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price of the product. When I am negotiating a contract with a local television station for the use of our programs (syndication), I have no idea of the number of cable homes in that local market, and today I couldn't tell you, if you asked me, the number of cable homes in any market.

The reason simply stated is that the number of cable households viewing a television program is irrelevant in our negotiations with television stations. In determining a sale price and negotiating with a local television station we analyze the following: the past history of selling programs in that particular market; the ranking in size of that market (New York is No. 1, etc.); competition in selling programs to stations in the market; our costs in the programs we're attempting to sell; and the needs of a television station for programming. Thus, for example, if a television station has a low rating, and we have what we think is a good program which will help his ratings, we may ask a higher price. The station may pay the higher price, if it needs our program, for just that reason. The sale price has no relationship to the number of increased cable viewers: it is based on the marketplace.

If increased cable subscribers had an effect on the contracts we negotiate, then as the number of cable viewers increased, our sale price should also increase. This has not happened in the case of films we sold on a syndication basis in December 1972 in comparison with the sales of films in the same markets in January 1969. Following is a table showing the approximated changes in 1972 sales prices over 1969 prices in the fifteen largest television markets that had from 3% to 19% cable household penetration:

Percentage
change
in price

Market:

New York....

Los Angeles---
Philadelphia

Boston

San Francisco__

Washington, D.C__

Pittsburgh

Cleveland

Dallas-Ft. Worth__

Minneapolis-St. Paul__

Houston

Seattle-Tacoma

Atlanta

Indianapolis

Tampa-St. Petersburg-

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During this period, television homes increased nationally by almost 9% and cable subscriber households increased nationally by 66%. Additionally, during this same period there was a continuing, high rate of inflation. Yet in those few markets where we obtained price increases for our product, the increases ranged only from 3% to 6%. Indeed, in most of those markets, we experienced no changes in prices or else reductions ranging from 1% to 40%. While such price changes can be explained in part by the quality and number of films offered for syndication, it is obvious that the number of cable viewers has no effect upon the price negotiated. What counts is the program we offer and the specific marketplace situation.

I must add that the "leasing" of copyrighted program material involves complex issues; it is not the same as selling bolts and nuts. I have touched only on the high points and have perhaps over-simplified in the interest of brevity. I would be pleased to make myself available for a fuller explanation and to respond to any questions you and the Members of the Subcommittee might have. I must repeat, however, that neither I nor any other seller of program material to a television station, that I know of, has ever obtained more money because of additional cable system coverage of that buyer's signal.

Respectfully,

KEITH GODFREY.

Mr. DANIELSON. I have one last question. This is really sending up a trial balloon. I would like to have you take a look at it, though. We are talking about a tribunal. It comes up all through this testimony,

as I sense it now, when we are talking about cable and the motion picture industry because, really, these are the contenders in our current discussion.

The issue is this. The cable people contend that they should not pay a copyright royalty because if they did so they would be the victims of, let's say, buying two tickets to the same show or doubledealing, those very terms that come up here, the theory being that a copyright license fee has already been paid indirectly through payment to the broadcasting system.

If there really is double-billing-I am going to use that as a frame of reference—if there is really double-billing, of course, I think a good argument can be made that that would be inequitable. A person should not get paid twice for the same thing.

On the other hand, you and persons similarly situated tell us that that is not the case at all. The cable people are getting something for free, for nothing. And very frankly, if that is true, that is not equitable.

I can see both sides of that. The issue is this: Are they or are they not getting something for nothing? Are they or are they not being double-billed for the same thing? I am not so sure that this committee or the Congress is a proper organization to decide an issue of fact, which is: Are they or are they not being double-billed?

Maybe that should be the issue to be decided by the tribunal. I am telling you this is only a trial balloon I am sending up. Suppose we do put out this bill. Suppose it is passed. It becomes law. Suppose we restructure this bill to condition the jurisdiction of this tribunal giving them the power and the responsibility of making a determination as to whether or not there is double-billing, to provide that they cannot permit double-billing. But there at least you would have a tribunal which could sit as a court and determine an ultimate fact of whether you have double-billing. There is a new proposition.

Take a swing at that.

Mr. VALENTI. The proposition you have posited is that a local station has licensed a film and paid a copyright fee to exhibit this particular film locally. Cable picks it up, says OK, the station has paid us for it, now I am going to pick it up and show it to other people. I am not liable because the station already has paid the copyright fee, and if I pay the copyright fee, it would be double payment.

That is what you have.

Mr. DANIELSON. Not quite. I think the tribunal would have to make a determination of whether or not that is a fact, a finding of fact. For example, if the syndicator in licensing the film to the station were to crank into his license fee the fact that you are not only showing it in New York City but also in Oswego, I think was the town. If that is already bought and paid for that is one thing.

On the other hand, if it is not bought and paid for, that is quite another thing. And very frankly, I would like to know the answer to it. I do not doubt your word. I do not doubt the word of the other ladies and gentlemen who have been here. But frankly, the position we are in is not resolved. I question whether the legislature can resolve it. I think it requires a judicial type of determination.

Mr. VALENTI. I have to go back to bedrock basis, Mr. Danielson. There is something repugnant in the fact that a man can build a

business and make a lot of money and the product he sells to the public is something that he gets for free. He does not pay for it. Somehow or another I recoil from that. It seems wrong.

Mr. DANIELSON. Let me coin a new expression and say I associate myself with your remarks.

Mr. VALENTI. Let me give you two examples. Let's suppose that Channel 9, which is CBS here, is running a motion picture in Washington. CBS paid a copyright license fee for it. They sold advertising to go with the program and it reaches out all over the country, and the advertiser is paying for that coverage. Let's suppose Channel 7, ABC, in Washington, said "that's the most marvelous film in the world. It is a 'Gone With the Wind.' We are going to run it on our Channel 7, but we do not have to pay anything for it because this copyright has already been paid for by CBS and Channel 9. We are merely enhancing the audience."

Mr. DANIELSON. Mr. Valenti, I have not communicated with you because that is not what I am talking about. Believe me, I want your people to get every dollar of licensing that they are entitled to. I really mean that. And I also want cable to pay for it if they are getting it. I want the TV stations to pay for it if they are getting it.

But after having had several days of testimony here, it looks to me like the nut is are you paying twice or are you getting it free? I wish I knew the solution.

Mr. VALENTI. Let me ask the question back to you, Mr. Danielson, because if this premise is wrong, I guess the whole problem of copyright becomes tattered and unraveled. I have been told by expert lawyers that the basic concept of copyright is separate payments for multiple use of a copyrighted product, whatever that product is.

For example, a novelist writes a book and a motion picture company pays him for it, a paperback publisher pays him for it, a book club pays him for it. If a play is made out of it, the producer of the play pays him for it. It is multiple use.

Mr. DANIELSON. You could not get a quarrel with me on that if you tried. I will tell you what. Here is where we are.

Under the present posture of the hearings on this bill the Congress is being asked to make this factual determination of whether or not the copyright owner is being appropriately compensated for his property. My proposal was only that instead of having this committee and the Congress make that determination, why not set up a tribunal which is able to hear evidence, to question witnesses, to examine evidence, to make a factual determination like any other court.

It is just a matter-I do not think-I think that as a legislative function this is pretty difficult. I am willing to fight it out but it is pretty tough.

Mr. VALENTI. I am under the impression, Mr. Danielson, that the very official body of cable is already past that threshold question. They admit they are liable for copyright. They testified so before you. Mr. DANIELSON. They admit that they are liable for copyright under some circumstances. They deny they are under some circumstances. Anyway, that is my question. I hope that others may give me a response on that as time goes by.

Mr. VALENTI. I will respond with the names of those people, sir, that you asked about.

Mr. DANIELSON. Thank you.

Mr. KASTENMEIER. I might say this question has been before Congress for a decade or so. To recoin an old phrase I think on that question, "The buck stops here."

Mr. VALENTI. Yes, sir.

Mr. KASTEN MEIER. Whether we like it or not. I yield to the gentleman from California.

Mr. WIGGINS. Yes. On the factual question raised by Mr. Danielson. It is troubling not to know what the truth is. It would be very helpful if we knew the truth but I suspect that there is not a single truth. I suspect that in some cases a copyright owner is paid for by reason of the expanded cable market. I suspect in other cases he is not. If we have to litigate this question, we would have to do so on an ad hoc basis, literally with every showing.

I think we are probably going to have to make a judgment that it is or is not more probably true in most cases. In other words, we are going to have to put a blanket on this whole thing and recognize that in some cases it might result in a double payment and in other cases it might not.

I do not want to foreclose any final judgment on this idea but I recoil at the notion you are going to have to file a lawsuit every time you sell a copyrighted work to determine whether or not the market did, in fact, in that case include the expanded cable coverage.

Mr. Valenti, I am tempted to spar around with you a little bit just for the exercise, but I will not yield to that. I do wish to add my personal interest in the names and testimony of people who will be furnished by you bearing on this question.

Mr. VALENTI. I will do that immediately, sir.

Mr. WIGGINS. I yield.

Mr. KASTENMEIER. The gentleman from Massachusetts.
Mr. DRINAN. Thank you, Mr. Chairman.

Mr. Valenti, I might as well put out some of my biases, but I want to diversify television. I think it is outrageous that we have all three television networks at 7:00 with the news, depriving members of Congress of the opportunity, and when I try to get NBC, Channel 11, from Baltimore at 6:30, it is very unclear. I wish there was some cable company out there. I have cable in my Congressional district for people who cannot get Boston television and only 10 percent of this community in northwest Massachusetts that subscribe, but it is a service to them, and I wish more of them had this available.

My impression also is that the cable industry does not deserve the tongue-lashing they received this morning. They are very aggressive and they are trained to get their product to more people. And I just have the impression that the existing networks and the establishment, so to speak, the biggies, are using copyright as a way to keep cable from being a severe competitor.

You admit you are passionate about these fees, then you say on the other hand that they are small anyway, they are not going to do any harm to the cable industry.

If they are that small and insignificant, why all the fear and the passion? Pay television, too. I spend at least $1,000 a year on magazines and books to get information. I am willing to pay. I want 30 channels every night. I want to be able to get the San Francisco Symphony, if that is what I want.

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I think the Congress should take as its basic bottom line, basic major premise, that we want to diffuse knowledge that is totally consistent with copyright and yet I am being pressured here by all types of establishment people to say that let's restrict the diffusion of knowledge because of this sacred thing called copyright.

I come back to some specifics. If the cable company in Massachusetts transmits only as an antenna and does nothing further, why should they have to pay copyright just on that assumption. They do nothing except have a super antenna.

You indicated you are for family choice television. I am for I will not say family choice television, I want a diversity of television. But suppose this particular cable company does nothing except a mechanical function. That is all they want to do. Why should they have to pay television to a channel in Boston to give the people a clear picture?

Mr. VALENTI. If they were doing that as a charitable gesture, if they were doing this in the public interest, if it was a nonprofit organization doing it in the public interest, I might probably say wonderful. I think that is a marvelous thing they are doing, bringing to the people of some part of Massachusetts who cannot get good television reception. But when it is being done for profit, when he is making money out of a business that he is building, when he is building his business on somebody else's product, it seems to me basically wrong that he would not pay even a modest fee for the use of that property. No one else is giving the cable system, Mr. Congressman, anything, not a thing, and the Congress is not asking the telephone company to exempt him paying rent for cable he puts on a telephone pole because it is "in the public interest."

Mr. DRINAN. Pretty soon, Mr. Valenti, we will have a little antenna you can buy. In fact, there are these ads that you buy this and you will get these sets. If I happen to buy that if they perfect it, you mean I am supposed to pay the copyright if I am in Massachusetts and pick up a Boston station?

Mr. VALENTI. No, sir.

Mr. DRINAN. They are selling these things and managing them for you.

Mr. VALENTI. But you are not selling it as a profitmaking business. If you go out into the business of selling these antennas, I do not know what the law is but we will sure as the devil investigate it to see if you were tramping on our property rights.

I do not make the copyright law in our country. We are trying to live under it. It seems to me it is right and proper that whatever product you make, whether it be this table or one that emerges from your brain, that is property and that you ought to be paid for anybody that uses it. That seems to be basic. I do not want to collide with your sense of justice or your sense of public service because I ally myself with you on that. But I have to say that there ought to be some dimension. I cannot believe that a man can go into business, make a lot of money, and get a free ride. You are not talking about housetop antennas when you are talking about Teleprompter.

Mr. DRINAN. No, sir. This is my first hypothetical that for the mechanical assistance that is given to people out there in the nonurban areas, there are millions of people who are not getting-very little diversity and not even getting television stations from a major market.

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