Mr. TENZER. And you overproduced, and you made a mistake. Mr. LIVINGSTON. And we will always overproduce a hit, or if we don't, we wouldn't meet our full demand.

Mr. TENZER. Other business people also exercise judgment sometimes, and have an inventory left over.

Mr. LIVINGSTON. True, but that is a day-to-day situation with us. Mr. KASTEN MEIER. I am sorry. We could go on at great length, I am sure, in this dialog.

Mr. CARP. Mr. Chairman, may I speak a moment, please?

I am Robert Carp, for Capitol Records.

There may be some misunderstanding with respect to the answer that Mr. Livingston gave to Mr. Tenzer on this possible increase in the mechanicals, and the division of it among various performers. Therefore I request permission to file a supplemental statement with the committee.

Mr. KASTEN MEIER. Without objection, a supplemental statement on this subject will be accepted and made a part of the record.

(Subsequently the following supplemental statement was received from Mr. Alan W. Livingston, President of Capitol Records, Inc.:)

In the course of my testimony on June 10, 1965, before Subcommittee No. 3 of the House Judiciary Committee with respect to H.R. 4347, I strongly espoused the view that the existing copyright law is inequitable and that the proposed revision (H.R. 4347) does not cure that inequity. There is a grave inequity because under the existing copyright law, although publishers and composers are granted a performance copyright, phonograph records are played publicly for profit without any payment or compensation to the phonograph record company and the creative artists whose money and joint creative efforts were responsible for the making of the phonograph record. I suggested to the subcommittee that the new copyright law should give to the phonograph record manufacturer a copyright to cover the public performance of his record.

Mr. Tenzer asked if it might be desirable to increase the present mechanical license fee even higher than the increase suggested in H.R. 4347, in order to pay a portion of the increased "mechanical license fee" to the phonograph record manufacturer and to the performing artist who made the record.

Upon rereading my answer, I do not believe it was as complete as I desire it to be. I stand foursquare on the position of the phonograph industry that mechanical license fees should not be increased. I believe that the economic study presented by Professor Glover, of the Harvard Business School, amply proves the soundness of that position. But, to go further: the idea that mechanical license fees should be further increased in order that a portion of the increased portion should be paid back to the record manufacturer for the public performance for profit of his phonograph record is basically illogical. In effect, the phonograph record manufacturer would have to pay out a larger sum of money in order that a share of the increase would be repaid to him. And, even if some or all of the increased mechanical fees could be passed on in the form of higher prices to the record-buying public, that group would, in effect, be paying increased record prices so that the persons who play the records on the air for their profit could be relieved of bearing an expense that should be a part of their costs of doing business.

Basically, the question noted above appears to be based on the same misunderstanding as the oft-repeated jukebox proposal to increase the mechanical fee. It confuses what are fundamentally two different rights: (1) the right to make records; and (2) the right to obtain payment for public performance for profit of the performances embodied in the records.

I recommend that record manufacturers be given a statutory copyright that includes the exclusive right to the public performance of their copyrighted phonograph records and that they be entitled to collect, as a matter of law, performance fees from those who play such records for profit. This can be

accomplished by simply inserting the words "sound recording" on line 26, page 6, of the bill after the word "pantomimes," and striking subsection (a) of section 112 on page 9.

The method by which the fees are to be collected is not by increasing the mechanical license fees to be paid by manufacturers, but rather by the establishment of a "phonograph record manufacturers' performing society." Such an entity would collect performing fees and distribute them. There is ample precedent for this type of organization in the various performing societies that exist in the United States of America for writers and publishers of music under the present copyright law and for various societies in Great Britain and elsewhere which collect not only for writers and publishers, but also for record companies.

Once that performing right is created, the next matter for consideration would be what persons' performances would entitle them to a share of the sums paid.

As Professor Glover's testimony demonstrated, the record companies make important creative contributions to the production of an individual record. Thus, my recommendation would be that we follow the pattern set by the performing rights societies in the United States such as ASCAP and BMI which now collect for music publishers and writers. The record company would be the copyright proprietor. The record company would receive 50 percent of the performance fees for its creative contribution, and the other 50 percent of the performance fees would be divided among the other creative people involved.

In

It seems to me that, besides the creative contribution of the record company, the most important other creative elements are the vocalist, the musical arranger, and the conductor or lead musician. If they do not receive all of the remaining 50 percent, they certainly should have the lion's share. It may be that Congress, after hearing from the various creative elements in the record business, might find that other persons or groups merited participation. some cases the vocalist, arranger, and conductor would all participate, and in others only one might; as for example, where an arranger-conductor performed for an instrumental record. This would parallel the fact that some copyrighted songs involve only one person who writes both words and music, and in other cases as many as three or four writers make contributions to music and lyrics.

Mr. TENZER. You have been very helpful.

Mr. KASTEN MEIER. We would be very pleased to have this, and your name, sir, is Mr. Carp?

Mr. CARP. Yes.

Mr. KASTEN MEIER. Robert Carp.

We have one more witness to hear from, Mr. Ernest S. Meyers, and I think that, while the statement is brief, his testimony is quite important, so the committee will again, I regret to announce, be required to recess briefly.

About 15 minutes from now, at 25 to 4, we will attempt to reconvene, and hear from our last witness today, so the subcommittee will stand adjourned until 3:35.

(A recess was taken until 3:35 p.m.)

Mr. KASTENMEIER. The committee will come to order.

At the request of Judge Arnold, Professor Glover may respond to a request put to him during the recess.

Mr. GLOVER. Mr. Fuchs, would you place the question again perhaps for the record and to refresh my mind?

Mr. FUCHS. Yes. I wonder to what extent your study was made with awareness of a study prepared by Catherine Corry, of the Legislative Reference Service of the Library of Congress.

Mr. GLOVER. I have a copy here before me of the report you refer to, Mr. Fuchs. This is a report entitled "The Phonograph Record Industry-An Economic Study" by Catherine Corry.

In answer to your question, Mr. Fuchs, we did not have this report before us when we presented the main body of our report. It did become available, however, after we had made this report, and we did have it in mind when we prepared the addendum to our report which we filed with you this morning, and the technical appendix, and a number of references are made specifically to this in the technical appendix.

Mr. FUCHS. You cited the study?

Mr. GLOVER. Yes, sir.

Mr. FUCHS. Do you agree generally with the conclusions of the study?

Mr. GLOVER. It is an excellent study; very diligent, very workmanlike, thorough, on the whole very objective. There are some specific figures and an occasional point of view with which we would not have 100-percent agreement, but this is an excellent report. Yes, sir. Mr. FUCHS. Thank you. I just wanted the record to show the extent to which the professor's study took this report into account.

Mr. KASTENMEIER. And now, the committee welcomes Mr. Ernest Meyers, who is general counsel for the Record Industry Association of America, and we ask Mr. Meyers to proceed.

STATEMENT OF ERNEST S. MEYERS, GENERAL COUNSEL, RECORD INDUSTRY ASSOCIATION OF AMERICA

Mr. MEYERS. May it please the committee, I am a member of the District of Columbia and New York bars, and as the chairman stated, general counsel for the Record Industry Association of America, familiarly known as RIAA.

Since 1956 I have served on the Copyright Panel on the General Revision of the Copyright Law.

Speaking for myself and for the phonograph record industry, we wish to compliment Mr. Abraham Kaminstein, the Copyright Register, and his most able and talented colleagues, Miss Barbara Ringer and Messrs. Cary and Goldman, for their unbounded patience in their handling of the many controversial debates before the Copyright Panel on the scope of copyright revision and for their extraordinary dedication and devotion to the public interest which H.R. 4347 strives to serve.

I understand that during these hearings the suggestion has been advanced that the royalty which has been variously described as the mechanical royalty or the record manufacturer's royalty or the statutory license royalty, should be increased in lieu of repealing the exemption which the jukebox industry has enjoyed from the payment of performance royalties.

The mechanical royalty or the record manufacturers' royalty-or as it is sometimes called, the statutroy license royalty is provided for in section 1(e) of the current copyright law.

At the present time there is no copyright in records.

Section 113(c) (2) of H.R. 4347 retains the principles of the mechanical royalty. This is the royalty that is paid by the record manufacturer to the copyright proprietor, whether he is the composer or the publisher. It should not be confused with performance royalties. The copyright bill which is before you would repeal the exemption that the jukebox industry has enjoyed from paying performance royalties. This issue dealing with exemption has nothing to do with the record manufacturers. This is an issue that exists between the copyright proprietor and the user of music.

I submit that the suggested increase in the statutory royalty which is paid by the manfacturer to the copyright proprietor cannot be justifiably substituted for the payment of performance royalties which is intended by the removal of the jukebox exemption.

The net result of this proposal-namely, to increase the mechanical royalties, which are now in section 1(e) of the current law-would be to burden the consumer and the record manufacturer with the amount of the increase in the manufacturer's royalty. The question of whether the copyright proprietor-the composer, or the publisher—is entitled to collect performance royalties from jukebox operators would still remain unanswered.

This committee recognized the distinction between the manufacturer's royalty—namely, that provided for in section 1(e) of the present law or section 113(c) (2) of the proposed law-and performance royalties in House Report No. 733, 88th Congrses 1st session, on H.R. 7194, stating:

The right to make recordings is and has always been distinct from the right of public performance for profit and serves a different purpose. It compensates the copyright owner for the embodiment of the music in phonograph records and tapes which may be sold to the public. The mechanical royalty becomes part of the cost of records, including records used for public performances for profit. It is not designed to compensate for public performance. All commercial performances using records, except only jukebox performances, already pay the mechanical royalty in addition to and apart from a royalty for the right of public performance.

In other words, while the manufacturer's royalty is paid on each record made, the compensation for performance is keyed to the popularity of the copyrighted composition and computed on the number of performances of the recorded composition.

Questions raised and statements made during these hearings seem to suggest that record companies produce some records expressly for use in jukeboxes. This is a misconception. It is just not so. Record manufacturers hope that each record released will find general acceptance for all purposes and particularly in the home which is the principal market for all records. Jukebox operators select for their use only such records as they believe will be played frequently, and it often happens that a record will be on the market for several weeks before it is purchased by a jukebox operator. Jukebox operators buy only a small percentage of all records released, and there is no possible means by which anyone can foretell which records they will purchase and which records they will not purchase.

The suggestion that the record manufacturing industry might serve as the collecting instrumentality through which additional royalties-

whether "mechanical" royalties or "performance" royalties-would flow from the jukebox operator to the copyright proprietor would necessarily make a record manufacturer a policeman and a guarantor of royalties for the holders of copyrights on records played in coinoperated machines.

In my opinion, these obligations would be unreasonable and unworkable. The record manufacturer does not know whether his records will be played in jukeboxes. Jukebox operators buy records from a variety of sources-retailers, distributors, jobbers, and the so-called "one-stop" retail outlet.

They do not buy records from the record manufacturer. The distributor and the retailer, in turn, do not know in advance which records may be sold and to whom records may be sold. As a practical matter there are no known mechanics by which the record industry is able to identify with any degree of accuracy the specific ultimate purchasers of its products.

This committee several years ago considered a proposal which would have required the record manufacturer to put a different or specially colored label on records intended for sale to and use by jukebox operators (hearings on H.R. 5473, 82d Cong., 2d sess., serial No. 11, pt. 2).

It soon became established at those hearings that such a requirement was fundamentally and economically unsound, principally because it would require duplicate facilities for the manufacture of the same records and would seriously burden the wholesale and retail distribution of records because of the onerous requirement of maintaining two inventories of the same record.

The matter of public taste in music is the great risk involved in the record business. It is impossible to identify a hit record in advance of exposure to the public and consequently, as you heard today, the record business becomes largely a business of trial and error.

Obviously, therefore, unsalable inventory represents a more than ordinary hazard in the record business, and if this risk is doubled through the necessity of supplying with a different label or some other distinguishing mark a quantity of each record release, then the burden becomes intolerable. The business is risky enough without adding these further hazards.

It must be emphasized that the overwhelming number of record releases are not played on jukeboxes. Jukebox operators, at most, purchase only a relatively small number of copies of a particular record. I was not present yesterday, but I understand from the testimony that was adduced that a witness stated that the jukebox operators purchased in the neighborhood of 55 million records a year.

I also recall having heard testified at the opening of these hearings that there are some 500,000 jukeboxes in the United States.

I would come to the conclusion, then, that the jukebox operator buys 100 records a year per machine. If the machine handles 100 records, then presumably there is very little turnover; if the machine handles 45 or 50 records, then he may double his turnover.

The suggestion has been advanced that the mechanical royalty be increased by a penny or more to compensate the copyright proprietor for the lack of performance royalties from the jukebox operator, which