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printed works were all reprints-an extension of the old scriptorium. But the granting of exclusive rights in the form of copyright made it possible for a new business to emerge-publishing; and that business prospered by the encouragement given to men and women of talent to devote their lives to fulfilling public demand for new works.
Just as the invention of printing and the early enactment of copyright laws developed and constantly enlarged the class of professional literary authors, so the invention of new forms of communications—the photograph, radio, television and sound movies have attracted thousands of able Americans to careers of authorship. The ASCAP membership has trebled in the past twelve years. Thus there are more and more writers to share in supplying the cultural and entertainment needs of our nation. This is one of our greatest and most dependable exports. In encouraging these men and women, the public interest will be truly served.
The juke-box operators have told you, Mr. Chairman, that they must have music free to serve the public interest of those members of the public who can hear the music supplied by juke-box operators. Of course, this music can be heard only when the appropriate coins are dropped in the box. I believe it has been clearly established that juke-box operators should pay for the performance of music from which they profit. The only question is whether they should pay in the same manner as other large scale, commercial users who profit from performances of copyrighted works—that is, by the usual method of negotiation; or whether Congress shall prescribe the basis of payment.
This is not a new question for the Senate Judiciary Committee. It was posed in 1958 and was answered in the negative in a very exhaustive report accompany ing S. 1870 which recommended outright repeal of the juke-box exemption. The Committee addressed itself to these specific questions:
"1. Whether the jukebox exemption should or should not be repealed.
“(a) Would the repeal of this exemption be seriously injurious to manufacturers and operators of jukeboxes?
"(b) Should the payment of the manufacturing royalty which is passed on to the operator exempt the jukebox operator from a separate royalty for public performance for profit?
"(c) Should the jukebox pay royalties for public performance for profit if it popularizes music and creates a broader market for records?
“(d) Should the jukeboxes continue to be exempt from royalty pay. ments for public performances for profit because part of the royalty
money may be paid to some prosperous writers and publishers ? “2. If the answer to No. 1 is in the affirmative:
“(a) What would be a reasonable royalty for the jukebox operator to pay?
"(b) Should the statute fix a specific royalty or royalty formula, and what would the latter be?
"(c) If the present exemption is repealed, should there not be a provision in the bill exempting the owner or lessee of the place in which jukeboxes are operated without admission charge when such owner or lessee has no control over the selection and placing of records in the
machine?" The question of whether the statute should fix a specific royalty or royalty formula ("2(b)” above), was answered by the Senate Judiciary Committee in the negative. I believe the witnesses for the juke-box industry have shown you why it is impossible to set up such a statutory formula. Let me review some of the reasons given by an impartial body-your Judiciary Committee, of which all of you are members.
The Committee reviewed in detail each of the questions under item 1. It answered each of the questions in the negative. It then addressed itself to this question: "What would be a reasonable royalty for the juke-box operator to pay?" It noted a resolution passed by the National Licensed Beverage Association, which suggested the following rates: $15 per year per machine designed to play 50 to 100 compositions; $20 per year per machine designed to play 100 to 200 compositions; and $25 per year per machine designed to play 200 or more
Senate Report No. 2414, 85th Congress, 2nd Session, August 15, 1958.
compositions. The Committee reached the conclusion that this would produce an average of $19.70 per box, calculated as follows:
Analyzing the cost to a juke-box operator on this basis, the Committe Report continues:
"From the foregoing, it would appear that the highest royalty payment would be 6.8 cents per day on jukeboxes carrying as many as 200 selections. This would mean that in any given 24-hour period, 1 play on a dime machine would slightly more than pay the royalty. The same would be true of a nickel played in a jukebox carrying not more than 50 selections. On a jukebox playing 50 to 100 selections, slightly more than 1 play on a nickel machine over a 24-hour period would pay the royalty, and if a dime were played, slightly more than one-half of a play would pay the royalty suggested by the Licensed Beverage Association. Again, in regard to the 200-selection machine, 142 play on a nickel machine would pay the composers' and authors' royalty for a given 24-hour period. In regard to this proposal, in a letter to the chairman of the subcommittee conducting the hearings on this legislation, the General Attorney for ASCAP, Mr. Herman Finkelstein, stated that the organization he represents was willing to accept its reasonable share of royalties on jukeboxes within the range suggested by the National Licensed Beverage Association."
The Committee then indicated its belief that:
"This royalty scale is workable and represents a reasonable and fair framework within which negotiations could be had between the authors and composers and their representatives and the juke-box industry and its representatives, with a view to adjust a equitable solution to the problem here presented."
The Committee pointed out that:
"In this type of matter the American way of doing business is through the bargaining of the interested parties in the product to be sold or the product to be used, and believes that negotiations should be the solution to the problem dealt with in this legislation.”
The House Judiciary Committee in its report of March 8, 1967 on the pending revison bill reached the conclusion that a fair average rate would be $19.20 per box which was very close to the recommendation of the Senate Judiciary Committee in 1958. Of course all costs have gone up great deal since that time, and the public now pays much more for each play than they did then. In 1958, no machines were equipped for half-dollar plays as they are today. The half dollar is keyed to a group of compositions. If two half dollars are dropped in at once in different wall boxes, the group of compositions is played only once, not twice. The cost per box recommendations of 1958 and 1967 should thus be viewed against the background of rising prices and rising incomes.
The House Report analyzes the data submitted to it and supports its conclusion that the industry can afford to pay an average of $19.20 per box, by pointing to the payments by other commercial users, the payments by juke-box operators in foreign countries and rates suggested by the National Licensed Beverage Association. The Report states :
"On the basis of these figures it can be concluded that, although the operation of jukeboxes is generally a small business, the industry can absorb the imposition of a reasonable copyright royalty, commensurate with what other commercial music users are paying. Comparative figures cited by the performing rights societies included widely variable jukebox rates in foreign countries ranging from $18 to $90 a box per year with an average around $50. A closer
comparison is offered by the amounts now paid by background music services, which apparently pay one performing rights society a minimum of between $20 and $30 per year per subscriber. Another guideline offered at the hearings was a proposal by the National Licensed Beverage Association to establish maximum annual per-box amounts for a 5-year period in accordance with a sliding scale: jukeboxes 5 years old or older would pay $15, jukeboxes with 100 plays would pay $20, those with 160 plays would pay $25, and those with 200 plays and over would pay $30.” (H.R. No. 83, 90th Congress, 1st Session, March 8, 1967, p. 83).
The House Report then discusses the proposal of the juke-box operators that the payment be $.02 for each song on the records purchased for juke-box use. It comments:
"The proposal advanced by the Music Operators of America (2 cents per song on records purchased) would have amounted to only $2,160,000 ($4.60 per box) in gross revenues to copyright owners. The committee regarded this figure as substantially too low but, under the compulsory licensing system embodied in section 116, it was unwilling to go as high as other figures that were suggested. Assuming an average of 160 plays per box and a total of 480,000 boxes in the United States, a quarterly fee of 3 cents per composition would produce annual royalties of $19.20 per box or $9,216,000 per year. The committee adopted a basic quarterly royalty rate of 3 cents as representing an amount that would be fair to both copyright owners and jukebox operators." (Report, p. 83)
At a negotiating session between the juke-box industry and representatives of the 3 performing rights organizations (at which counsel for the House Subcommittee and the Register of Copyrights were present), the 3 performing rights organizations offered their combined repertories to the juke-box industry at a rate of $20 per box per year. This was to be binding on the performing rights organization, but not necessarily binding on individual juke-box operators.
With respect to the ASCAP repertory, the operators individually or collectively could decide that they preferred to make an application to the Federal court under the ASCAP consent decree, for the determination of a reasonable rate for the use of the music in that repertory. Rates could be fixed on the basis of individual machines or machines generally, at the option of the operators.
With respect to the distribution of any amount received-speaking for ASOAP, I can assure the Committee that the Society would consult an independent sampling organization to determine the best form of survey, as it is required to do under the 1960 consent decree. The findings would be reported to Judge John E. McGeehan, who was appointed by the United States District Court for the Southern District of New York to supervise the ASCAP survey and to report his findings to both the Court and the Department of Justice. The entire cost of designing and conducting such a survey would be borne by ASCAP, and not by the operators.
ASCAP does not wish to impose any burdensome paperwork on the juke-box industry or any other users of music. Such requirements would interfere with the free selection of musical works. It is one of the very purposes for which a clearing house such as ASCAP is organized. It is a reponsibility which ASCAP discharges under the supervision of the Federal court and its duly appointed official, who, às I have pointed out, makes periodic reports to the Court, to the Department of Justice and to the ASCAP membership.
The price of $20 per box was quoted on behalf of the 3 performing rights organizations collectively because it was understood that that was the way the Juke-box operators wished to negotiate. ASCAP, of course, prefers to negotiate individually and is prepared to offer the music in its repertory for an amount which it would regard as acceptable for that repertory. This would be graduated on the basis of the number of compositions which the box is designed to play, or on the basis of the number of boxes owned by the individual operator. A very low rate could be assigned to the smaller or older boxes and to the smaller operators, and a higher rate to the newer boxes and the larger operators. Whatever rate ASCAP quotes is subject to final determination by the Federal Court if the amount is not agreeable to the Juke-box operators individually or collectively.
A committee of the juke-box operators agreed that they would recommend a rate of $15 to the members of MOA (Music Operators of America) but they have since withdrawn even that suggestion. The performing rights organizations have accepted the conclusions of the Committees of both houses charged
with the initial responsibility for copyright legislation. The juke-box operators are understandably eager to hold on to their exemption as long as possible.
In view of the safeguards against unfairness on the part of ASCAP or any other licensing organization, I believe the Senate Judiciary Committee reached a sound conclusion in 1958, when it refused to recommend a statutory scheme of licensing
The juke-box operators contend that they do not have adequate counsel to conduct a rate proceeding on an industry-wide basis. I believe it is apparent to the Committee that they have the talent and resources to do so.
Any attempt to write a statutory formula is bound to be unworkable either for the operators or the copyright owners or both. The copyright owners did not write the formula contained in S. 597 and certainly do not champion it. As I have indicated, the demonstration by the juke-box operators only shows that the Senate Committee reached a sound conclusion in 1958 when it decided that the statute should not fix a specific royalty or royalty formula. On that subject the Committee Report concludes:
"It should be stated that the committee believes the setting forth of specific payments in a statute of this nature is not desirable, if there by any other reasonable solution. The committee reiterates its belief in the American system of bargaining as a means of resolving the problems that appear in the general business world. It seems to be true that other users of the compositions which are the subject matter of this legislation have arranged to be provided with those compositions through negotiation. The committee perceives no reason why this could not or should not be done in the case of the juke-box industry. The committee has heretofore set forth what it believes to be an equitable and fair framework in the circumstances now existing within which the interested parties could and are urged to negotiate. The committee believes that this formula will be followed and that it is not necessary to place wtihin the statute itself a formula or rate schedule which would direct specific payments. As a matter of fact, the committee, believes that in many instances, depending upon the local situation and the individual involved, that something considerably less than the maximums set forth above should and would be the eventual rate upon which the interested parties would agree.” (P. 13.)
We endorse fully these conclusions of the Senate Judiciary Committee in 1958.
There has been some reference to rates paid to ASCAP for uses similar to those in juke-boxes. Perhaps the closest analogy is Muzak, or wired music services. These rates were determined in a judicial proceeding. The payment for usės in banks, factories, offices, etc. (uses of a mercantile nature) is 342 percent of the gross amount paid to Muzak by the subscriber. The rate is higher for restaurants and other places of refreshment and entertainment-$27 per year for each establishment where the music is installed.
If the juke-box operators paid a rate equivalent to that paid by the wired music services, they would pay at least 342 percent of $500,000,000 or $17,500,000. Broadcasters pay a little over 2 percent, but they present much entertainment in addition to music. These rates were fixed by the Federal Court. If the Committee is interested in the entire ASCAP schedule of rates, that can be filled as part of these proceedings. I am sure the Committee will find all these rates most reasonable.
How does AŞCAP distribute the amounts it receives? This question was raised in 1958, when changes in the system were under consideration. I am happy to have an opportunity to give this Committee a brief summary. First, it is necessary to explain that the basic premise in ASCAP is that the writers and publishers are equal participants in the ASCAP clearing house system. The board of directors is composed of twelve writers and twelve publishers. The writer members of ASCAP elect the twelve writer members of the board ; 'the publishers elect the publisher members. Each director has a single vote. The amounts received by ASOAP are divided equally, after deducting operating costs, which are approximately 15 percent-a very low figure.
There has been an inference by the juke-box onerators that ASCAP is dominated by the publisher members; this assumes that there is an ignorant or docile writer membership. Without encumbering this record by a list of these writers, which I shall be happy to supply, let me indicate some of their achievements in terms of public recognition :
60 ASCAP members have been elected to membership in the National Institute of Arts and Letters.
23 have been awarded Pulitzer Prizes in music, theater and poetry.
21, including members of affiliated foreign societies, have won the Academy Award for the best original film score.
16 have written musicals which received New York Drama Critics Awards.
I should like to go into detail about the members of the board of directors, writers such as Richard Rodgers, Morton Gould, Arthur Schwartz, Paul Creston, Peter Menin, Richard Adler, Jimmy McHugh, Cy Coleman and others, and shall do so if you desire. Perhaps it is best to submit to you the ASCAP Biographical Dictionary for such reference purposes as the Committee may desire.
Now to return to the distribution system. That is regulated by an amended consent decree entered in the Southern District of New York in 1960. In view of the inaccurate statements made at the hearing on March 18 by Mr. Miller (representing the manufacturers of juke boxes), with respect to what ASCAP is and what it does, I should like to make that decree part of this record.
The 1960 decree specifically describes the kind of survey ASCAP must employ in making its distributions. It specifically provides that every writer and publisher is entitled to be paid 100 percent on the basis of the current performances of his works as shown in that survey (except for the top 100 writers who, as a group, may elect to take a lesser amount-and who have elected to do so). A sum equal to not more than 5 percent is set aside for distribution to members whose works have exceptional prestige value, or whose works have a value not reflected in the survey. The awards are made by panels of distinguished experts who are not members of ASCAP; all members are notified of all awards made by them. Judge McGeehan (an appointee of the Federal Court) attends all meetings of the panels. If the Committee desires, I shall submit a list of all their awards.
Publisher distribution is entirely on a current performance basis.
In distributing amounts to both writers and publishers, symphonic and similar concert works are substantially upgraded so that they receive five times as much as their works earn in radio and television, and fifteen times as much as they earn in concerts. This upgrading is necessary because most works of this nature are used in "nonprofit” endeavors and produce very little for the composers. The writers and publishers of popular works recognize the need of encouraging those in the serious music field and willingly forego part of their royalties for this purpose.
If there is any other phase of ASCAP's operations that the Committee would like to know about, I shall be glad to endeavor to answer any questions.
In addition, if the Committee wishes to review further the conclusions reached by prior Committees as to reasonable rates for juke-box uses, I suggest that it might request the juke-box industry to furnish the following information which may be considered along with information supplied by ASCAP and other performing rights organizations:
How many machines have been sold by each of the four juke-box manufacturers during each of the last five years, indicating the type of machine and the price paid?
What is the financial arrangement between the four companies and each of its distributors? How many distributors does each have? How is the territory divided ?
Are any of the manufacturers also their own distributors or operators, and if so, to what extent?
What is the financial arrangement between the distributors and the operators! How many operators does each distributor deal with?
What is the typical form of agreement between the operator and the establishment where the machine is located? Are there any forms of agreement recommended by M.O.A. or any state associations of juke-box operators ?
Who are the top 25 operators, and how many machines does each control?
What is their total revenue (a) from juke-boxes, and (b) from any other business in which they may be engaged?
Are any of these operators also distributors of coin-operated machines?
How many machines have devices to indicate the number of performances of each composition, and what records are kept of those performances ?
I believe that all the information that is required has already been furnished to prior committees of both House and Senate, but if the question of reasonable ness of rates is still open, this Committee may wish to have further data from