and the jukebox has become a relatively small part of their busi

ness.

We wish to emphasize, therefore, the apprehension with which jukebox operators view any proposal that would create a new royalty and thereby increase their royalty burden under the Copyright Act. We believe the depressed condition of this industry demonstrates the unfairness of imposing any such added burden upon it. We submit that, in all fairness, jukebox operators should not be subjected to any increase in the $8 royalty, as this bill would do.

II. OUR OBJECTIONS IN PRINCIPLE

Record manufacturers, who are included among the beneficiaries of this legislation, cannot be considered "authors of writings" within the terms of the constitutional grant of authority to Congress, except by stretching those terms beyond their true meaning. Article 1, section 8, clause 8, confers upon Congress the power to legislate: To promote the progress of science and useful arts by securing for limited Times to Authors and Inventors the exclusive Right to their Respective Writings and Discoveries."

Even this committee acknowledged at one time that record manufacturers-producers-do not always contribute a copyrightable element to a musical recording, when the committee stated in its report on the general revision bill that there are "cases in which sounds are fixed by some purely mechanical means without originality of any kind," and added:

The copyrightable elements in a sound recording will usually, though not always, involve "authorship" both on the part of the performers whose performance is captured and on the part of the record producer responsible for setting up the recording session, capturing and electronically processing the sounds, and compiling and editing them to make the final sound recording. There may, however, be cases where the record producer's contribution is so minimal that the performance is the only copyrightable element in the work, and there may be cases-for example, recordings of birdcalls, sounds of racing cars, et cetera-where only the record producer's contribution is copyrightable. (Report No. 94-1476, p. 56, on S. 22, September 3, 1976.)

While H.R. 997 does not define a record manufacturer as an "owner of copyright in a sound recording" or as an "author of a sound recording," it is unmistakably clear, nevertheless, that they are intended to be included in those terms. By including all record manufacturing in this indiscriminate fashion, the constitutionality of the bill is necessarily questionable.

We oppose the creation of a new performance right for record manufacturers and performers, also, on the ground that there should be but one performance right in the laying of a musical recording. If multiple rights are to be given statutory recognition with respect to the contributions that are asserted to be embodied in a recording, the most that can be claimed, we believe, is that playing of a record constitutes only one performance of all such rights. This is not just a matter of semantics. It is at the root of the question posed by this legislation of whether Congress should create more than one performance right in the playing of a musical record and so impose upon jukebox operators two liabilities instead of one, as in the present law.

We oppose the proliferation of claimed rights of creativity in sound recordings, also, because this can open a Pandora's box for the assertion of many more claims beyond those that are now covered by the definitions of the term "performers" in this legislation. In this connection, we note the failure to expressly include "record manufacturers" in the legislative definitions, thus requiring their coverage to depend upon interpretation of the legislative terms "owner of copyright" and "author." An even more serious deficiency is the failure to attempt any definition that would identify those who serve the record manufacturers in ways that could be claimed as contributing creativity to their recordings. These ambiguities are matters of serious concern to jukebox operators as these operators are the ones who will bear the brunt of any further claims for performance rights that go beyond those that this legislation recognizes.

We submit that record manufacturers and performers do not need the enactment of a new royalty right. They traditionally have secured compensation for their recordings through contractually negotiated royalties. They really do not need added congressional assistance to obtain fair compensation for their recordings.

Regulations promulgated by bureaucracies are destroying many small businesses throughout the country. Mr. Danielson so aptly put it, we don't want to make mistakes in legislation in 1979.

I suggest H.R. 997 is premature as it relates to the juke box operators. It appears that the present method of collecting additional copyright royalties from jukebox operators by assessing $8 per jukebox could be a mistake.

At the present time the CRT has not reached the point of decision on dividing proceeds on the first year's collection of jukebox royalties, and we understand there has been no agreement between the beneficiaries of these royalties as to the manner of the division of funds. To add an additional royalty will probably complicate the present situation.

We earnestly hope, therefore, that the committee will see fit to take no further action on this bill.

Finally, Mr. Chairman, I would like to ask permission for our counsel, Mr. Allen, to submit a written brief on the issues in answer to statements of other witnesses on this bill.

Mr. KASTENMEIER. We will be pleased to receive Mr. Allen's brief.

[The information follows:]

STATEMENT SUBMITTED BY ROCK-OLA MANUFACTURING CORP., ROWE

INTERNATIONAL, INC., ANd Seeburg CORP.

This statement is submitted on behalf of the American manufacturers of coin operated phonorecord players, or "jukeboxes": Rock-Ola Manufacturing Corporation, 800 North Kedzie Avenue, Chicago, Illinois 60603; Rowe International, Inc., 1550 Union Avenue S.E., Grand Rapids, Michigan 49507; and Seburg Corporation, 1500 North Dayton Street, Chicago, Illinois 60622.

This subcommittee is considering H.R. 997, a bill to amend the Copyright Act to establish a new performance right in sound recordings by extending the benefits of copyright monopoly to record companies, performers, and others who have never before been entitled to such protection. The manufacturers oppose this legislation as drafted on two grounds. First, the extension of copyright benefits to record companies, performers and others whose contributions are separate and distinct from those which render a work creative and original is of questionable constitutionality. Second, while the manufacturers do not operate jukeboxes themselves, the proposal

in H.R. 997 to increase the existing per-jukebox royalty to be paid by operators would impose a heavy burden on those small businessmen while affecting the economics of the industry generally, and circumvents the procedure established for redetermination of such royalty rate in the 1976 revision of the Act.

Congressional authority to grant copyright monoplies is governed by Article I, Section 8, clause 8 of the Constitution, which gives Congress the power "To promote the progress of science and useful arts by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries."

The paramount purpose of the copyright monopoly is not to compensate the author individually, but to stimulate creativity for the benefit of the public as a whole. Thus, the Supreme Court has explained that:

"*** the immediate effect of our copyright law is to secure a fair return for the 'author's' creative labor. But the ultimate aim is, by this incentive, to stimulate artistic creativity for the general public good. "The sole interest of the United States and the primary object in conferring the monopoly,' this Court has said, 'lie in the general benefits derived by the public from the labor of the authors.'" (Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156 (1975), quoting Fox Film Corp. v. Doyal, 286 U.S. 123, 127 (1932).)

The grant of this monopoly right must therefore be justified by a demonstration that it accomplishes a purpose consistent with the public policy behind the Copyright Act; and the touchstone of protection under this copyright clause has been the originality of the creation, whether "writing" or "discovery.'

The proposed new "performer's" right created by H.R. 997 would apparently grant copyright control not only to the individuals whose performance is embodied in the sound recording, but also to unidentified "copyright owners", which apparently refers to record companies. The purpose of copyright law is to grant a limited monopoly right to those who have made original, creative contributions to a work. The proposed legislation, however, specifically provides that a substantial share of the new compulsory license fees would go to parties which are not creative contributors to the sound recording. Under H.R. 997, 50 percent of these sums would go to the copyright owner. And this 50 percent share, presumably for the record companies, is not intended to trickle down to performers whose contribution was "work made for hire", since their shares are already assigned under Section 7(c)(14). It is questionable whether the efforts of performers can be considered to make “original” or "creative" additions to a work; that there may be serious problems in identifying the creative contributions of individual performers is implicit in the drafting of Section 7(c)(14) of H.R. 997, which allocates payments to performers on a pro-rata basis "without regard to the nature, value, or length of their contributions."

Thus the legislation would grant substantial copyright monopoly benefits to parties which do not, under any stretch of the imagination, make significant "original" contributions to the sound recordings. This result cannot be squared with the fundamental purpose of the Constitution's limitation of the copyright monopoly to the "writings" of "authors", even if it is accepted that creations other than books might be entitled to copyright protection. Perhaps it is difficult, in the context of sound recordings, to determine the relative creative contribution of each participant; but that difficulty cannot justify indiscriminate extension of the copyright monopoly. Even assuming an "original" contribution by the performer whose name appears on the record jacket, what then is the contribution of the background musician; the arranger; the recording technician; the record producer; the record manufacturing plant; the record company marketing department? Are all of these "authors" entitled to copyright monopoly benefit and protection? It would be no more defensible to grant such monopoly benefits to all of these, than it would be to grant copyright protection not only to the author of a book but also to the typists, the research assistants, the printer, the copy editor, and the literary agent.

The impossibility of characterizing the "original" creative contribution which this legislation would reward with the benefits of the copyright monopoly demonstrates the inappropriateness of using the copyright law to reward those efforts. There is substantial doubt that such efforts could be "authorship" of Constitutional significance, since the proposals cannot characterize "authorship" in a way which distinguishes the efforts which arguably amount to original creative contributions, from those which are incontestably routine.

Senator Ervin pointed out in the debate on the Copyright Act revisions that the contributions made by performers and record companies "do not constitute original intellectual creations which would justify protection under the copyright law. To create performance royalties for the benefit of record manufacturers and performers under copyright law would stretch the Constitution's meaning beyond reason and justification." (Congressional Record, September 6, 1974, page S. 16073).

In furtherance of its principal purpose, H.R. 997 would also add $1.00 per jukebox to the royalty already paid by jukebox operators. Those operators have testified before this subcommittee as to the financial condition of their industry and as to the burden this additional fee would impose. While the manufacturers do not themselves operate jukeboxes, and would not therefore be subject to this proposed new performance fee, they are concerned about the impact of the proposal upon the economic health of the operators, usually small businessmen, who ultimately purchase the manufacturers' products.

Unlike broadcasters, for example, jukebox operators are limited in their ability to pass on the cost of such additional royalties. They have no advertising or similar source of revenue; revenue can only be increased by altering the number of plays per coin, a substantial change in the "product" they offer, which requires of necessity mechanical alteration of the coin receiving mechanism in each box. Moreover, the existing $8.00 royalty rate is already scheduled for review in proceedings before the Copyright Royalty Tribunal next year, under the procedure envisioned in the 1976 revision of the Act. An adjustment in the royalty rate, if any, ought in fairness to await that proceeding.

In sum, the manufacturers oppose the unwarranted creation of a performance copyright in sound recordings, as well as the additional jukebox royalty contemplated by H.R. 997. Performers, as well as record companies, can continue to receive royalties as they have historically—through negotiated contract. We urge the Subcommittee to reject H.R. 997.

Mr. HESCH. Thank you for giving us the opportunity to express our views.

Mr. KASTENMEIER. Thank you very much, Mr. Hesch.

Which of the other two witnesses desires to proceed first? Ms. Kaplan?

TESTIMONY OF SIS KAPLAN

Ms. KAPLAN. I am here today, Mr. Chairman and members of the committee, representing the National Radio Broadcasters Association, a nonprofit trade association representing approximately 1,200 AM and FM radio broadcast stations throughout the United States, and this organization has previously made its strenuous opposition to any legislation which would require radio broadcast stations to pay recording companies, performers and/or producers for playing their recorded product on the air.

As we have noted in the past, any such requirement would represent a step backward, a counterproductive effort, working against the public's interest in shifting the focus of government away from overregulation and away from Washington.

Further, it would intrude upon the competitive marketplace situation which has evolved, and would upset the delicate balance between the respective interests of broadcasters and artists, which the marketplace has nutured.

If there is one trend which has in recent years been apparent throughout America, it is the trend away from centralized bureaucratic regulation. The American people have tired of the notion that every aspect of their lives, business or otherwise, must be subject to the whims of a faceless bureaucratic structure, and yet despite this obvious trend, the present bill would in effect create a new bureaucratic structure, to be grafted onto the existing copyright bureaucracy.

The new structure, while apparently intended to aid artists, would impose a system of government collections and government payment between the artist and those from whom royalties might be expected.

As a middleman in the system, the Government would obviously exact its percentage of the deal. Whether or not the Government would be able to fulfill this role efficiently is at best an open question, but what is of greater concern to the NRBA is the fundamental question of how the proposed performers' rights bill might adversely affect the existent relationship between artists and in particular radio stations.

Both artists and radio stations appear to be contributing something to the relationship, while deriving satisfactory benefits therefrom. The artist provides recorded music which the broadcaster may use to attract an audience. Of course, the broadcaster's ability to attract an audience enhances his or her ability to sell advertising time. In return, if a broadcaster chooses to air an artist's record, that artist automatically receives valuable publicity by virtue of the fact that his or her record is being brought to the attention of an entire audience, specifically the audience of that station. This type of publicity cannot be bought, but its value is unquestioned.

Because of the two-sided nature of the arrangement, with both artist and broadcaster giving something and receiving something, there has been no need for Government intervention. For some reason, however, a need has now been perceived to translate one side of the arrangement into dollars. As a result, under the proposed bill, broadcasters would be required to pay artists for the recorded product used by their stations.

However, no provision is included which would permit broadcasters to translate the other side, that is, the de facto advertising time which the artist received for free as a result of this airplay into cash for the broadcasters, and indeed the present system of regulation under which broadcasters operate prohibit them from charging for this extremely valuable air time. As a result, the instant proposal is in our view inequitable to the highest degree.

Perhaps the extent of inequity involved can be illustrated through some figures. Let us assume the broadcasters were permitted to and chose to charge artists for the advertising value derived from playing of their records on the air. About a year and a half ago we asked a number of our member stations to carefully log the number of records they played during a normal week as part of their entertainment programing. We also asked them in turn to calculate the commercial value of the time which was thus dedicated to the artist's product.

The response we got was staggering. The values we were told ranged invariably into six figures, one station as high as $475,000. The benefits which artists derive from the broadcast of their music have not been ignored in any way by the record companies.

Weekly and even daily the major and minor record companies engage in a massive promotional effort aimed at getting their records played on the air, and I am not referring here to the normal purchase of advertising time which in itself is substantial. Rather, I am talking about efforts specifically directed toward getting broadcasters to add certain songs to stations' play list. They are not necessarily the illegal efforts which were discussed here earlier this morning concerning the payola situation, but they are indeed massive efforts in which the companies send to the individu