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not syndicate to the networks. You syndicate to independent stations or network affiliates.

Mr. DANIELSON. Let me interject something. Syndication goes to independents, but network licensing is handled in a different manner. Mr. VALENTI. Yes, sir.

Mr. DANIELSON. What do you call that?

Mr. VALENTI. As an example, Universal Pictures will sit down with NBC or CBS and work out two different licensing arrangements covering theatrical films and series made for television viewing. One is the full licensing of motion pictures for one, two, or three times showing on a network. Involved is a contract date, an availability date, and a broadcast date. The contract provides how long the network has the right to run that program; once, twice, or three times. That is a simplified version of a sale of films to a network. On a series made for television you work out a deal perhaps to produce a pilot for a network. The network may look at 30 or 40 pilots that they contracted for; and they may choose 4 or 5 of those pilots for inclusion in their next season's network programing.

Mr. DANIELSON. And then the network buys it?

Mr. VALENTI. They license it, and they do it with options, Mr. Congressman. They will pay blank dollar per segment of the series for perhaps one, two, three seasons; or there may be an option to have it for another specified length of time.

Mr. DANIELSON. You mentioned, for instance, Universal would sit down and make this business arrangement. Would Universal-I assume that Universal would buy the copyrightable interest of the artist or the writers, and it would own that interest. Would they retain ownership in the copyrightable interest?

Mr. VALENTI. Almost without exception, they have the copyright, or they have the right to license and bargain in that copyright's name. It is theirs.

Mr. DANIELSON. May I call this type of person the producer?

Mr. VALENTI. Yes, sir.

Mr. DANIELSON. The producer retains the bundle of property. They retain not only they retain all the copyrightable interest in the production, and the agreement with the broadcasting system is simply a licensing agreement under whatever terms they come to?

Mr. VALENTI. Yes, sir.

Mr. DANIELSON. So you have got two different systems here. You mentioned earlier, in testimony in response to, I believe, Mr. Wiggins, that when you sell a film in a syndicated market, apparently— are you using the word syndicated in a different sense than I have just spoken of?

Mr. VALENTI. Yes. I am using syndicated in the sense that syndication is off-network syndication. We are not then selling to a network. We are selling the film to individual stations, wherever they are.

Mr. DANIELSON. Could you give us the name of some well estab lished, deeply experienced negotiator who sells these films to the offnetwork market?

Mr. VALENTI. Yes, sir. I would be very happy to give this committee several names of people with long years of experience in this sort of trade.

Mr. DANIELSON. I very frankly would be most interested in know. ing how they arrive at the licensing fee, what factors they consider,

and most particularly the geographical distribution factor, the poten tial viewer factor, the market.

So if you could do that, I will appreciate it.

[Subsequent to the hearing the following material was received for the record:]

MOTION PICTURE ASSOCIATION OF AMERICA, INC.,

Washington, D.C., June 24, 1975.

MY DEAR MR. CHAIRMAN: When I testified before your committee on June 12, Congressmen Danielson and Wiggins requested the Motion Picture Association to make available individuals who actively engage in selling our copyrighted programs to television. The two Members and Congressman Railsback were specifically interested in determining from information provided by such individuals whether our member companies (1) seek additional payment for our program material from a television station because of cable subscribers included in the station's audience rating; and (2) are paid by the station for those cable viewers who may tune in to that station's programs.

After a number of discussions with the staffs of our member companies and with television licensees, I am confirmed in the view I stated at the hearing that we are rarely, if ever, paid for cable viewers. The amount of copyright payment is based on negotiations in the free and open market place. We try to get what the market will bear, and in determining what the market will bear a number of factors are considered, none of which is related to cable viewers.

They may be summarized as (1) supply and demand; (2) the rating of the market, i.e., No. 1, 2, or 50, or 100; (3) the viewer value, i.e., the attractiveness of the program; (4) the predetermined amount to be paid for the program or group of programs which involves the cost of the program(s) including marketing costs.

I am assured that in our negotiations with television networks and with individual television stations (syndication sales), the issue of cable viewers is never mentioned-with one exception. In an increasing number of syndication sales, a television station may refuse to buy a program, or insist on paying a lower price, because a cable television system in the market of the station has imported that program into the market and thus its potential viewing audience has already seen the program, diminishing its value to the television station.

Our witnesses are (1) men who labor in the television marketplace every day selling copyrighted material to television stations, as well as (2) television station executives who buy copyrighted material. These knowledgeable witnesses are prepared to go over, in as much detail as you and your colleagues choose, the actual give-and-take of the marketplace negotiations, so you and your committee can be convinced that allegations of "double payment" are simply not true.

There are a number of ways this can be done. You could (1) hold another hearing and we could present our witnesses; (2) we could have the witnesses prepare and submit statements; or (3) our witnesses could meet with you and members of your subcommittee informally, either in small groups or individually.

Since you already have a full set of copyright hearings now scheduled into July and since additional hearings would further delay consideration of the copyright bill, I hesitate to suggest an additional day of hearings. On the other hand, submission of written statements would not permit questions and explanations of matters that may be unclear or not covered by the statements. My preference would therefore be a meeting or meetings with members of your subcommittee.

We are, of course, anxious to present the requested information in the manner you feel most appropriate. I would appreciate your always friendly consideration in letting me know how you think we should proceed. Sincerely,

JACK VALENTI.

MOTION PICTURE ASSOCIATION OF AMERICA, INC.,
Washington, D.C., July 7, 1975.

MY DEAR MR. CHAIRMAN: In response to the requests made by Mr. Danielson and Mr. Wiggins, there are submitted herewith affidavits and letters by a number of persons who are personally knowledgeable about the licensing of copyrighted products to television stations and the sale of advertising time to advertisers.

These persons, in affidavits and letters to the Subcommittee, refute completely the charge that so-called "double-billing" takes place, i.e., that television stations obtain additional advertising revenues as a result of cable retransmission of their signals, or that correspondingly copyright owners demand or are paid additional license fees by such TV stations for their product because of the cable retransmissions.

The persons who have submitted the statements that follow are Jim Terrell, vice president and general manager of Station KTVT-TV in Dallas-Fort Worth, Texas; Sheldon Cooper, Vice President and General Manager of Television for Station WGN-TV, Chicago, Ill.; George Koehler, President of Gateway Communications, Inc., Cherry Hill, N.J., owner and operator of WBNG-TV in Binghamton, N.Y., WTAJ-TV in Altoona, Pa., and WLYH-TV in Lebanon, Pa., WOWK-TV in Huntington, W. Va.; John T. Reynolds, President TV Division of KTLA, Los Angeles, California; Crawford P. Rice, Vice President and General Manager of KSTW-TV in Tacoma, Washington; R. Kent Replogle, President of Metromedia Television, New York, N.Y.; A. Frank Reel, President of Metromedia Producers Corporation (a distributor of tape and film programing) New York, N.Y.; James R. Terrell, Chairman of Independent Television Stations, Inc. (the national organization representing independent television stations) New York, N.Y.; Richard Woolen, vice president in charge of programing for Metromedia Television network, New York, N. Y.; Erwin Ezzes, Chairman of the Board of United Artists Television, Inc., New York, N.Y.; H. Keith Godfrey, Executive Vice President of MCA-TV, New York, N.Y.

Hon. CHARLES E. WIGGINS,

JACK VALENTI.
JUNE 27, 1975.

Subcommittee on Courts, Civil Liberties and the Administration of Justice, U.S. House of Representatives, Washington, D.C.

DEAR CONGRESSMAN WIGGINS: Mr. John Mercer of your office has contacted me for additional details concerning out-of-market homes reached by television stations via CATV. He was particularly interested in the relationship of advertising rates to film program costs because of the out-of-market coverage.

As previously stated advertisers will not pay for these out-of-market homes. Local advertisers have no interest in people located far from their retail area. National advertiser's buying concept is based on those homes located in the home market of the station (ADI). Additionally there is no accurate way to credit a station the viewing it may receive on a cable system. For example, last year KTVT carried the World Football League Games. Our signal was blacked out by the cable system in Monahans, Texas, because the local station was also carrying the telecasts. This may have happened on other cable systems of which we are not aware. Because of this local station protection, we cannnot be sure which of our programs are being carried on cable. This uncertainty further precludes advertisers from paying additional money for cable coverage. Therefore, our advertising rates have not increased because of cable coverage. And, in fact, if cable coverage were eliminated the rates would remain the same since this coverage in no way affects our pricing which is based on the home market viewing audience (ADI).

Nor does cable figure in the price we pay for film program costs. Film distributors base the price they charge for their product on the market rank. The market price for film in Dallas-Ft. Worth, the eleventh television market, will be less than the price in Washington, D.C. . . . the 9th market, but greater than the price in Houston, the 14th market.

I hope this additional information will be of help in your deliberations.
Thank you very much for your interest.
Kindest personal regards,

JAMES R. TERRELL,
Vice President/General Manager.

JUNE 30, 1975.

Hon. ROBERT W. KASTEN MEIER,

Chairman, Subcommittee on Courts, Civil Liberties and the Administration of Justice, U.S. House of Representatives, Washington, D.C.

DEAR CHAIRMAN KASTEN MEIER: As reported in the trade press, it appears that cable television witnesses who testified before your Subcommittee on June 11th may have generated some erroneous impressions relative to the value which a station derives from extension of its signal to cable subscribers residing beyond

the station's normal over-the-air coverage area. I hope this letter will serve to correct those impressions.

To the best of our knowledge, WGN-TV is currently carried on 170 cable television systems whose subscribers total 576,000. Approximately 142 of these systems, with a total of 490,700 subscribers, are located beyond the Chicago Area of Dominant Influence. This area, known as the ADI, represents those counties wherein the Chicago television stations have a preponderance of television viewing.

Without going into detail regarding the methods used in the buying and selling of television commercials, I would like to advise you that the price of advertising purchased on our station reflects only the homes we reach within the Chicago ADI. We do not receive extra consideration by virtue of those homes beyond the ADI which are reached via cable television.

I will be pleased to discuss this further with any members of the Subcommittee or their staffs.

Sincerely,

SHELDON COOPER.

Hon. ROBERT W. KASTEN MEIER,

GATEWAY COMMUNICATIONS, INC.,
Cherry Hill, N.J., July 9, 1975.

Chairman, Subcommittee on Courts, Civil Liberties and the Administration of Justice, U.S. House of Representatives, Washington, D.C.

DEAR MR. CHAIRMAN: My attention has been called to certain testimony made by spokesmen for the cable systems during the hearings on copyright legislation before your Subcommittee.

Cable protagonists have stated, unequivocally, that cable so enhances the quality of local signals and so extends local signals beyond normal coverage areas that local stations benefit from the added coverage, and therefore cable systems ought not to pay copyright fees, but on the contrary, they should collect fees from local stations to compensate the cable systems for improving and extending television signals.

That claim is preposterous.

In certain locations it is possible that local signals have been "enhanced" but when it happens it is an improvement less apparent to the eye and mind than to the meter of the measuring device. In my area of operations, the television signal may be extended for the cable viewer in Williamsport, or in similar physically shaded areas where normal station signals cannot be received. This is the classic cable situation.

But the argument is wholly fallacious that this "service" by the cable systems permits the station to charge more for its advertising and thus enables the syndicator to charge more for his copyrighted program.

Virtually all television advertising buying is done on the basis of station reception in what Nielsen calls the Designated Market Area, and the American Research Bureau calls the Area of Dominant Influence. These are the areas in which the stations in a market command the attention of a majority of the viewers (county-by-county) and is, as a practical matter, well within the coverage area of the station's unassisted signal.

Each DMA (ADI) is defined by viewer response to television stations in a market. From an advertising selling viewpoint, much of a station's unassisted signal is "wasted" because it is broadcast over areas where a majority of television sets are tuned to stations operating in an adjacent market.

The Johnstown/Altoona area offers an excellent case in point, when one considers the degree of cable saturation-nearly 55%-and the number of cable connections—about 150,000. In combination, the Johnstown/Altoona market becomes the biggest and toughest cable market in America.

"Television Fact Book" shows that the Johnstown television station, WJACTV, has a net weekly circulation approaching 600,000 television homes. The Altoona station has a net weekly circulation of under 300,000 homes. But, "Broadcast Advertiser Reports" (the authoritative source on TV advertising), shows that most national business is placed on the Altoona station, WTAJ-TV, despite the fact that Johnstown has a two to one total coverage over the Altoona station. Superior selling may account for some of the difference, but the simple fact is that most buying is done on DMA or ADI figures and in the DMA or ADI, the Altoona station, WTAJ-TV, in a majority of time periods, has the audiences equal to or larger than the Johnstown station.

On the other hand, the Johnstown station's physical coverage over Pittsburgh is "wasted" in the sense that advertisers buying the Johnstown/Altoona market also buy the Pittsburgh market separately; they buy by DMA or ADI and not by total coverage of the station.

The local merchant doing business in Johnstown or Altoona has no desire to pay more advertising dollars to reach viewers in Pittsburgh; his store is in Johnstown or in Altoona, and he'll not pay more for a signal that competes with the signals used by Pittsburgh merchants-who are "local" merchants for Pittsburgh area residents.

Where and how does cable help the Johnstown/Altoona television stations? The answer is that cable doesn't help them; it hurts. There has been no ABCTV affiliate in either Johnstown or Altoona. Cable brings in to both cities the signal of WTAE-TV in Pittsburgh, a station that is 75 to 100 miles away from Altoona and the area served by its station. The Pittsburgh station can't sell this coverage, but the viewers watching the programs, obviously are not watching the signals of the Altoona or Johnstown stations. Consequently, these audiences for the Altoona and Johnstown stations are diminished rather than increased. In short, cable has fractionalized the local viewing audience.

Or, look at Binghamton, New York, and audience survey records going back to November 1963. The share of audience viewing signals other than those in the market has risen from 2% in November of 1963, to 25% in May of 1975, and it has gone as high as 30%. The total number of homes attributed to the Binghamton market has gone from 43,000 in November of 1963, to 51,000 in November of 1966 but sharply down to 38,000 in May of 1975. In a time when the number of television homes was increased and the population was increasing, the Binghamton stations have had to run at full speed in order to remain in approximately the same place. The reason? The growth of cable systems in the area, systems that import three signals from New York City 200 miles away and additional signals from Syracuse and from Wilkes Barre-Scranton.

The total homes here cited is from 9 AM to midnight, 7 days a week. The prime-time situation is even more revealing. In 1963-1965, the number of homes viewing the three Binghamton network stations ranged around 90,000. At the height of the last television season, 1974-1975, the number had dropped to as low as 69,000.

On the purchase of syndication copyrighted product for use on television stations, the distributor prices each market according to its size. From that point on, the price the station pays is negotiated.

Prices for copyrighted programs are negotiated on the basis of competition between sellers, on what a station operator feels he can afford, on the going price in the market for similar programs, on the quality of the product under consideration, on the number of stations in a market, on the length of time that the program has been available. These are among the more important factors that are the determinants of price for program material; not the size of the station's audience. Thus, the DMA or ADI is seldom, if ever, a measure of price paid and the total service area is of even less significance in such price discussions.

The syndicator may sell the same product in adjacent markets-the Pittsburgh/Johnstown/Altoona situation again. If he sells the same program in the two markets and the Pittsburgh station is carried by cable in Altoona and Johnstown, one may find that the Pittsburgh station is taking away audience with the same program for which the Altoona station has paid good dollars. At the same time, the Johnstown/Altoona audience is an audience that the Pittsburgh station cannot sell in formulating its rates. Meanwhile, the Altoona station is forced to sell at a lower rate because the program coming into the market via cable has eroded part of the Altoona station's audience.

Cable's claim that its enhancement of local signals and its extension of those signals in additional homes should make it exempt from copyright payment is not based on the facts and is not deserving of serious consideration, in my judg. ment.

Sincerely,

Hon. ROBERT W. KASTEN MEIER,

GEORGE A. KOEHLER.

GOLDEN WEST BROADCASTERS.
Los Angeles, Calif., July 14, 1975.

Chairman, Subcommittee on Courts, Civil Liberties, and the Administration of Justice, U.S. House of Representatives, Washington, D.C.

DEAR MR. CHAIRMAN: I have been asked as General Manager of KTLA. an independently owned television station in Los Angeles, California, to comment on

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