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(The documents referred to were made part of the record and will be found in the files of the committee.)
(They are the following articles by Herman Finkelstein :) “Recent Developments in the Copyright Law", Southwestern Legal Foundation, Fifth Institute on Patent Law, Dallas, Texas, March 31, 1967 (To be published by Matthew Bender & Co.) ;
"ASCAP as an Example of the Clearing House System in Operation", 14 Bull. Cr. Soc. 1 (1966) ;
"Copyright Problems, Copyright Revision and Protection of Intellectual Property", Report of Fifth Annual Conference, National Association of College and University Attorneys (Tulane University, June 24-25, 1965)-pp. 173–183;
"Music and the Copywright Law", 10 N.Y.L.F. 155 (1964);
"Public Performance Rights in Music and Performance Right Societies," 7 Copyright problems Analyzed (Commerce Clearing House, 1952; revised 1961 ) ;
"Music and Copyright Laws-Economics of Authorship,” 2 New Hampshire Bar Journal 136 (1960);
"The Copyright Law-A Reappraisal", 104 U.PA.L.REV. 1025 (1956). Mr. FINKLESTEIN. Thank you very much.
Senator Scott. I just want to get the background, as I said, of the legal rights of performing artists as a part of the record. Thank you, Mr. Finkelstein.
Senator BURDICK. We are running way behind time here, but we have another area to inquire about. That is how this legislation will affect county and State fairs that flourish in my State and many other areas of rural America. The staff, if it is agreeable with you, will send you a couple of questions that I would like to have you reply to in writing.
Mr. FINKLESTEIN. Thank you, Mr. Chairman, I shall be happy to do that.
(The following letter was subsequently made part of the record by order of the chairman.) AMERICAN SOCIETY OF COMPOSERS, AUTHORS, AND PUBLISHERS,
New York, N.Y., April 14, 1967. THOMAS C. BRENNAN, Esq., Chief Counsel, Committee on the Judiciary, Subcommittee on Patents, Trade
Marks and Copyrights, U.S. Senate, Washington, D.C. DEAR MR. BRENNAN: This is in reply to your letter of April 7 which requests answers to five questions.
Since your letter was written, the House on April 11 approved an amendment adding the following subsection to the exemptions set forth in § 110:
"(6) performance of a nondramatic musical work, without any purpose of direct or indirect commercial advantage, by a governmental body or nonprofit agricultural or horticultural organization in the course of its conduct of an annual agricultural or horticultural fair or exhibition whose duration does not exceed sixteen days."
I shall answer the questions in the light of this amendment.
1. Q. What is the current policy of ASCAP concerning the use of ASCAP music by nonprofit fairs and agricultural shows?
A. The current ASCAP policy will conform to the amendment. In other words, ASCAP will not expect payment from the fair under the circumstances set forth in the amendment. If performers or promoters are paid, however, for performances which they may present by agreement with the fair, it is understood that the private promoters or paid performance organizations are not exempt.
2. Q. Is a distinction made with respect to the use of music by (1) paid performers and (2) carnival shows located on fairgrounds?
As. Yes. If a performance is given by a high school band on the fairgrounds or by any other amateur performance group, payment is not expected from either the fair or the amateur performance group.
3. Q. In your opinion, what changes, if any, would be made in the liability of nonprofit fairs under S. 597 as compared to the existing copyright statute ?
A. The Society subscribes to the exemption of nonprofit fairs under the cir. cumstances set forth in the amendment above.
4. Q. What is the position of ASCAP concerning the amendment to S. 597 offered by Senator Frank Lausche?
A. ASCAP prefers the amendment approved by the House, to S. 597 offered by Senator Frank Lausche. It is understood that the amendment as passed by the House is satisfactory to the fairs themselves.
5. Q. Is there any language which ASCAP would support to deal with this problem?
A. ASCAP supports the amendment as passed by the House, if it is understood that it does not exempt the paid performers or carnival shows located on fairgrounds (see #2 above). I trust this answers the questions fully. Sincerely,
HERMAN FINKELSTEIN. Senator BURDICK. Will Mr. Sidney Kaye, Mr. Gunther Schuller and Mr. John Loudermilk, come to the committee table, please.
STATEMENTS OF SIDNEY M. KAYE, CHAIRMAN OF THE BOARD
AND GENERAL COUNSEL, BROADCAST MUSIC, INC.; GUNTHER SCHULLER, COMPOSER; AND JOHN LOUDERMILK, COMPOSER Mr. KAYE. Mr. Chairman, my name is Sidney M. Kaye. I am a member of the law firm of Rosenman, Colin, Kaye, Petschek, Freund & Emil with offices at 575 Madison Avenue, New York City, and I am chairman of the board and general counsel of Broadcast Nusic, Inc., commonly known as BMI.
I am accompanied on my right by Mr. Gunther Schuller and on my left by John Loudermilk, whom I would like the privilege of introducing personally
BMI is engaged solely in licensing to all types of music users the public performance rights of the musical compositions of over 10,000 authors and about 5,000 publishers. All the money that BMI collects, except for its necessary expenses and reserves, is paid to these writers and publishers.
BMI has an extraordinarily diversified repertory, which includes the majority of the current popular hits, the major part of country and western, and rhythm and blues music, and much jazz and religious music. It licenses the music of successful shows and motion pictures, and a great deal of serious music. The writers of serious music affiliated with it have won a substantial number of Pulitzer Prizes and other awards.
Nineteen of the 23 records which sold over a million copies in 1966 were licensed by BMI. BMI music won the 1966 awards for the song of the year, the record of the year and the classical album of the year.
Copyright is the most intensely personal form of private property. It comes solely from the mind and spirit of the author. The recognition that copyright protection is crucially necessary in the public interest is embodied in our Constitution. Indeed, the extent of protection of these intangible rights represents an important measure of a country's civilization. Any erosion of these property rights, either by compulsory license or by confiscation, is justified only by overwhelming consideration of public, as distinguished from private, interest.
The efforts to erode this bill come from persons who have never paid and who don't want to pay, and from people who have never
bargained and who therefore are afraid to bargain. In a sense, you are dealing more with neurosis than with reality.
S. 697 contains a number of provisions which have been accepted by authorul interorts only with great reluctance, but the bill represents a great forward step. It constitutes a tribute to the work of the Register of Copyrights and his able staff and to the distinguished and conmientra subrommittee of the Committee on the Judiciary of the lloum of Reprezentatives and its counsel. With the exception of section 111, commonly called the CATV clause, BMI supports the bill and use its passage.
In dincussing the bill, I should like to limit myself to a consideration of the effects of the bill on the right of public performance of music. This is the only field in which BMI operates.
I will turn first to section 116. The congressional report which accompanied the Copyright Act of 1909 referred to the jukebox exemption only in terms of the "penny parlor.” I am old enough to have been a patron of the penny parlor. In the penny parlor there was a machine in which you put a penny, to which there was something attached very like a doctor's stethoscope, and one person at a time was able to listen. Obviously, this was not a public performance, and that there was ready acquiescence in this exemption is not surprising.
Senator Scott. You might have called it a narrowcast rather than a brondeant.
Mr. Kaye. That is right, sir, I must confess that I cheated. Another little boy and I put one piece of the stethoscope in each of our ears and would jam our heads together and both heard the same piece.
Senator Scorr. That was the origin of broadcasting.
Out of this has developed the $500 million jukebox industry, the only industry which makes all of its revenue from the performance of music, I must point out that, when the jukebox industry refers to itself, it fractionates the industry into units of small business, and when it refers to publishers and writers, it combines them into one aggregation. The average individual author and publisher are very small business indeed. The fact is that the gross revenue of the jukebox industry is 10 times the revenue of the performing rights organizations with which it would have to deal.
Certainly, we must all agree that the juke industry was well represented here. It would be well represented in negotiations. It has always been the practice of BMI to negotiate initially with trade associations and representative committees and it has sought to do so here. Of course, each individual remains free to make his own final decision.
In logrie, the jukebox clause should be repealed. Outright repeal has been supported by ererr bar association and every dispassionate body which has considered the matter. This is what the copyright revision bill originally provided and this is still what BMI thinks should le dore. There is no reason why the jukebox operators could not funetion, in relation to the use of music, as successfully as restaurateurs or local broadcasters or anyone else who uses music for profit. Section 116 against which the jukebox industry so violently inreighs, was inserted in the bill for the benefit of the operators We do not want it.
It was they who wanted a ceiling, and this is why the maximum of $19.20 a year per machine was established.
There is no doubt that compliance with section 116 imposes difficulties on both the operator and the copyright proprietor and the avoidance of these difficulties would be an incentive to both sides to enter into a reasonable contract.
The matter is not as bad as it was made to appear by the coin machine operators, by Mr. Cannon last Friday. Mr. Cannon testified last Friday that the impressive 24-inch stack of reports which he placed before you was "all actually duplications”-the result of duplicating reports for 330 publishers and for 70 machines.
The fact is that the average coin-machine operator adds only about 50 selections to the machine each quarter. In practically every case, the records bear on their face the designation of BMI or of ASCAP as the licenser of the performing right. It is to avoid the multiple difficulties of dealing with individual copyright proprietors that ASCAF and BMI and comparable groups were created and no such duplication as was indicated to you is necessary. Like every part of the copyright law, this provision is not intended to designate a mode of practical procedure but to create a definition of rights. A compulsory license clause for the manufacture of phonograph records, for instance, is imbedded in the law, but is practically never availed of in practice. Persons operate, as they always do under a free economy, by private contract. Since the coin-machine operators said that they could not bargain on terms of equality with BMI, it may interest you to know that BMI tendered arbitration to the Music Operator's Association and that the offer was rejected. We joined in the negotiations in which we agreed to share in the approximately $20 per machine. We were eager to work this out. We are at the disposition of anyone who can be helpful to the coin-machine operators and to us in arriving at an agreement.
The coin-machine operators have tried to make it appear that there is something unique in the fact that there is one royalty for the making of a copy, in this case a recording, and another royalty for the right to give a public performance. This is common to every kind of copyrighted work. In almost every case, the person who gives the performance has to acquire some physical object to give it from. If he then gives a public performance, he pays a separate performing royalty. This concept is so firmly established that even our present law specifically provides that the payment of a mechanical fee does not free the record from the obligation to pay for a public performance for profit. When the coin-machine operators try to merge these two wholly different concepts into one, they merely confuse the issue.
Nor does the $19.20 maximum represent an unfair or unusual charge. It is, in fact, an inadequate sum, reluctantly accepted by copyright interests and representing less than half of what is annually paid by Hourishing coin-machine industries of other countries.
Royalties are invariably figured on, and paid out of, the gross receipts from the use of the copyrighted work. The ratio of royalty rate to gross receipts established by the bill is extremely modest. The broadcasting industry, for instance, which derives much of its revenue from the performance of material other than music, for which it must also pay, pays a higher percentage of its revenue than this bill would re
quire the coin-machine people to pay of their revenue, despite the fact that they make all of their money from the performance of music.
The coin-machine operators say that they intend to revise the proposal which they have placed before the committee. I am not surprised that this is so, because, in its present form, the proposal they have laid before you is clearly indefensible. We ask leave, of course, to submit an analysis of the new proposal after it has been prepared and copies have been made available to us. An adequate coin-machine clause must be based on performance, it must be enforceable and it must yield adequate revenue. The present coin-machine proposal does none of those things.
As the coin-machine operators have themselves testified, the variance in performance between records is extreme. Some records in a machine are performed innumerable times during a brief period. Others remain in the machine for an extremely long time. The physical life of some forms of recording is indefinite. Acquisition of a record is not a measure of its performance.
The coin-machine operators referred to 2 cents a record, apparently because that is the royalty paid by manufacturers when they press thousands, often hundreds of thousands of records, the vast majority of which go into the home. The jukebox operator buys individual records in comparatively small quantities; sometimes, to test the market, one or two at a time. The suggested return would be inadequate; not even a substantial fraction of 1 percent of the revenue from performances. The amount which would theoretically be yielded would not make it economically possible to enforce the provision, even if practical enforcement machinery were available.
The fact is that there is no enforcement machinery. Records may be and are purchased at "one stops," from retail dealers and from other sources. The seller in many cases cannot identify the purchaser. Records move from machine to machine and from operator to operator, and no control would be possible.
To analyze this proposal, let us see what the representative of a copyright proprietor would have to do if he wanted to enforce it. First he would have to send at least one reliable witness into the place where the machine was located. That man would have to stay there, probably buying a few drinks, until a number of compositions in which that copyright proprietor had rights were performed. Then he would have to wait until the end of the next quarter to see if he had gotten any money from the operator. If he got any money from the operator from that chain of machines, he would not have enough evidence to proceed. If no record had been bought, he could give 30 days' notice.
But suppose he detected five infringements. Within the 30 days the jukebox operator could pay him 10 cents. So the Music Operators of America proposal obviously calls only for the voluntary payment of nominal amounts.
Careful analysis will convince this subcommittee that no enforceable proposal for a ceiling price on jukebox royalties is possible without the imposition of burdens on both the operator and the copyright proprietor. The proposal in the bill was carefully throughout. The proper solution, in our view, however, is the complete elimination of the exemption, thus placing the coin-machine operator on the same footing as all other persons who perform music publicly for profit.