based on past experience in the music industry can easily result in the monopolistic control of the entire background music industry by just a few music publishers. It therefore should be deleted from the copyright bill.

You have previously heard long and detailed discussion and argument concerning the compulsory license provisions of section 115. At no time, however, have you heard any reasonable justification for the inclusion of the special exception found in the last sentence of section 115(a) (1). This is a new and special exception.

The effect of the sentence is to deny to the background music industry the compulsory license protection which the entire phonograph record industry has enjoyed for 58 years. What justification can there be for such a discriminatory special exception?

In order to understand the impact of this sentence it is necessary to understand something about background music. Background music or functional music consists largely of familiar music unobtrusively performed. It is designed to supplement other activities such as social conversation, factory or office work, shopping, eating, drinking, waiting or just plain thinking.

Background music or functional music has become an integral part of our way of life. We expect to hear it in restaurants, elevators, shopping centers or waiting rooms. Industrial psychologists have recommended its use in industry. We estimate that there are presently approximately 75,000 installations in the United States which perform background music publicly for profit or otherwise.

This industry has grown from an idea in the 1940's to a substantial industry in 1967. 3M's entrance into the field in 1965 marked the first time that an organization was created to sell, rather than lease, background music equipment and tapes. This has been a highly successful development and has resulted in more favorable terms to consumers. It is apparent that without unjustified restriction the industry will continue to grow in the coming years and continue to make the days more pleasant for millions of people who have access to this music.

The development of a background music program necessitates access to the same vast repertoire of music which is available to the phonograph record companies under the compulsory license provision. The songs are generally in the category of standard popular works, are generally more than 10 years old, and are mainly in the control of five or six large publishing companies. In 3M's case, over 2,000 selections have already been recorded for use in its background music program. The background music manufacturers are very much aware that the performance of this music is subject to the payment of public performance fees or royalties and, in addition, royalties for the mechanical reproduction of the music. These fees are not modest. We understand that for public performance ASCAP alone collected in excess of $1.5 million from the industry in 1966. In addition to this, 3M has itself already paid-as only one manufacturer-directly to the music publishers over $1 million for both mechanical and public performance royalties since it entered this industry in August 1965.

Our client does not object to paying fees or royalties for the use of music. In fact, in all countries of the world where 3M has dealt for these rights, our objective has been to simplify the problems of collection and administration of these moneys. Our objection to this special

exception is to a dangerous implication which threatens the entire existence of the background music industry.

In the past the right to record was never questioned and the rates were either negotiated or were established by the statute. The rate of payment of public performance fees was the subject of bargaining between the users of music and the performing rights societies. It had almost always been necessary to negotiate a contract with ASCAP because the public performance rights of the great preponderance of standard musical works were controlled by ASCAP.

If a rate could not be negotiated the user could petition the court of the southern district of New York to set a rate. This procedure has been employed several times during the last 10 years and it has served to avoid abuses in the exercise of the exclusive rights of public performance.

Under the special execption the copyright proprietors are given a new exclusive right. They can determine, without limitation, the rate they wish to charge for the recording of their music, and can also deny the use of their music entirely. By doing so they could determine who could stay in the background music business and who could not. Since the bulk of standard musical compositions suitable for background music are still in the control of five or six music publishers, a combination of these companies or some of them could exert monopolistic control over an entire industry.

The 3M Co. has invested millions of dollars in this industry and it believes that other companies also have substantial investments in this field which are now threatened. We cannot believe that your committee or the House committee intended this result.

We have spoken with a number of music publishers and have found that they were not even made aware of this special exception. We can only assume that neither did the publishers intend this to be the result. Why discriminate against the background music industry? What is the origin of the special exception to the compulsory license? It was not in the Register's original draft.

Our first indication that such an exception was to be included in the bill came when Herman Finkelstein, general counsel of ASCAP, suggested the addition of the questioned language. His suggestion was seconded by Julian Abeles, general counsel for Harry Fox, the largest mechanical licensing agent in this country.

This suggestion was made at the last meeting of the Register's panel of experts and was not debated. Both of these gentlemen have testified before your committee but neither of them has explained the origin or reason for the special exception. We have searched the published records of the drafting panels but can find no debate or discussion on this issue.

As we said previously, we do not believe that most of the music publishers are even aware of this discriminatory provision. The explanation of the Register of Copyrights Supplementary Report of the Register of Copyrights of the General Revisions of the U.S. Copyright Law, May 1965, Copyright Revision, part 6 at page 54-in no way justifies this special exception.

Please note that the special exception as worded would permit a phonograph record company to avail itself of the compulsory license and then make a background music use of the recording by later trans

ferring it to tape. Recordings made by it would thus be created primarily for the purpose of distribution to the public for private use. That these recordings can be, and now are, publicly performed as background music is beyond doubt. Anyone who has flown American Airlines, TWA, or a multitude of other airlines can testify to this fact. This would place the background music industry in a disadvantageous position with the recording industry. Why discriminate? The compulsory license should apply equally to all those who wish to make recordings for listening purposes.

The 3M Co. is aware that the public performance of music calls for payment of fees, and equally aware that a fee is due for the manufacture of recordings. 3M has willingly honored these obligations by paying $1 million in 18 months. The new special exception would put monopolistic control of an industry in the hands of a small group of publishers or their licensing agent.

It may even take the right to license this type of performances out of the hands of the performing rights societies and place them in the hands of the mechanical licensing agents. The effect of the special exception is to merge two existing rights, the right to record and the right to perform. This merger creates a new exclusive right which is greater than the sum of its parts and abusive in its effect.

This merger would place the background music manufacturer at the mercy of any group of copyright proprietors, or their agent, who are capable of discriminating against individual companies in favor of others or even of driving existing companies out of business or preventing them from entering the business.

It would be ironic if, because of the possibility of third parties bidding for exclusive rights to background music uses of music, the 3M Co. would be forced to do the same. The financial capacity of 3M would make it possible for it to be the highest bidder and an unwilling and unwitting monopolist. It is not our client's wish that this should be the result of the draft before you.

In his testimony before this committee on March 20, Sydney Kaye, general counsel for BMI, said with reference to the jukebox provision:

. . . 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. 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. Merging the two payments together simply confuses the issue.

We agree with this philosophy. Our client is not asking for the right to use the property of others without payment. But the right to grant business life or cause its death should not be conferred on private business organizations even to our client. We ask therefore that section 115 (a) (1) be amended to delete the last sentence which can have such a devastating effect on an existing industry.

Thank you.

Senator BURDICK. As far as you can gather from the testimony in the House, there never was any supporting testimony for this sentence, that crept into the bill?

Mr. ARROW. We have not been able to find any. We found some opposing testimony, but none in support. The report of the House committee very simply says that the committee concluded without any reason that the purpose of the compulsory license does not extend to manufacturers of phonorecords that are intended primarily for commercial use including not only broadcasters and jukebox operators but also background music services.

Senator BURDICK. Thank you.

Mr. ARROW. Thank you.

Senator BURDICK. Mr. Saltzstein, general counsel, American Business Press Association.

STATEMENT OF ROBERT A. SALTZSTEIN, GENERAL COUNSEL, AMERICAN BUSINESS PRESS

Mr. SALTZSTEIN. Mr. Chairman and members of the committee-I hope you will pardon my gravel voice. I have one of those voices. Mr. Chairman and members of the committee, the American Business Press represents some 450 specialized business publications. The fields of commerce and technology served by the business press parallel all phases of American industry, merchandising and finance. Among the publications for whom we speak today are such illustrious periodicals as Aviation Week, Steel, Iron Age, Oil and Gas Journal, Automotive News, to name but a very few. My name is Robert Saltzstein; I am general counsel of this association of publishers.

Our purpose in coming before you today is to discuss section 107 of H.R. 2512, the fair-use provision. We most strenuously urge that this section emerge from your considerations without weakening amendments and, if anything, strengthened. We are similarly concerned about the use of copyrighted material which is fed into computers and ultimately appears in print with the copyright, in effect, emasculated by the electronic process.

When the farsighted framers of the Constitution gave Congress the power to secure "to authors and inventors the exclusive right to their respective writings and discoveries" and when Congress enacted the present copyright law, it was certainly intended that the fruits of a writer's labors, whether economic or esthetic, would belong to that author. Certainly, neither the Founding Fathers nor the Congress which enacted the last copyright law could have foreseen or even imagined the advent of the photocopying machine.

We are now at a point where the electronic and scientific revolution has collided with advanced education and the need for man to know. Today, the education of men and women in industry continues long after formal educations stops. It is in the fulfillment of this critical need to know, that the business press of the United States plays so vital a role.

Name any field of endeavor and you will find a business publication reporting late news, later scientific developments, late economic changes and proposals for that entire field of activity. A metallurgist develops a new process for coating steel-nine out of 10 times, the metallurgical section of the business press is the first to inform the metals industry about that development. And thus is that industry and the entire economy benefited.

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It is, therefore, imperative that the United States have a strong, independent, virile business press. The news which is within its aggregate pages must be kept flowing. Circulations must be maintained and expanded. Without circulation directed to specific markets, whether by subscription or by qualified controlled methods, the financial ability of business publications to serve the need to know of specific industries will be impaired. And there is no greater threat to the long-term future of a strong and independent business press than unrestricted use of the photocopy machine to outflank the copyright, whether by intent or otherwise.

In some instances, a copy of a business publication is mailed to the library of a large corporation. There the staff of that library scans the publications. An article of special interest is photocopied and sent to the man in the corporation directly concerned with the subject photocopied. Whereas, 50 copies of the publication may have been sent to that corporation, now one is sent.

The engineer who should see the whole publication never sees it. Instead, he gets a spoon-fed stream of articles the librarian thinks he ought to have. Not only has the copyright law been evaded, but the recipient of the photocopy has received limited information.

Such editing by photocopy machine further specializes already narrow specialties. Instead of developing people who know something more than just their specialty, the photocopy machine can be used to deny to that specialist information, on many other subjects which would make him or her a better informed American, not only in his specialty, but also in his entire industry and, indeed, in the economy as a whole.

Carried to its extreme, an omniscient company librarian will dole out informational capsules to specialized specialists. George Orwell will be looking over that specialist's shoulder much sooner than 1984, unless something is done to preserve the integrity of the copyright against the unrestricted onslaught of the photocopy machine.

We submit that if an author writes, and a periodical prints, the news of an industry, that information is for individuals, not just for company mailrooms or company librarians. Millions of dollars are spent by the business press of the United States to seek out, interpret, describe, and disseminate in newspaper, magazine, and newsletter form the information men in industry must have.

The only way the whole story about an industry can get to the population of that industry is through business publications. If the whole publication is marked up, torn apart, photocopied, and sent to whomever this Orwellian figure determines, then what good is the copyright? And if the copyright is no good, if pirating of literary creation is to be countenanced, if the vast investment of publishers in seeking out the news is thus to be vitiated, what will be the effect on a free and independent business press?

In short, there will be a very weak press. The stimulation of original thought and the dissemination of ideas will be stifled. Advertisers will increasingly turn to mailing lists of specialists so as to get their sales messages to them. The broad-gaged editorial spectrum on which the business press of the United States is based will be lost in the shuffle. One of the tragedies of our time is the contraction and disappearance of more and more daily newspapers.