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copyright revision, the manufacturers were charged by governmental backers of section 116 with intending to direct a "concerted and unyielding opposition" to the "entire revision." This is simply not true. We want the record to show that we consider the enactment of a general copyright revision as one of the most important pieces of legislation before Congress.

In this connection, during the past year, we have met on a number of occasions with the Register of Copyrights, the Honorable Abraham L. Kamenstein, and with his associates, George D. Cary, Barbara A. Ringer, and Abe A. Goldman. We have been impressed with their tremendous accomplishments as embodied in the general copyright revision and wish to express our appreciation for their sincere and conscientious efforts, which still continue, to arrive at a workable soluton to the problem of jukebox royalties.

We support the revision-but we resolutely oppose section 116 of this bill an administrative nightmare, never in the original bill, conceived in executive sessions, and never, until now, examined in the critical light of public hearings.

Since 1909, ASCAP, later joined by BMI and SESAC, has repeatedly sought to have the Congress grant them the right to license the jukebox operators-just as they have licensed first the radio and then the television networks. Since 1926 there has been legislation introduced or pending in every session of Congress aimed at creating this new right.

Hearings were held on such bills in 1929, 1931, 1932, 1935, 1936, 1947, 1951, 1952, 1958, 1959, and 1963, again in 1965, and now here.

I earnestly refer the committee members and your counsel to the House hearings on H.R. 4347 and also on the articles as exhibits to our testimony in such hearings from Broadcasting magazine of March 15, 1965, which appear on page 607 of the printed testimony of those hearings.

I also refer you in the same hearings to page 634, which sets forth photographs and descriptions of coin-operated phonographs in existence prior to 1909. Also, I wish to quote in this record from the committee report on the 1909 Copyright Act. That is Report No. 2222 at page 9, because there, in summarizing the then pending legislation with respect to the general revision of the copyright laws, the report said, and I quote:

The exception regarding the public performance of a musical composition upon coin-operated machines in a place where an admission fee is not charged is understood to be satisfactory to the composers and proprietors of musical copyrights. A representative of one of the largest musical publishing houses in the country stated that the publisher finds the so-called "penny parlor" of first assistance as an advertising medium.

I might add that the representative of the composers in these hearings was the noted copyright lawyer and predecessor of Mr. Herman Finkelstein. It was Mr. Nathan Burkan. In this connection, it is critically important for this committee to recognize that even while undertaking such a radical departure from the consensus of some 13 previous Congresses, even the principal authors of section 116, Mr. Kamenstein and his associates, have made it plain that the creation of an unlimited right to license performance on jukeboxes is not in the public interest.

Thus, the Register of Copyrights in 1965 warned the House Judiciary Subcommittee on Patents, Trademarks, and Copyrights:

The principal arguments of the jukebox operators, which deserves careful and objective consideration, is that removal of the exemption would subject them to royalty demands and risks of infringement suits without limits or safeguards. Yet, in spite of this express concern and recognition of the evils of unlimited licensing, even a cursory analysis of the House committee's executive session creation (sec. 116) reveals that it accomplishes, most emphatically, precisely what that committee and the Register sought to avoid.

Now, in my principal submission, I review in considerable detail the problems concerned in connection with compliance with 116, the hazards of penalties from even inadvertent ommissions to make the proper filings, to file accurate inventories. I will not go into those problems other than to reflect their presence in my testimony.

On the matter of royalty, the most significant ambiguity and cause for concern is found in clause (c) (2) of section 116, where it is provided that "unless the parties have agreed otherwise in a written instrument signed by them" (this is a euphemism for saying that unless the parties have entered into a blanket licensing agreement with performing rights societies), the operator shall pay a royalty of 3 cents for every 3-month period or fraction thereof that the work has been made available for performance in the phonorecord player.

However, if the records are changed in the phonorecord player so that the number of works "made available" during the 3-month period exceeds the "capacity" of the phonorecord player, the royalty is calculated by "first multiplying 3 cents by the capacity of the phonorecord player" and then "dividing the product of that multiplication by the total number of works actually made available in the phonorecord player for performance during any part of the 3-month period." When the records are not changed in a jukebox, the royalty should be no greater than 12 cents times the works in the jukebox. Bear in mind, though, if the capacity is based on the number of works which would be in the jukebox were it filled with album records, then the 12 cents per work royalty is not a ceiling on a box filled with two-work records. Until the rotation of records results in the works made available equaling capacity, the 12 cents per record royalty applies.

I refer you to the tables in my principal statement, which sets out the consequences of varying capacities or work contents in the jukeboxes.

If the statutory capacity is held to be 160 selections or works, based on 80 two-work records, the royalty per annum would be $19.20 per box irrespective of how many times the records were changed. However, if the statutory capacity is determined to be 480 based on 80 album records with six works per record, then the royalty annually from that box could range as high as $57.60.

Senator BURDICK. Is that based on three plays per

Mr. PATTERSON. Three plays per side.

Senator BURDICK. An LP or something?

Mr. PATTERSON. That is correct, Mr. Chairman.

The only way the operator could avoid this is to make no changes at all in his records, something that the House committee found undesirable.

Now, on the salient problems of section 116, which are not merely those of unworkability. Clause (c) (6) states, "Every musical work whose title" appears on the jukebox "during any part of a 3-month period is conclusively presumed to have been publicly performed at least once during that period by means of the phonorecord player." The witnesses this morning, who are in this business, testified as to the number of plays received by hits, by ascending pieces and by descending pieces, and as to the fact that many records in the box are mere filler and aren't played at all.

Now, this type of statutory presumption, in our judgment, is unconstitutional unless there exists a demonstrable and rational connection between the facts proved and the facts presumed. And I have cited in the footnote Tot v. United States, 319 U.S. 463 (1943).

Careful consideration of the nature of the jukebox industry reveals the lack of such a rational connection. The list on the box might be incorrect, so a work listed might not even be in the machine. The jukebox may not have been played at all during the quarter-for example, during the winter in a summer resort, or conceivably in a warehouse transiently for repairs while another box was replacing it on location. It is plainly not rational to conclusively presume that the work was played at least once when the facts relating to a particular jukebox may conclusively demonstrate otherwise.

Senator BURDICK. At this point, maybe the record should show the life of a record that is popular. How many times can it be played?

Mr. PATTERSON. Well, they have a fairly long life, Mr. Chairman. According to my understanding, it is not how long they can be played; it is how long it is economically intelligent to have them played. I think it is not physical life and durability, but rather appeal in the marketplace that determines how long a record is left in a box. Senator BURDICK. Market life, not physical?

Mr. PATTERSON. Market life, not physical life.
Senator BURDICK. Thank you.

Mr. PATTERSON. Indeed, the whole concept of equating presence in a machine with performance is highly questionable. It has been challenged by no less an authority than the Register of Copyrights himself, testifying in 1963 before the House Judiciary Committee on H.R. 5174, which bill would have given him the responsibility of collecting a set fee for each jukebox and distributing it to the copyright owners based on a formula of distribution.

The Register then told Congress:

The records in a box at a particular time do not necessarily reflect performance; since some may be performed frequently and others not at all, the possibility of rigging cannot be ignored.

On the subject of reports on records in jukeboxes, he added:

While less impractical than logging performances, it would probably be prohibitively expensive for the government to make an accurate survey or records in boxes.

Further he stated: "I believe the statute should provide specifically that *** the Administrator [who was to be the Register of Copyrights] should be empowered to call on the operator of a coin-operated machine for reports concerning the number of performances or records on the machine. However, in order to keep report making from be

coming an unnecessarily expensive burden, the statute might provide that a particular jukebox operator should not be required to furnish reports more than once in several years. In some cases the statistics he maintains for his own purposes might be sufficient."

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All this, in the face of section 116 which would call for these inventories on a quarterly basis.

Compare Mr. Kamenstein's foregoing statements in 1963 with the requirements of section 116 in 1967. He said in 1963: "Even to take count of the records in jukeboxes would be prohibitively expensive for the Copyright Office."

In testimony, then, I estimated it would cost probably a million dollars to police and take such a count. What would be prohibitively expensive for the Copyright Office in 1963, section 116 would throw on the shoulders of the operators today.

Mr. Kamenstein in 1963 was more considerate. He would have asked the operator to produce his accounts only once in several years. Here we are faced with the potential quarterly reports.

Section 116, in specific terms, makes it clear that if the operator cannot gamble on whatever regulations the Register of Copyrights may decide to pass in the future; if he cannot take a chance that an innocent mistake might cost him as much as $16,000 minimum damages on one machine; if he cannot understand just how much he has to pay as to performances in each machine; and if he cannot ascertain who he has to pay it to; if he cannot afford the help needed to prepare thousands of pages of reports to the Government and individual composers; if he cannot risk inadvertent infringement of compositions conclusively presumed to have been performed, although they may never have been; if he cannot comply with a statutory provision which no knowledgeable person in the trade can validly defend as workableall he has to do is bargain with ASCAP, BMI, and SESAC, and he may be home but not free.

Can anyone say with a straight face that section 116 would not, in the words of the House committee report, place the operators in a position that would be unjustifiably weak with respect to bargaining and unnecessarily perilous with respect to liability? Is section 116 a law which in all honesty, a legislator can expect a music operator to comply with and stay in business? Everyone in this room knows that this is not so.

Clearly, the so-called statutory alternative deserves to be characterized as a "nonalternative."

Reaching toward a conclusion, we have stated that the public interest is not served by section 116. I believe it clear from my review and from the testimony of MOA counsel and witnesses that section 116 places an intolerable burden on the individual operator, and that under its provisions, he has no choice but to deal with ASCAP and BMI in order to ever attempt to continue in business. The final irony is that if the operator is ever able to come to fair terms with either or both of those societies, the copyright law suddenly loses all interest as to just what songs are in the machine or even if they are played at all. For, as the operators have learned, a set fee will be paid by them to ASCAP and/or BMI and possibly SÉSAC, completely unrelated to which of their records were in the jukebox, how long they were in the box, how often they were changed, or even how many times they were played.

In other words, any blanket license agreement between the performing rights society or societies and the operators would be, practically speaking, wholly unrelated to the actual performances of that society's work in that jukebox. Instead, the license fee will be a set fee per box. Continuing with my summary, I state in caption that the bill is thoroughly unrealistic from an economic standpoint. Section 116 would put an extraordinary financial burden on the individual operator of the jukeboxes, much greater than initially evidenced from the face of the bill. Section 116 guarantees minimal, if any, final compensation for even the composer member of a performing right society.

The jukebox industry is a marginal industry which will have difficulty absorbing the extra costs required under section 116. On paying the royalty alone, 54 percent of the operators would earn $3,027 or less annually from their jukeboxes, which would place them in the lowest one-third income group in the United States and close to the President's classification of poverty stricken. As the members of MOA demonstrated to you, the additional costs of administration created by section 116 could mean about $6,088 from every 70 jukeboxes. Over 95 percent of music operators in the country would be forced to give up a significant portion of their salary to pay for these administrative expenses. This would make the business financially unattractive for the newcomers, drive many of the present operators into bankruptcy or other lines of business, and generate irresistible pressures tending to force out many of the operators, especially the smaller ones, in an industry where consolidation and diversification at the expense of a smaller operator has already manifiested itself.

There were an estimated 10,000 operators in 1950, with an average of 61.5 jukeboxes each. Now there are about 7,000 operators with an average of about 73.7 jukeboxes each.

I might at this point make the observation that from the standpoint of the manfuacturers of jukeboxes, the industry in the aggregate is a declining one. It is, inadvertently a victim of several factors over which it has no control, such as, the insulated Interstate Highway System and toll roads which eliminate access to taverns; and the consequences of urban renewal programs which have made neighborhood taverns and fountains a thing of the past. The music operators have experienced these consequences.

They are also faced with the potential consequences of excessive royalties, which would have the result of eliminating numerous marginal operators who will not even make an effort to keep machines going where they are not productive and are not worth the servicing and time necessary to maintain them.

This, among other things, would certainly reduce the level of activity in the record industry. The number of new recordings would be seriously depressed in the face of an industry which claims to be concerned with a half-cent increase in mechanical royalties.

Another factor I think I mentioned earlier in my submitted statement is that rather than face the complications with respect to inventory and payment of the performance royalty attendant on having LP's in machines, the jukebox operators would just eliminate completely the little LP's from their jukebox repertoires.

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