One, we are threatened with a nationwide injunction which would be vindictive and discriminatory. Two, if we are denied a rehearing by the ninth circuit court, we will of course ask the Supreme Court to consider an appeal. Important as this case is, we cannot be sure the Supreme Court will take our case. Three, an appeal to the Supreme Court, even if accepted, would not be resolved for a year or more. Four, in the meantime, in the ninth circuit at least, every person who is using a VCR to record copyrighted material off the air for private use is a law violator. On this last point, the motion picture company plaintiffs in the lawsuit are trying to have it both ways. They say they are not interested in pursuing the individuals who are doing the recording with VCR's, but their whole case hinges on a claim that the people doing the recording for private use, are the lawbreakers. This is because the whole exposure of the manufacturers and retailers to a possible injunction depends entirely on a contributory infringement-on that theory-and if there is no violation by the private tapers there can be no contributory violation. What it boils down to is that Universal and Disney do not care if under their theory, millions of private tapers are breaking the law. They are only interested in getting and destroying the VCR manufacturing and merchandising industries. This is not just a battle between two big industries-one, the movie companies, thriving from their triple dipping, and, on the other hand, the television manufacturing industry, threatened with loss of their most popular product. It is a consumer issue. The copyright laws, like all laws, are supposed to benefit the public at large. The VCR user is not taping for commercial use. He is merely using a convenience that developing technology has made possible as a byproduct of television broadcasting. The copyright laws should face up to and adjust to the vast strides in technological advancement which have made time shifting possible. The copyright laws should not be used for greedy purposes, to hold back inventiveness and technological creativity. We certainly urge the enactment of legislation to exempt from the copyright laws off-the-air VCR recordings for private, noncommercial use, of copyrighted material broadcast for television viewing. Thank you, Senator. Senator DECONCINI. Thank you very much. Mr. Kretzer. STATEMENT OF JULIUS KRETZER, PRESIDENT, NATIONAL Mr. KRETZER. Thank you, Mr. Chairman. I am a little awed by the introduction of Senator Denton. I do not know whether I can carry on. Mr. Chairman, I am Julius Kretzer, president of Kretzer's Television Center, Inc., of Mobile, Ala. I am also president of the National Association of Retail Dealers of America, NARDA, an organization of approximately 3,600 members, who operate more than 10,000 retail outlets nationwide. NARDA members sell not only home entertainment products, but a variety of merchandise ranging from microwave ovens to refrigerators to electric toasters. My brother and I own and operate two Kretzer's "Home Entertaintment Centers" in Mobile. Kretzer's sells a variety of electronics, including video cassette recorders and other video supplies, tape recorders, television sets, hi-fi products, calculators, video games, and electronic watches. We also service most of the products we sell and are in the business of selling and renting prerecorded tapes for use with video cassette recorders. Sales of video cassette recorders and related products have become our No. 2 volume category, ranking second in sales to color televisions. Our sales of video cassette recorders totaled in excess of $380,000 in fiscal year 1981, a 56-percent increase over fiscal year 1980. Revenues from the sale of video cassette recorders and related equipment amount to about 15 percent of our total sales volume, and I expect this percentage to increase substantially in 1982. Gentlemen, the experience of our stores, is typical of other retailers in our industry. We are not alone. As a small business owner who depends on the sales of video cassette recorders and related equipment as a major portion of my business, I am extremely concerned about the recent ninth circuit court decision regarding off-the-air copying of telecasts of copyrighted programs by owners of videotape recorders. This is clearly a product which the public wants, and one that benefits the small retailer, who is able to offer the specialized service which the product requires. In a sluggish economy, our business has remained good, and our sales force and service department have grown, thanks in large part to the public's demand for video recorders. I appreciate the opportunity to testify before the committee on S. 1758, a bill to exempt the private, noncommercial recording of copyrighted works from copyright infringement. NARDA strongly supports this bill and urges that you take prompt, favorable action to report it to the Senate floor. It is our belief that S. 1758 is needed so as not to deter the further development of what I believe to be an important product which has created and will sustain many jobs in manufacturing, distribution, and retailing and which will enable small retailers like ourselves to develop a specialized market with a product which has tremendous potential for consumer benefit. Sales of video recorders are mushrooming. Industry figures which I have seen indicate that sales during 1981 alone will be about two-thirds of what they have been for the preceding 5 years combined. The Commerce Department reports that production during 1981 is up more than 75 percent over 1980. I do not believe it to be an overstatement that the recent court decision could, if not superseded by S. 1758, severely retard development of this product and, with it, make it even more difficult for small retailers like myself to compete successfully in the marketplace. As a retailer, I am at the everyday, day-to-day level of having direct consumer contact. In the first and final analysis, the con sumer's interest and his rights under our system of free enterprise are paramount. The ninth circuit court has, in effect, threatened Mr. and Mrs. America with severe penalties, as lawbreakers, for what they do in their own homes. As so-called consenting adults, they have freedoms which may or may not offend the personal views of their peers, but they would be denied the freedom of video time shifting as engaging in something illicit and criminal. Mr. Chairman, as president of NARDA and with a candid admission of more than a casual interest in protecting our businesses in this very important area, I respectfully suggest that what is at stake here is something substantially more important, more fundamental, than the special interests of my retail colleagues, our manufacturing suppliers, or the industrial giants of the movie and entertainment world. The protection and preservation of the basic rights of the average citizen, the public interest if you please, is where we share an obligation that is both mutual and inescapable. Gentlemen, your favorable action leading to the enactment of the legislation under consideration is, I truly believe, the proper way for you to fulfill your obligation. Thank you. Senator DECONCINI. Thank you, Mr. Kretzer. Mr. Day, do you have any statement? Mr. DAY. No, thank you. Senator DECONCINI. You are a distinguished public servant and former Postmaster General, if I am correct. Mr. DAY. Yes, sir. Senator DECONCINI. We are very pleased to have you here. Mr. Wayman, can you explain to this committee how the practice of time shifting of a television program by a video recorder could actually be of economic benefit to the copyright holder? You made some reference to that in your statement. Mr. WAYMAN. I guess you generally have day workers and night workers, and those who would like to record a program in the day when they work at night, or vice versa, may set their video cassette recorder and record anything they would like to see off the air, and then they can view it at a time they desire. They can roll back the tape at any time, just like you do an audio tape, and have full view of the program. Senator DECONCINI. So you mean by being able to do that, there is just more exposure of the copyright holder? Mr. WAYMAN. Yes, that is right. As I stated, the copyright holders usually negotiate up front, if it is Hollywood for a movie, and based on what they estimate the share of the total viewing audience will be viewing that program. Often it is now the case that some of those viewings are renegotiated based on the actual audience, because things can conflict with that audience or help out the audience, according to other competing programs. This, as the FCC stated, should certainly be of benefit to the broadcasters and, in turn, be of benefit to the copyright holders, because they will be able to negotiate for a higher audience. A VCR, with Arbitron and Nielsen into the new technology, is counted as a television set. If you are viewing one program and re cording another-which you can do, by the way-Nielsen and Arbitron record you as having watched both programs-the fact that you will time shift the other one. Senator DECONCINI. Often, I guess, on prime hours there is more than one selection a viewer would like to see. Mr. WAYMAN. That is what the networks and the local stations like to do-compete with each other for good programing. Senator DECONCINI. Could any of you inform the committee as to your knowledge of various new technologies which may soon be forthcoming in the area of electronic communications and also indicate to us what problems in the area of copyright would develop as a result of these new technologies? Are we just talking about the tip of the iceberg here? Is there something else that could be forthcoming, in your opinion? Mr. WAYMAN. I do not know of anything right now. The television has become an active product. Someone said it was a vast wasteland. We think it is a verdant valley today. You have the ability to do home movies with this VCR. You are moving away from film technology to tape technology, and in a year or so you are going to see this as we are doing today-use of cameras to record your own home movies. You can play prerecorded tapes on it. Also, the video disk is here, and that can also play copyrighted material. Certainly, those copyright holders have been well compensated. We see nothing in our area in the foreseeable future. Projection television is here with us but has nothing to do with this case. Senator DECONCINI. Maybe Mr. Lagore could answer this one. What is the feasibility of making a video recorder that can play over a conventional television set but would not be able to record off it? Mr. LAGORE. Could I have the question again? Senator DECONCINI. Yes. What is the feasibility of making a video recorder that can play over a conventional television set but would not be able to record off it? Mr. LAGORE. You mean to be used as a playback unit only? Senator DECONCINI. Yes. Mr. LAGORE. We do not think it is feasible. Senator DECONCINI. You do not think it is feasible? You have looked into that as a company? Mr. LAGORE. Yes, we have. Senator DECONCINI. What would be the cost involved in recalling the video recorders already in the possession of the American public and mechanically fixing them so that they would be subject to this limitation? Mr. WAYMAN. You can answer it, Joe. We both know the answer to that one. Mr. LAGORE. The cost would be astronomical-in the millionsand I do not think it technically could be done. I do not believe you can pull the tuners out of the sets. The electronics of the machines are related. I do not think it could be done. Senator DECONCINI. You do not think it could be done, even ifMr. LAGORE. Well, perhaps at tremendous expense it could be done. Who would allow it? Senator DECONCINI. Pardon? Mr. LAGORE. What consumer would allow it? Senator DECONCINI. I do not know. I ask the question to try to find out what the economic problems are here in the event that nothing is done and an injunction is granted or an order to order such action. I just wonder if your company or your industry has assessed what the damages could be. Mr. KRETZER. I would like to add to that, Senator. Senator DECONCINI. Yes, please. Mr. KRETZER. I think you would find a lot of law violators. I do not think people will voluntarily give up their ability to record. Mr. WAYMAN. It is inconceivable, Senator, that this could ever happen or that we would even try to do it. Senator DECONCINI. You answered a question for me, Mr. Kretzer, that obviously the popularity of videotape recorders is mushrooming by sales. Is that true in your national organization, the National Association of Retail Dealers? Is that true all over? Mr. KRETZER. Yes. Senator DECONCINI. They are a very popular item today? Mr. KRETZER. I would say it is the difference between many businesses carrying on and probably going out of business today. It is a new life for them, and it is just inconceivable the number of units being sold, especially in your major markets. Senator DECONCINI. Thank you. I have no further questions. Senator D'AMATO. Thank you, Mr. Chairman. A number of the witnesses have testified that were the process to be continued or left in abeyance, there would be created as a result of this great uncertainty. We have heard about the fact that we are talking about people's rights and individual rights, but let us deal with the hypothetical that Congress does not act and this procedure is allowed to continue winding its way through the courts, and that in the absence of any clear legislative intent-as we have heard Professor Friedman testify that there appears to be that absence and ultimately the circuit court's decision is affirmed, now we come to that situation of penalties or an attempt to bring about a cessation of the infringement of the copyrights. I think Mr. Kretzer said it is inconceivable to think that people would allow, for example, their recorder to be tampered with-the 3 million that are now in homes and Lord knows how many if the procedure continues. That being the case-and I ask our esteemed counsel here-it would seem that the manufacturers would really come in for the onus, and the financial burden then would befall them as a result of the copyright infringements and their allowing these devices to be sold. Is that not true? Mr. DAY. Yes, I think it definitely is true, Senator. I think not only is there the burden that has been referred to of the enormous cost of trying to make an electronic alteration in the equipment that is out there, even if you could get access to it which is doubtful in many cases, but the consumer has a product which he bought with all good intentions, and somebody is going to have to compensate him for a loss of a very important feature of that product. It is like somebody suddenly decided that you cannot have fourwheel brakes in your car anymore. If you are going to have those |