they don't receive. Right now, you have a situation in the pay cable market where one company so dominates the pay cable market, they set the prices, HBO. They have about 70 percent of the business. Now, if you don't like their price, you don't have to do business with HBO, but you only have 30 percent of the market left to do business with. So, as a result, maybe the average price per subscriber is in the 8- to 10-cent category overall.

No. 2, I think, from the standpoint of elected officials, that you have a right to look at the public interest in this thing and if there is a diminution in the amount and quality of programing that goes on free television, advertiser-supported television, it will have a singularly deleterious impact on those people who cannot afford these expensive machines or who don't even have access to cable. Now, that is the point I made earlier and I am saying to you that that will have a big impact.

Now, the program producer, if you insist that you are not going to license this one unlicensed market, the VCR, he is going to figure out some way to live with that and he may figure out ways which are anathematical to the public interest; that is, people who depend on home entertainment. He might do that.

Mr. RAILSBACK. That is what I am asking. What would he do? Mr. VALENTI. Well, for one thing you would cut back on your production. You wouldn't take his risk. Last year we put out 200 movies. We may cut back to 100 movies. Mr. Orear, who has unhappily had to depart, he would go out of business if we cut back our production in half. I mean, he literally would because you can't keep a movie in a theater if nobody wants to see it. You have to get rid of it and have a new movie come in. So, he needs a large supply. The same thing would happen with network and if you didn't have that kind of programing that the advertisers are going to pay for, you would have a subtraction in what the public has to offer-I mean, what the public is offered.

The scenarios can be written any number of ways, but I can assure you of this, prudent businessmen will adjust to whatever it is that you put before them.

Mr. RAILSBACK. I guess, you know, I find a difference between home recording off the air of regular television programing and, say, somebody recording the pay-say, somebody that has pay cable and, as you pointed out, there are a lot of homes that do not have access to cable. But I am just saying, even where somebody has cable and has subscribed to pay cable, at least in that case they have paid a fee or they have paid for the reception of that pay cable. It is a little bit different than recording, I think, something for which they haven't paid anything off the air.

Mr. VALENTI. Mr. Railsback, let me respond this way. What they paid for is the same thing you and I pay for when we go into a theater. We go into a theater; we pay $4 to see that movie, but you don't bring a recording instrument in with you.

Mr. RAILSBACK. A lot of people bring in audio to concerts.

Mr. VALENTI. Well, that is what is wrong-that is one of the problems that is wrong with the audio business today. That is why it is going down the tubes.

Mr. RAILSBACK. We are going to hear from them

Mr. VALENTI. You are going to hear from them on Wednesday. What I am saying to you, on the other hand, if you have 40 million pay cable homes, as you will have in a few short years, it is those pay cable homes who will be mostly owning VCR's and if you have 40 million and they are recording-25 to 30 million of them are recording "Superman II" or "Firefox," No. 1, HBO knows that. They are not going to pay you a lot of money for the second, third and fourth run of that picture because it has already been recorded and nobody is going to watch it. No. 2, the networks will know it and they will know that the audience has diminished for the subsequent showing of that on network television and so forth on down the line.

Any time you imprison on tape to put in your permanent collection and see three or four times, by the time it goes on network television, your want to see has diminished severely. All of that goes into the marketing of a film and we are dealing with smart people. They have as good polling instincts and apparatus as we do. They know what is going on out there.

Now, the problem with 2 million, 3 million today, that is not what we are talking about, but this is growing exponentially. The Japanese already say this-and this year they sold 2.5 million. They are probably going to sell 3.5 and then to 4 and then to 5 and then to 6 and pretty soon you got 40 million of those bloody machines out there and then you have a whole new universe.

Mr. RAILSBACK. I didn't mean to give you that carte blanc opportunity.

Mr. VALENTI. I am sorry, Mr. Railsback.

Mr. KASTENMEIER. The gentlewoman from Colorado.

Mrs. SCHROEDER. Well, I thank you very much. We have kept you much longer than we said we would. You have done a wonderful job and everybody has done a great job that was here. One of the things that I hear in the cloakroom as I try to talk to people about this bill is their fear about not setting the fee the first time in the bill so that they know what it is. I guess there is a fear of delegating to the Royalty Tribunal that authority and I am wondering if we were to put in there the first time fee and then it is reviewed after 5 years-I realize you can't answer "yes" or "no" at this time.

Mr. VALENTI. The answer is "yes," Mrs. Schroeder, something that is just and reasonable; we would have no problem with that at all.

Mrs. SCHROEDER. I guess I am looking at it from marketing. I am very pleased that you are seeing the audio and the other together because I think the audio shows what happens if the recorder suddenly starts selling for $30 and they can be-so, I am really pleased that those are joined. And, as I say, from my marketing of it then, from other members or talking to them about it, I find that is one of their biggest fears.

Mr. VALENTI. No barrier, Mrs. Schroeder. We would be absolutely delighted to discuss it, just a reasonable fee. We have no objections at all with what is in the bill.

Mrs. SCHROEDER. Thank you.

Mr. KASTENMEIER. Well, on behalf of the committee, we wish to compliment you, Mr. Valenti, and all of the witnesses who ap

peared here today. You represented your point of view and your industry very nobly here and we are very pleased to have you be our leadoff witnesses today.

Mr. VALENTI. Thank you, Mr. Chairman.

Mr. KASTENMEIER. I would like to say, for the benefit of the audience, that we will have Mr. Edwards here tomorrow. He missed his plane, but he will be here shortly, so we will have him here tomorrow. And also, as our witnesses tomorrow, as Mr. Valenti would call them, the Japanese witnesses, but I-seriously, we will have Mr. Charles Ferris, Ms. Nina Cornell, Commerce, Inc., Virginia Kummel, chairman of the board, McCann-Erickson, Jack Wayman, senior vice president, Electronics Industry Association, Ms. Carol Gunter Foreman, also representing dealers, Sea Coast Appliance, Mr. Richard Anderson, George Atkinson, president of Video Station and Mr. David Nederhauer, Western Appliance Co.

Those will be the witnesses on tomorrow and we hope that tomorrow's session goes as well as today.

Until 10 o'clock tomorrow morning in this room, the committee stands adjourned.

[Whereupon, at 4:42 p.m. the subcommittee recessed, to reconvene the next morning at 10 a.m., Tuesday, April 13, 1982.]

HOME RECORDING OF COPYRIGHTED WORKS

TUESDAY, APRIL 13, 1982

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON COURTS,
CIVIL LIBERTIES, AND THE ADMINISTRATION OF JUSTICE
OF THE COMMITTEE ON THE JUDICIARY, LAW BUILDING,
MOOT COURTROOM, UCLA SCHOOL OF LAW,

Los Angeles, Calif. The subcommittee met, pursuant to call, at 10 a.m., Hon. Robert W. Kastenmeier (chariman of the subcommittee) presiding.

Present: Representatives Kastenmeier, Schroeder, and Railsback. Staff present: Bruce A. Lehman, chief counsel; Timothy A. Boggs, professional staff member; and Thomas E. Mooney, associate counsel.

Mr. KASTENMEIER. The hearing will come to order. This is the second day on hearings relating to copyright liability for off-air TV. Today our panel is back and we are also pleased to greet our colleague from California, Don Edwards, who is part of the panel today. I would only point out that Congressman Edwards from San Jose is author of the principal bill, I guess one can say, in this proceeding.

Also the Chair should state that Congressman Don Edwards served with this subcommittee when it was considering the revision of copyright in 1976, and has a long history of interest in the question. He, of course, chairs his own committee with distinguished work with respect to civil rights and constitutional rights for all Americans.

We are pleased to have Congressman Edwards here.

Mr. EDWARDS. Well, thank you very much, Mr. Chairman. I appreciate your allowing me to sit in with this subcommittee. I want to congratulate you for excellent hearings yesterday, and I want to thank you also for bringing the panel to Los Angeles.

It is a very important issue that the subcommittee is wrestling with, and one that must be resolved. And I am looking forward with great anticipation to listening and communicating with these fine witnesses that you have scheduled today.

Mr. KASTENMEIER. Thank you, Congressman Edwards. The gentleman from Illinois.

Mr. RAILSBACK. Mr. Chairman, I have a statement and a letter from the president and planning director for a firm called Kodark, which relates to some new technology that may be very useful in this field of communications and copyright, and I ask unanimous consent to have both the statement and the letter placed in the record.