decreased by nearly one-third. 11/ A number of studies show that many home tapers, if precluded from taping, would purchase a record or prerecorded tape. 12/ In short, the evidence suggests that, for many consumers, audio home taping has become an inexpensive alternative to the purchase of records and prerecorded tapes, and that the inability of audio copyright owners to collect royalties from home tapers has caused a significant decline in the value of copyrighted audio works. The harm that has been suffered by video copyright holders as a result of video home recording seems to us, at this point, to be less clear, and still more difficult to quantify. Evidence to date is ambiguous as to whether VCRs have been used primarily to "time shift" that is, to facilitate one-time-only viewing of movies and programs that individuals cannot arrange to - 11/ 12/ See generally Statement of the Recording Industry see at the time of broadcast. 13/ Because time-shifting results in larger audiences for programming, it could increase advertising revenues received by copyright holders, and thereby could raise the value of copyrighted works. To the extent, however, that video recorders are used by the consumer to edit Moreover, video out commercials through the "fast forward" devices available on some machines, advertising revenues and the value of the 14/ copyrighted works could be decreased. copyright holders are, of course, denied extra compensation from those commercial television viewers who engage in "librarying" the creation of permanent tapes of particular films which are stored and viewed repeatedly. Though librarying does not appear to be a widespread phenomenon at this time, it may become so. - 13/ 14/ See, e.g., Home Recording Rights Coalition, The Case for Currently, both the Nielsen and Arbitron rating services We believe that copyright owners deserve compensation for financial injuries to their property rights suffered as a result of unlawful copying. Nevertheless, it is clear that more concrete information concerning the extent of the harm suffered by copyright owners may be required for either Congress or an administrative body to determine rationally the amount of any royalty that should be assessed. As we have noted, we believe that Congress should itself establish the standards and mechanisms for determining and allocating copyright loss, so far as practicably possible. We are presently, however, unable to suggest what these should be. Yet, we cannot at this time endorse the simple delegation of these difficult problems to the Copyright Tribunal. Since the problems presented by video and audio taping are likely to increase dramatically in the years to come, particularly as video recorders become more common, we believe that the unsettled issues of copyright loss should be given serious and expedited study by the Congress. The Justice Department would certainly be interested in assisting the Congress in this effort. I Mr. Chairman, this concludes my prepared statement. would be happy to answer any questions you or the members of the Subcommittee may have. Mr. KASTENMEIER. Thank you, Mr. Rose. I appreciate the statement. It may not satisfy many people, but I think I understand where you are coming from. Mr. Rose. It wasn't intended to, Mr. Chairman. Mr. KASTENMEIER. Perhaps it would be best to hear the other witnesses as well. Your statements are a bit briefer, although I will say that Mr. Rose delivered his statement in record time, covering a lot of material. Mr. WUNDER. I would ask that my prepared statement be placed in the record. Mr. KASTENMEIER. Without objection, your several statements will be received and made part of the record. I believe, however, in Mr. Rose's case he did give his statement verbatim. You may proceed as you wish. Mr. WUNDER. Thank you, Mr. Chairman. As Mr. Rose indicated, the administration at this time is not taking a position in support of or in opposition to this legislation. I would say, however, that it seems to us there is near universal agreement that no one is seeking to forbid a person from using his or her audio or video equipment for home taping for private use. That seems to be a reasonable approach to me. The issue is really, then, whether or not and how copyright owners shall in some way be compensated for this use. We think that the resolution of this question by the Congress should await the outcome of the Sony Betamax case. I think that the creation of a regulatory solution utilizing the Copyright Tribunal which, as I have testified before, I find to be an inadequate body, as the GAO report has also indicated, in leaving the matters up to the CRT that the legislation contemplates would be a task of significant proportions and I am not very sanguine abut the ability of the CRT to accomplish those goals. Another problem that we have, which is consistent with what Mr. Rose said, is that we are not really very certain how the CRT or anyone could measue damages or allocate them to manufacturers. What we also don't know at this time is how you develop a remedy which does not penalize infringers along with noninfringers. Thank you, Mr. Chairman. [Mr. Wunder's statement follows:] Statement of Bernard J. Wunder, Jr. Assistant Secretary for Communications and Information U. S. Department of Commerce Thank you for giving me this chance to express the views of the Administration on the proposed legislation dealing with audio and video recording that the Subcommittee is considering. Our position, briefly, on legislation is that we believe Congress should await action by the Supreme Court in the SonyBetamax case. We are sympathetic to the concerns of the program producers, and we do not want to get into the situation where injury is visited upon important industries. We believe that the arguments of both proponents and opponents of a royalty fee have merit. We do not think, however, that a special copyright royalty scheme should be legislated at this stage. In its 1981 Sony-Betamax decision, the Ninth Circuit held, essentially, that the home videotaping of broadcasts: (a) did not fall within the traditional "fair use" exemption; (b) constituted a copyright infringement, accordingly; and (c) that the suppliers of video recorders (such as Sony) were thus liable, since their products were not a "staple of commerce," but rather devices "not suitable for substantial, noninfringing use." Universal City v. Sony Corp. of America, 659 F.2d 963, 973, 975 (9th Cir. 1981). The issue of home audio recording and its exemption under the 1976 copyright law, or the 1971 Sound Recording Act, was not technically before the court, though the audio and video |