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quires separate treatment in the cable section of the copyright bill, and have devoted our comments principally to this area.
As the cable television industry has recognized from the very outset music does not present the licensing problems that exist with respect to other forms of copyright material. Music does not pose questions of exclusive rights, nor are music interests desirous of limiting the importation of remote signals or of giving anyone an advantage over any competitor. Unlike other works, music is licensed in bulk ; there are no problems of innumerable negotiations for separate licenses for each work or each use. Even the problem of price is solved by the opportunity, if there are any disputes as to rates, to resort to a Federal Court as in the case of ASCAP, or to arbitration in the case of the other licensing organizations.
We urge that there is no necessity for a compulsory license for musical works if those works are available on the following basis :
(1) The works are part of a total repertory made available to cable television under a single agreement without the requirement of separate negotiations for individual works or individual uses;
(2) The works are available on a non-exclusive basis on fair and non-discriminatory terms;
(3) The agreement makes the works available for a substantial period of time;
(4) In the event of dispute as to the reasonableness of the rates quoted, the rates can be determined by resort to a United States District Court or to arbitration.
(5) Provision is made for payment to the licensor for distribution to the parties entitled to the amounts collected so as to avoid any disputes between the licensee and individual copyright owners.
To the extent that these provisions are met by an organization licensing musical works to cable television, the reasons for statutory regulation disappear.
Section 111 could be framed so as to exempt musical works from a compulsory license if they are voluntarily made available on the foregoing basis; or it could specifically require that all musical works be licensed to CATV for retransmission on the foregoing basis. If a work does not meet these requirements, it could, of course, be made subject to a compulsory license on the same basis as other material.
In its comments, ASCAP has also addressed briefly the other questions raised by your letter of December 15. In sum, we feel that for copyrighted material which is subject to statutory licensing, a formula based on the gross receipts from all sources would be best. And we believe that small systems should pay copyright fees. These systems are operated for profit, and they should pay some kind of fee, although, as is usual, the rates charged would take into account their economic position.
For many years now the three music licensing organizations have stood ready to license the cable television industry. There is no dispute between the parties, and the cable industry has long recognized its obligation to pay royalties for the use of music. The parties should now be given a green light to seek voluntary agreement. Sincerely yours,
STATEMENT OF HERMAN FINKELSTEIN, GENERAL COUNSEL, AMERICAN SOCIETY OF
COMPOSERS, AUTHORS AND PUBLISHERS TO THE U.S. SENATE SUBCOMMITTEE ON PATENTS, TRADEMARKS, AND COPYRIGHTS
(January 14, 1972) By letter of December 15, 1971, Thomas C. Brennan, Chief Counsel of the Senate Subcommittee on Patents, Trade Marks, and Copyrights, invited the American Society of Composers, Authors and Publishers (ASCAP) to submit its comments on the forthcoming modification of Section 111 of S. 644, a bill for the general revision of the copyright laws. The letter, after pointing out that the Subcommittee "has already made certain determinations concerning the basic nature of the cable television copyright provision,” requests comment on (1) the basis to be used in determining royalty rates; (2) the desirability of exemption on the basis of size: and (3) "whether any particular type of program material, such as music or professional and collegiate sports, requires separate treatment in the cable section of the copyright bill."
These comments on behalf of the 13,000 writer members and 4,000 publisher members of ASCAP will be devoted primarily to showing why music requires separate treatment.
Whereas other material used by CATV involves complicated problems of importation of distant signals, the protection of exclusive grants of rights, and the possibility of unfair competition between competing media—situations that required meetings among the CATV, broadcasting and motion picture interests to arrive at a compromise-music presents no such problems. In fact, no one representing musical interests was invited to attend those meetings although I made it clear to the parties on many occasions that I was prepared to attend if invited. The reason why music has not been a problem to CATV is that long before CATV came on the scene, the men and women who founded ASCAP in 1914 had devised a system for licensing the performance of musical works on a basis that insured complete access by all media on a non-exclusive basis without the necessity of separate negotiations for individual uses, and without any complicated records or accounting of uses. There is complete assurance in advance that the user will have access to all musical works from any source; there is an assurance that the amount paid will be distributed to the persons entitled to those sums; and there is an assurance that the price charged will be reasonable. In the case of ASCAP, as will be shown, any user, including CATV, may apply to the federal court for determination of a fair rate if the parties cannot agree.
Before commenting on the specific issues raised by Mr. Brennan's letter, I would like to describe ASCAP and the role it plays in the licensing of musical compositions in the l'nited States.
Under the ASCAP system, a single agreement licenses the non-dramatic performance of all the musical works in its repertory. Such licenses have been issued by ASCAP for many years to virtually all radio and television stations in the United States to perform any or all of its members' works.
In licensing the performance of musical works, it is customary to base the charge for a particular commercial user on the value of the music to that user in relation to the amount paid by the public to that user. Where several users benefit from a single performance, each pays in proportion to its receipts. For example, in a professional football game, music performed during half-time is viewed and heard by those in the stadium. At the same time, it may be carried by local radio and television stations in the city of one or both of the participating teams, and may even be broadcast on a national television network. It may also be retransmitted by one or more cable systems. At the present time, the professional football organization pays for the music used in entertaining the fans in the stadium during half-time; and the local stations, however small, and the national television network pay on the basis of the music's value to them in attracting audiences for their respective advertisers. The cable systems should pay on the basis of the value of the music to the particular CATV system. This will be discussed in more detail later.
l'nlike other copyrighted material for which separate negotiations are necessary, in the case of music the rates paid by the broadcasting industry are reached by negotiation of a single agreement between ASCAP and an association representing the industry or the entity or entities seeking its license. There is also a mechanism to ensure that ASCAP's rates are fair and reasonable. In 1950, ASCAP agreed that the public interest would be served by having a neutral body available to determine the reasonableness of ASCAP's rates for the use of its music. That policy was embodied in a Consent Decree entered into between the United States Government and ASCAP, providing that any user who questioned the reasonableness of ASCAP's rates could have the rates reviewed by a United States Court. Since then, the broadcasting industry has resorted to the Court on many occasions; and proceedings are, in fact, now pending between television networks and ASCAP and between wired music services and ASCAP to determine what is a reasonable rate. If in the future ASCAP and the cable television industry are unable to agree on reasonable rates, the industry can, like all other users, bring the dispute to the Court for its determination.
There are two other organizations in the United States for the licensing of non-dramatic performances of music. One is Broadcast Music, Inc. (BMI), which offers to submit any question of reasonableness to arbitration. The third and sinallest organization is SESAC, Inc., which is also willing to submit the reasonableness of its rates to arbitration. Thus, all the music used on radio and television is covered by the licenses of only three organizations. The same ease of licensing is now available to CATV.
ASCAP also provides a mechanism for the fair distribution among its members of the copyright royalties it collects. For most active music writers, their share in these royalties is their basic livelihood. The essential rules governing ASCAP's distribution process are prescribed by the Consent Decree entered into by the United States Government and ASCAP. Both BMI and SESAC also have distribution inechanisms.
None of the problems that S. 644's system of statutory licensing is designed to meet is present in the case of music. First, there is complete access to music by any cable system regardless of who else may be licensed in the same area. Compare music with motion pictures or other types of copyrighted material licensed on an individual basis. Unlike music, the latter material is licensed on an exclusive basis in a particular area. It will presumably be licensed to the highest bidder. If it is licensed to a particular television station in a market, it is not licensed to another station or to a cable system for origination at least for many years. Conversely, if it is licensed to a cable system, it will not be made available to a television station in the same market for many years. No one can perform a motion picture unless she has secured the original film from the producer or has access to a television broadcast. Musical compositions, on the other hand, are equally and immediately available to all television and radio stations and all cable systems. Recordings and sheet music may be bought in the open market by any station or CATV operator. One cannot preempt another's use of music; nor may one would-be user of music be bargained off against another to see which will pay the higher price.
Second, there is no problem of clearance. ASCAP receives from its members the authority to grant, on a non-exclusive basis, the right to perform their works publicly for profit in non-dramatic form. Once a cable system has an ASCAP license to retransmit ASCAP's music, it has full clearance to do so.
Third, there need be no fear that cable systems will have to pay an excessive amount to ASCAP for its license. As I have described, ASCAP has a system for licensing music that provides all who seek a license an opportunity to secure a judicial determination of the reasonableness of the proferred rate. This system has been in existence for more than twenty years and has proven its worth.
Fourth, there is no need to establish a statutory mechanism for the distribution of the royalties collected by ASCAP. It already has a sound and effective mechanism, one that is now embodied in a Consent Decree.
Music of the other two organizations is available on substantially the same basis.
There is no necessity for a statutory system of licensing music which is made available to cable systems under the foregoing conditions. A system of voluntary agreement is preferable to a statutory system if the necessary safeguards are present. It permits the parties in seeking agreement to take into account the conditions existing at the time of negotiation and the peculiar facts that apply to the particular works and uses which are then under consideration. A statutory rate, in contrast, can at best reflect only the conditions existing at the time the statute was enacted ; it cannot take into consideration the unique factors applicable to the works involved-that is, their general availability to cable, the basis on which they are made available to television stations and networks, and the many other factors that influence terms and price. These conditions can vary from time to time and in innumerable ways. With judicial determination or arbitration to resolve disputes as to price, there is full assurance that a party cannot misuse negotiations to refrain from agreement and that a fee or schedule of fees will ultimately be fixed.
The cable people recognize that there is no problem with music for which a statutory method of licensing is necessary.
ASCAP has offered to grant the industry a license to use its repertory without restriction as to the source of performance—that is, whether performances are originated by distant radio and television stations, are originated by local radio and television stations, are recorded on commercial phonograph records or motion pictures, or are originated by the cable television operator. There is no dispute between ASCAP and the cable industry with regard to access to its repertory and the opportunity to retransmit on cable any musical work in that repertory. Cable television operators have conceded that they should pay for the retransmission of copyrighted musical works, and ASCAP concedes that they should have an unlimited right to make such retransmissions.
Thus far we have been discussing television and CATV. There is another aspect of CATV which does not relate to other program material (such as motion pictures) and deals almost entirely with music. I refer to the retransmission of radio signals. The primary fare of radio, as I have indicated, is music, and most of it is performed by the playing of phonograph records. A cable operator may provide a music channel by playing phonograph records, much as a radio station does. If he does so, he will be acting as an originator and would require an ASCAP license in any event. A cable operator who instead establishes music channels by retransmitting radio stations that carry the kind of music he wants for his channels should not be permitted thereby to escape the same obligation to pay the same fair share of the amounts paid by the public for the enjoyment of copyrighted music that would be paid by the radio broadcaster.
In choosing the radio station to be picked up, CATV will select the stations playing the best music and having the smallest number of interruptions for commercial messages, if any. Unlike motion pictures, the smallest station can afford to play the best music. It is all available to it. If payment by CATV is not related to all sums received by the public, the author of the works used will be denied a fair return for his work.
We turn now to the question of "whether royalty rates should be determined by a single graduated formula of a percentage of the gross receipts paid by subscribers for the basic service of providing secondary transmissions, or whether the formula should provide a basic rate for carriage of local signals, with an additional charge related to the number of distant signals carried by a particular system.” To the extent that certain material may require compulsory licensing, the best formula would be one that provides for payment of a percentage of the gross receipts from all sources. ASCAP is mindful that a number of significant studies (for example, the report released in December, 1971 by the Sloan Commission on Cable Communications) have predicted that by the end of the 1970's, between 40 and 60 percent of the nation's television viewing population will be on the cable. If this is so, cable may acquire an importance now undreamed of, and sources of income attributable to the copyrighted material supplied by broadcasting which may be far greater than amounts receive from subscribers.
We turn now to the question of whether “it is desirable to exempt a commercial enterprise from the payment of copyright fees exclusively on the basis of size".
The November, 1971 “compromise" reached by the broadcasting industry, the cable industry, and certain copyright owners (as set forth in Broadcasting Magazine, November 8, 1971, pages 16-17) states that the parties support legislation that establishes "liability to copyright, including the obligation to respect valid exclusivity agreements. . .. for all CATV carriage of all radio and television broadcast signals except carriage by independently owned systems now in existence with fewer than 3,500 subscribers". Incidentally ASCAP first learned of this compromise from the trade press.
ASCAP feels that independently owned cable systems with less than 3,500 subscribers do not require an exemption. Small cable systems like large ones should pay reasonable fees for the use of copyrighted material. The rates will, of course, take their respective economic positions into consideration. There are many such systems in the l'nited States today. They serve an important function by making a full complement of television signals available to rural areas and to small towns that are poorly served by over-the-air television. But these small systems are also commercial enterprises that operate at a profit, and there is no warrant for asking in effect that copyright owners subsidize them. Small radio and television stations pay for the use of music. Music enhances the value of cable to subscribers, and all cable systems should pay a ratable portion of their receipts for the use of copyrighted music. If the rates are reasonable and all systems are treated in a non-discriminatory way, there can be no unfairness.
STATEMENT OF BROADCAST MUSIC, INC. (BMI) BEFORE THE SENATE JUDICIARY
COMMITTEE ON S. 1361
(August 1, 1973) BMI welcomes this opportunity to express its views concerning cable television. We have chosen to limit our comments to the licensing of copyrighted music, an area in which BMI, which represents the largest number of writers and publishers of any music performing rights licensing organization in the world, has been active over the last 33 years
It is BMI's position that the licensing of music should be treated differently from the licensing of copyrighted works which involve such problems as clearance and exclusivity, factors which are wholly absent from music licensing.
Among the points made herein are:
I. The reasons given by CATV operators for special copyright consideration have no application whatsoever to music licensing.
II. Direct negotiation between music licensing organizations and the cable industry will more efficiently assure availability of and fair payment for the use of music than any statutory regulation.
1. A method of licensing music which meets all of the problems of CATV operators has evolved throughout the world over the course of almost a century. To see how this system functions we should look at the position of the television broadcasting stations, the primary transmitters of the performances which the CATV operators wish to retransmit.
Broadcasters have contracts with three performing rights organizations : Broadcast Music, Inc. (BMI), The American Society of Composers, Authors and Publishers (ASCAP), and Sesac, Inc. These three organizations, through their contracts with many thousands of writers and publishers and with sister performing rights organizations throughout the world, make available to broadcasters the entire repertory to which access is desired by the broadcasting stations. Under these licenses, which run for terms of years, the station may perform any composition in these repertories at any time and by any method that the broadcaster desires-live, recorded, or embodied in films. Payments in accordance with the licenses are made to the organizations involved, which in turn make royalty distributions to their affiliated writers and publishers.
We stand ready to make similar licensing available on non-discriminatory terins to every operator of a CATV system. Let us see what the availability of such licenses does to the only reasons given by the CATV operators for special copyright treatment.
CATV bases its claim to special treatment upon problems of exclusivity, clearance, the restriction of licensing for competitive reasons and an unfounded fear that CATV systems may be required to pay unreasonable copyright fees. None of these problems exist in the field of musical performing rights, where the licensing organizations have eliminated every claim which has been raised by CATV operators. In addition, BMI and its competitors indemnify broadcasters against any copyright liability deriving from the use of their repertories and offer an established procedure for the distribution of royalties.
(a) Exclusivity is not a factor. The rights granted by BMI and its competitors to broadcasters and all other users of music are non-exclusive. Any number of users may simultaneously perform a musical work at the same time. This applies whether the music is live, recorded or filmed. It will clarify the point to consider a broadcaster who is interested in presenting a hit film, “Mary Poppins", to his viewers. He will be concerned, and rightly so, that his screening will be the only one in the region in his chosen time period. He will want assurances that his local competition will not be showing the same film, and that it will not be beamed in from some distant point. That same broadcaster, however, will face no such problems with the individual songs from "Mary Poppins". BMI licenses permit simultaneous performances of these tunes in any number of different outlets-radio, television, night clubs, via background music services and by other users-to the detriment of none. Therein lies a basic difference in the handling of these copyrighted properties.
(b) Clearance is not a factor. Virtually all of the 27,000 domestic users of BMI music have elected blanket licenses under which they can perform any number of compositions contained in the BMI repertory any number of times, at their discretion. Thus, the need to obtain permission or clearance for individual selections or uses is eliminated.
(c) BMI and the other performing rights organizations have no incentive to restrict the availability of their repertories to any CATV system. The sole function of BMI is to collect copyright fees from as many customers as possible and to distribute these fees to copyright proprietors.
(d) There no possibility that unreasonable fees will be exacted. BMI has repeatedly expressed its willingness to arbitrate the amount of its fees if nego