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receipt or transportation in interstate commerce of any counterfeit record a criminal offense. The NAB supported this legislation.

The "dubbing” problem differs from counterfeiting in that there is no "palming off," as it were, of a product as the original. Rather the practice that is sought to be controlled is the unjust enrichment of one individual through the copying and sale of an article made by another. While we would agree that control of the “dubbing” problem is necessary, the remedy should be directed to the sale of the copy, not to mere use. Copyright protection is not the answer, nor is it necessary.

The Constitution, in article I, clause 8, provides that Congress shall have 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 writing and discoveries." We find it extremely difficult to determine what is intellectually created by a record manufacturer in providing technical know-how to the recording of the creative work of a composer,

Furthermore, under the compulsory licensing provisions of the copyright law, a record manufacturer may record a song without permission from the copyright owner upon payment of the licensing fee. It would appear to us that the grant of copyright protection to a recording would permit that some manufacturer to secure copyright in the recording and then prohibit re-recording, a right that is denied the composer This hardly seems equitable.

In any event, should the Congress believe that sound recordings should be brought under the umbrella of the Federal copyright law, we see no justification for extending performance rights to either the manufacturer or the performer as a proposed by the amendments of Senator Williams.

As this committee is well aware, it is customary for record manufacturers to give records to stations free of charge in order that they may be given the widest possible exposure. “According to a Billboard survey of 1963, the average station had average weekly receipts of 70 free singles and nine free LP's.

This exposure inures to the benefit of the record manufacturer, the performer, and the songwriter. The important contribution that broadcasting has made in this regard is graphically illustrated in the following table compiled by the Record Industry Association of America. We have taken the period 1945 to 1965 because it corresponds to the time during which the greatest growth in the number of radio stations occurred. For example, as of June 30, 1945, there were 931 radio stations on the air. As of June 30, 1965, this had increased to 5,662. It seems more than pure coincidence that the growth of both industries followed similar paths.

1 "This Business of Music," Sidney Schemel and M. William Krasilovsky, Billboard Publishing Co., 1964, p. XVIII.

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(The table previously referred to follows:) Record Industry Association of America, Inc.-Composite estimate of total industry

sales of phonograph records in the United States only

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Note: It has been estimated that retail sales will reach $800,000,000 by 1956 and $1,000,000,000 by 1970. Ibid., p. XVI.

The plain truth of the matter is that recorded music benefits radio, and radio, by exposing this music to the public, benefits both the record manufacturer and the performer.

In view of this astounding growth, it is hard to understand the statements made by certain representatives of the record industry that many stations consistently cause harm by overplaying records. Certainly the history of the record industry over the past 20 years does not indicate that exposure to the public by broadcasting causes people not to purchase records. As a matter of fact, the reverse would appear to be true. In any event, we are at a loss to understand how performing rights to manufacturers or performers would aid this situation. The radio station would still continue to play those records which have the greatest appeal to its listening public.

Much has been said of the profitability of radio stations and their ability to pay additional performance rights. For example, Judge Arnold introduced a table indicating the profits made by radio stations during the period 1961–65. The last line on that chart indicated an average profit of $41,956 for profitmaking stations. What the table fails to show, however, is the fact that this represented the profit of some 500 stations in the largest markets; that of the 2,708 stations reporting profits in 1965, 2,261 reported a less than average profit, or $18,364. We believe a more accurate picture is contained in the chart set forth below. It is compiled from the records of the FCC and indicates the average financial data for AM and AM-FM stations operating a full year.

(The chart, previously referred to, follows:)

Reportin Losses » (number).

1965
1964

1963 Stations reporting profits.

2, 708 2, 631 2, 451 Average profit.

$41, 956 $37,927 $34,961 Stations reporting less than average profit. 2. 261

2, 190 2,064 Average profit.

$18, 364 $16, 992 $15, 175 Stations reporting losses.

1, 150
1, 108

1, 234 Average loss..

$26, 594 $22, 568 $22, 027 Total stations reporting

3, 858 3,729 3,685 Average profit

$21, 523 $19, 990 $15, 877 FM stations operated by non AM-licensees.

338
306

294
102
93

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2,318 $33, 035

1,937 $14, 781

1, 215 $21, 151

3, 533 $14, 400

279

71

2,097 $31, 396

1, 588 $11, 842

1, 372 $21, 704

3, 469 $10,395

249

59

86
()

236
213

208 Aggregate loss (thousands)

$3,300
$3,000

$3, 200

208 $3,200

190 $2,600

Now we do not mean to imply that radio is not a good business. But the relative prosperity of particular broadcasting entites and for that matter, of particular recording entities, is primarily the result of business acumen. It is not because particular records are played. An advertiser buys a spot in a program unrelated to the particular musical numbers the program might contain. The format of the program represents the business judgment of the licensee. If it is good, the program sells; if it is not, he may find spare time on his hands.

Nor is it correct to state that broadcasters do not pay for the music they play. Last year radio and TV paid some $45 million to music licensing organizations. Of this some $20 million was paid by radio. This is more than 25 percent of the pretax profits of $77 million. To add another $20 million to this, and I assume that the record manufacturers and the performers would not settle for less than is already being paid by the composers—by the imposition of recording rights for sound recordings would place the burden on those least able to afford it--the small stations. And what of television? How many records are played on television stations? And while the record manufacturers have not made a claim against television per se, there are indications in the transcript-for example, Mr. Livingston's testimony on page 635 and on page 644 indicating a desire, in my opinion at least, to also go after performance rights for television stations.

Another factor overlooked by the manufacturers in their zeal to equate themselves with the authors and composers is the compulsory license problem. Under the present and proposed copyright law, the recording rights of composers are subject to a compulsory license. Once an owner has licensed his work to be recorded, anyone else may record it for a statuatory fee. This is designed to prevent a monopoly in the recording industry. It would appear to us that copyright and performance rights for record manufacturers would promote such a monopoly since the largest companies have exclusive contracts with the most popular artists. Judge Arnold is well aware of this problem and adverted to it in his testimony on March 21. On page 621 of the transcript, he stated that since there was no compulsory license for performing rights, composers and publishers were free to do as they pleased with respect to those rights. The result was "they built up a monopoly” and it was necessary for the Department of Justice to bring a criminal indictment against ASCAP and a civil proceeding against BMI. What assurance do we have that the grant of perform

ance rights to record manufacturers will not result in a similar abuse of power, making it necessary for the Department to step in once again!

Turning now to the question of performing rights for performers. Presently, a performer obtains two fees: one, from the record manufacturer for making the initial pressing; and two, a stipulated sum for each record sold. This compensation is a result of bargaining between performer and record manufacturer and will be influenced, of course, by the reputation and popularity of the artist. To this dual compensation the performers would not add a third payment, compensation each time the record is played.

Contrast this with what the composer now receives and can receive under the copyright law, present and proposed. Once he permits a record to be made of his work, he must afford similar privileges to other record manufacturers. This precludes his ability to bargain with any manufacturer for the initial recording. He must be content with his

Performing artists benefit from the wide exposure given their ree ords by broadcast stations. Not only does it stimulate the sale of their recordings, but it promotes their personality and permits them to augment the demand of the public for personal appearances, endorsements, and other remunerations.

Finally, it has been stated on this record that some other countries have performing rights for sound recordings. I do not think it necessary to tell this committee that most broadcasting in other parts of the world is government owned. In the United States, under a system of free enterprise, we have built up the finest system of broadcasting in the world. By giving the widest possible dissemination to music of all kinds to people of all classes we have contributed substantially to the culture of the Nation.

The insertion of performers' rights in S. 597 would create tremendous complexities for all users of music. It would upset the traditional practice of decades and would breach all known copyright concepts. Gentlemen, we urge that you reject the proposed amendment to S. 597 that would extend performance rights to record manufacturers and performers. Thank you.

(The statement of the National Broadcasting Co., Inc., previously referred to follows :) STATEMENT OF NATIONAL BROADCASTING COMPANY, INC., BEFORE THE SUBCOMMITTEE

ON PATENTS, TRADEMARKS AND COPYRIGHTS, SENATE JUDICIARY COMMITTEE NBC submits this statement for consideration by the Subcommittee on the question of the status to be given under the copyright laws to sound recordings.

Special counsel and representatives of members of the Record Industry Association of America and the National Committee for the Recording Arts, testify, ing before this Subcommittee on March 21 and April 11, proposed that the producers of sound recordings, the recording companies, be granted an exclusive right of public performance--and consequently a right to collect performance royalties--for the benefit of themselves and the performers for sound recordings.

Such a grant would be at the expense of all those entities, including broadcasting stations, that use sound recordings, and it would be to the great detriment of the public.

NBC therefore fully supports the Statement which Douglas A. Anello, Esq., General Counsel for the National Association of Broadcasters, is presenting today in opposition to the recognition of such a right under the copyright laws.

A brief analysis of the statistics and the arguments advanced by the RIAA, the NCRA and their representatives and members and submission of facts they omitted will establish, we believe, that their position is unjustified and that Amendment #131 should be rejected.

BACKGROUND

Under the bill (S. 597) in its present form, sound recordings would be given recognition in American copyright law as copyrightable works for the first time. This would be done under a definition of "fixation of a series of musical, spoken and other sounds”, whether on disc, tape or other phonorecords. See sections 101 and 102.

That recognition will protect against unauthorized duplication and against distribution of phonorecords duplicated without authority. See sections 106 and 114.

To make clear the purpose of this limited extension of traditional copyright, section 114 of the present bill specifically states that the owner of the copyright in a sound recording is denied an exclusive right of public performance.

To the extent that copyright recognition protects against unauthorized duplication and distribution of phonorecords duplicated without authority, the bill carries over, federalizes, and perhaps refines a right of protection afforded to producers of and performers on sound recordings by the common law of unfair competition and related case and statutory law of the several states. In that context alone, assuming that appropriate exception is made to allow ephemeral recordings for broadcast purposes, NBC has offered no objection to using the derice of copyright to afford that protection.

However, NBC opposes any further extension of copyright benefits and specifically opposes the establishment of an exclusive right of public performance in sound recordings.

NATURE OF BROADCASTING The American system of broadcasting is based on the government grant of a license to use a portion of the spectrum for a public service and incidentally to have available a means of emergency communication between the government and the public.

In lieu of government subsidy or a tax or a charge on the ownership or use of receiving equipment, the American people have elected to have their broadcasting system supported predominantly by advertising. Most of this advertising is in the form of commercials of various advertisers, inserted in programs like newspaper and magazine advertising is inserted in publications, and without advertiser proprietorship of the program or identification with it. To the extent that the advertiser does seek identification with the programming, it is an identification with the program concept and not with particular item of material, whether it be musical numbers, conversation, news, discussions, or etc.

Accordingly, there is no such thing as the "sale" of a "sound recording" performance by the broadcaster to the advertiser for identifiable quid pro quo. The program is broadcast regardless of the presence or absence of commercial messages or the degree to which the station is able to obtain advertising material for broadcast.

NATURE OF THE RECORDING INDUSTRY The business of the recording industry is the production and distribution of phononrecords to the public for use as the purchasers choose. The rewards to the recording company are realized through the proceeds from the public sale of the phonorecords.

The performing personnel who engage in sound recording activities do so primarily for two reasons: first, to increase their income by the sale of their phonorecords; and secondly, to promote their personalities and performance so as to increase the demand for their services. In the former aspect they may negotiate with the recording company a contract which gives them a share of the gross or net proceeds from the sale of the phonorecords.

Any analogy to motion pictures and other visual arts in terms of "production" and "artistic contribution" is superficial at best since these latter are typically in a pattern of limited circulation for exhibition rather than for mass distribution for personal use.

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