. Cable system owners are in the cable system business-what for? To make money, pure and simple. Nothing pejorative about that, but that is why they are there. They ought to be subjected to the same risk factors and the same cost factors as every other private business in the American marketplace—and particularly, their competitors in the television industry. They should be subjected to the same cost factors. Ah, but say cable interests, we are just a little antenna service. We do not do any more than a house-top antenna does. You do not charge copyright fees for a house-top antenna. House-top antenna, indeed. Cable television is a highly sophisticated industry using complex machinery and equipment of the most sophisticated kind. I was in New Orleans, and heard Edward Allen, of Walnut Creek, Calif., who is an official of the National Cable Television Association, and the president of Western Communications, which operates cable systems in California with 60,000 subscribers. This is what he had to say-I am now quoting from Mr. Allen: We do receive those television broadcast signals at our headends. After we receive these broadcast signals, we process them, we amplify them, we distribute them, and then we make a charge for them. What we do to these signals after we receive them, to my mind, says Mr. Allen, does in fact constitute a performance for profit. Those are not my words, gentlemen, they are the words of a respected man in this business-and, I might add, an honest and candid member of the industry. Ah, yes, but say the cable interests, what about the Supreme Court decision which held that we were free and affirmed cable's exemption from copyright. The answer is, the Supreme Court did no such thing. I do not have to explain that to you distinguished lawyers, you know that better than I. The Court held only that cable systems were not liable for copyright. Why? Because the Court was interpreting the 1909 copyright bill, a law 66 years old-and very feeble for its age-a law enacted before radio and television were even invented. This is what the Court said plainly-and, at least to my judgment, a bit plaintively These shifts in current business and commercial relationships, while of significance with respect to the organization and growth of the communications industry, simply cannot be underscore "cannot be" controlled by means of litigation based on copyright legislation enacted more than a half-century ago, when neither broadcast television nor CATV was yet conceived. Detailed regulation of these relationships, the Court went on to say, and any ultimate resolution of the many sensitive and important problems in this field, must be left to the Congress. In short, the Court said to the Congress, look, gentlemen, you have got to construct a new copyright law; you have got to take into account all these new dazzling technological developments. That is not the work for the Court to do. Then cable interests balked over that. They said, yes, but you copyright owners are getting double payment. To those trained in the law, this is a false-bottomed argument. The plain fact is as I have been advised by eminent counsel-that copyright usually involves separate payments for multiple uses. You gentlemen are far more cognizant of that than I, and I leave that interpretation to you. But the contention that because one user, television, has already paid its copyright fee, that cable should use the same copyright material free is an argument that violates the very concept of copyright. Cable television fragments the markets of local TV stations. When cable imports a signal from distant stations in faraway cities, it siphons audience from the local TV stations. No one can deny that. And consider also that the cable system today pays not 1 cent for copyright, and yet cable imports distant signals to fragment the audience of local TV stations. What is more important to us is that it lessens or totally destroys the value of a film which is exhibited in one city and transported by cable to another city. It lessens or destroys the value of that film in the city into which it is imported. In short, if the Congress were to exempt cable or any portion of the industry from copyright payment, the Congress would be conferring on cable it would be legitimizing unfair competition against television, which itself is unsubsidized and which pays copyright. I want to interrupt my comments to comment on what my good friend, Commissioner Ford, talked about yesterday of paying a double ticket. Let me get to that. Cable systems do not pay a double ticket, as the former Commissioner pointed out. It is not the same person who is buying two tickets to the same performance; it is two different people buying one ticket each to the performance. That is the basic concept of copyright: Separate payments for multiple use. |