unions, the warehousing, shipping, and advertising costs, and the remaining substantial general overhead expenses.

The resultant economic squeeze will necessarily have dire consequences, on which I will elaborate shortly.

Record companies, knowing full well the financial condition of their industry, were puzzled and dismayed when in 1964 the Register, who first espoused the repeal of the compulsory license provision, reversed himself and supported its retention, with the statutory rate being increased from 2 to 3 cents.

This business, by the way, of 2 and 3 cents, is, I want to say again, a semantic trap, but I am sick of the word "semantic." I suppose it is an etymological trap.

At any rate, it is not 2 cents. It is not 3 cents. On no record is just 2 cents paid. If it is a single record, it has two sides, 4 cents is paid. We pay 2 cents per part, whatever is used of the music, and it is very deceptive constantly to speak about 2 cents and 3 cents. It really is an increase ratio which is quite different, but I can only explain it to you by saying that there is no record that has only one piece of music. on it, excepting classical music, of course, where you have a full symphony.

Otherwise, you do not pay for one piece. You pay for at least two pieces, so the reference to "2 cents" is silly terminology, I think.

At the hearing held in New York in August of 1964, the Register did not state that he had conducted an economic study to ascertain if the increase was warranted and what the effect would be. He merely said that he was presented with the 3-cent rate figure by a committee, which included record company representatives, and he "assumed that it had some economic validity."

He was informed that there had been no agreement between publishers and record companies on an increase in the statutory rate. Indeed, no possibility exists for record companies to compromise on this issue.

The statement in the Register's report that the 3-cent rate was "part of the compromise proposal by the subcommittee of the American Bar Association Committee 304" is also completely misleading, since the proposal is just a unilateral one supported by publishers' representatives only.

Member companies of RIAA are certainly all against this increase, and against any compromise on the 2-cent rate question. On the contrary, the Glover report, which you have just seen, dramatically shows the need for a reduction of the 2-cent rate.

When the Register learned to his surprise that he was given erroneous information about the alleged compromise, he reserved the right to retreat to his initial position favoring repeal of the compulsory license provision.

However, as his supplementary report states, he found it unwise to do so.

Not only were record companies against the repeal, but so were many publishers and writers who recognized the benefits which they have received from this provision through the years.

Thus, he was left solely with an economic issue, and his proposal, strictly monetary in nature, was apparently made by him without a separate economic study on his part.

Such a study obviously had to be made, and, as you have heard from Professor Glover, the factual results of this study convincingly show that there is no justification for an increase.

Now, in his report, the Register justifies his increase not on economic grounds, but on the fact that the 3-cent rate would only operate as a ceiling, and that a lower rate can be negotiated, since "the vast majority of recording licenses in the United States have been negotiated."

Here, too, the Register's position is untenable. He is apparently unaware of present practices.

Although the compulsory license procedure is rarely used, this does not mean that "negotiated licenses" are entered into. In practice, and I think you have just been told this, the terms of the statute are rewritten by the Harry Fox office in its representation of approximately 70 percent of all music publishers. His license is automatically submitted to record companies, and 2 cents is the amount paid the great majority of times.

Columbia submitted its actual 1965 licenses to Professor Glover and his colleagues. After study of these licenses, and comparable information from other record companies, it became apparent that the notion that the statutory rate is a ceiling is quite false.

Gentlemen, if you agree to increase the present 2-cent rate, history shows that you are not raising a ceiling, you are legislating, without any justification whatsoever, a new actual rate which will not only seriously adversely affect record manufacturers, distributors, and dealers, but also the public.

Record companies cannot afford to absorb the increase in copyright royalties. To keep the economics viable, they would either be forced to raise the price of the record, or reduce the number of compositions on a $3.98 record from 12 to 8. Clearly, in either case, it would be the millions of record purchasers who would suffer.

If, on the other hand, a price increase could not effectively be passed along because of marketplace factors, then obviously the resultant profit squeeze would mean that many of the cultural and experimental projects which invariably lose money, but which are nevertheless presently subsidized by record companies from other revenues, would have to be dropped.

First and foremost would be the recording of classical music. Already, a number of companies have had to stop making recordings in this area because they could not afford to continue to make such recordings.

Columbia records almost 100 classical records a year. Relatively few of them are profitable.

For example, in 1953 we introduced a modern American music series, making available to the public recordings of contemporary American composers, and while, in 1964, the publishers of "Who's Who in America" honored Columbia's efforts on behalf of 20th-century music by awarding the company a special citation of significant contribution to society, this was, by no means, reflected on the profit side of the ledger.

Spoken word recordings have also been largely subsidized by revenues from more commercial ventures. In exploring the possibility of presenting history in word and picture as well as music, we intro

duced in our Legacy collection a number of combination book and record sets depicting "The American Revolution," "The Union," "The Confederacy," "The Badmen," which recreated the West in songs, pictures, stories, and first-person accounts, and, most recently, a history of Mexico in the light of its artistic development.

These deluxe sets are well received by educators and historians, but, unfortunately, do not usually return the investment made in such sizable undertakings. Therefore, the continuation of such recordings would also be threatened, since the proposed increase would seriously reduce the moneys available from other sources.

And I would like to tell this committee that I came into this business 25 years ago, as a recording director of so-called classical music, and that I think I was instrumental in building the very large Columbia classical music list. At all times I found it necessary, throughout these years-and we have done a good many experimental things, and a good many things that have not been profitable-and at all times, my theory was that these experiments were valid for the company because I covered them by doing things that did bring in

money.

And I didn't consider this too great a sacrifice. But this was the method, also, of doing the sort of things that I felt that our company had a responsibility in doing. And we continue on that plan, and I am sure that most record companies do.

In the last few years, we have felt it important to preserve for future generations in permanent form not only the classics, but also the works of our great modern dramatists, as performed by the foremost actors of our time.

In 1963, we recorded Edward Albee's prizewinning drama, "Who's Afraid of Virginia Woolf," as performed by the original Broadway cast. We continued with the famed Actors Studio Theater revival of "Strange Interlude," first in a series of projected recordings to encompass the entire works of Eugene O'Neill. We have since recorded O'Neill's "Hughie," with Jason Robards, which first came to Broadway last year.

Our original cast recordings of "Hamlet" starring Richard Burton, "Dylan," starring Alec Guinness, the Pulitzer Prize winning "The Subject Was Roses," and the acclaimed off-Broadway versions of "Brecht On Brecht" and "In White America," have all enriched our culture but not, usually, our pocketbooks.

So have our ventures into political and historical recorded productions, such as Edward R. Murrow's famous documentary series, "I Can Hear It Now," which preserves for posterity the voices and speeches of Churchill, Roosevelt, Eisenhower, and other great leaders, the eyewitness accounts of our first venture into space, and the recent special two-record set embodying the voice of Eleanor Roosevelt telling us of her life with F.D.R.

We plan to release a new major work in the fall on President Kennedy, which includes, on records, personal reminiscences of Mrs. Rose Kennedy, Senator Robert Kennedy, and Adlai Stevenson, among many others.

I have detailed some of our contributions only to show you what is at stake here. The issue before you so seriously jeopardizes the finances of record companies that the survival of some companies

would be in question, and clearly the cultural documents that a number of us attempt to produce would have to be seriously curtailed or eliminated.

I know that it is surprising for you to hear that such extreme consequences would stem from what appears to be only a 1-cent increase, but multiply this penny by the hundred million long-playing records produced each year, and then again by 12, since these records contain 12 compositions each, and then consider, in addition, that more than 100 million single records are produced each year, and you get a better idea of the enormity of the issue before you.

I sincerely urge the committee the adopt the amendment to section 113 (c) of the bill, previously introduced by Judge Arnold, which deals fairly with all parties concerned.

Mr. KASTENMEIER. Thank you, Mr. Lieberson.

I understand, then, that you do not only want the language of the copyright law as it is, affecting this, but you would actually care to repeal the compulsory licensing feature of the law. Is that correct? Mr. LIEBERSON. Oh, no. No, that was not my point at all. Mr. KASTENMEIER. I am glad to have that straightened out.

The reason I mention that is that I thought there was some reference to the study suggesting that the compulsory license feature was not entirely satisfactory.

Mr. ARNOLD. May I correct your impression?

That study is in favor of the compulsory licensing feature and it was made to dissuade the Register from abandoning the compulsory license feature, and it is a very thorough study, and it did persuade him, and the compulsory licensing, thank God, is now in the bill. Mr. KASTENMEIER. Thank you.

Mr. DAVIS. We are in favor of the compulsory license provision, and also the retention of the 2-cent rate, but as the amendment will show, we are agreeable to inserting into the statute a provision which will set a rate based on playing time, at a quarter of 1 cent per minute.

Mr. KASTENMEIER. For the reporter, would you identify yourself? You are Mr. Davis?

Mr. DAVIS. Correct. I am counsel for Columbia Records.

Mr. LIEBERSON. If I could just say a word on that, on this last point, the record industry, voluntarily, set up a payment on a time basis at the introduction of longplaying records. The record industry would have had every right, I believe, to say that this is one piece. I am now speaking again of classical music, and we would have paid 2 cents for it. That is the statutory rate. We did not do that. We voluntarily worked out a system, I can't remember what it is, of payment based on the playing time.

I am told it is a quarter of a cent a minute.

Mr. KASTENMEIER. Do I understand, Judge Arnold, that you presented this amendment?

Mr. ARNOLD. That will be presented.

Mr. LIEBERSON. I am sorry.

Mr. KASTEN MEIER. Mr. Lieberson, you refer on page 3 to the effect of the increase as to give, in one case, 24 cents up to 36 cents, for publishers, saying that the publishers are not necessarily doing any more than they did in 1909, as copyright proprietors.

The payments that go to the Harry Fox agency subsequently go to whom?

Mr. LIEBERSON. They go to publishers.

Mr. KASTENMEIER. To publishers, for the most part, and not to individual composers?

Mr. LIEBERSON. No, but the publisher is obliged to then make a distribution of his money, and that depends on whatever deal he has with the authors and the songwriters.

Mr. KASTENMEIER. Yes. I think there was some testimony that it was normally 50-50.

Mr. LIEBERSON. Yes, I think it is.

Mr. KASTENMEIER. In any event, the distribution system, in terms of the legal entitlement, would be different from any similar arrangement with the performance societies?

Mr. LIEBERSON. Yes. The performance society is not involved in this collection.

Mr. KASTENMEIER. I realize that.

Mr. LIEBERSON. I am sorry.

Mr. KASTEN MEIER. But your implicit objection here is that the publishers are getting some of this money.

Mr. LIEBERSON. I think the point I was making there was that in judging the difference between 1909 and the present day, and we don't have to go back that far, the change in our business has been so profound that the publisher is less and less an active part of it, and the recording companies are now doing a great deal of the work in, let me say, the propagandizing, if that is the right word, of popular music, a role which was played in the past by the publishers, and paid for by the publishers.

I think I am correct in saying that.

Mr. KASTENMEIER. I think what misled me in terms of

compulsory license was the sentence which said:

Record companies

your view on

And I am quoting you

knowing full well the financial condition of their industry, were puzzled and dismayed when in 1964 the Register, who first espoused repeal of the compulsory license provision, reversed himself, and supported its retention.

You were "puzzled and dismayed."

Mr. LIEBERSON. Yes, that is perhaps badly put.

What page are you on?

Mr. KASTENMEIER. Page 3, the lower part of the page.

Mr. LIEBERSON. You have to continue with the same sentence.

Mr. KASTENMEIER (reading):

*** with the statutory rate being increased from 2 cents to 3 cents.

Mr. LIEBERSON. Yes, we were dismayed at the whole concept of the economic increase.

I am afraid that is perhaps not clearly put, but that was the idea. Mr. KASTENMEIER. Speaking for the industry, Mr. Lieberson, what percentage of your records are sold to or consumed by, sold to the jukebox industry, the music operators, in this country?