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should not encompass and be liable for copyright payments particularly where they only carry broadcast signals from local television stations. It is not my intention in this letter to argue this point further beyond noting it and pointing out that inevitably these added costs for copyright will have to be absorbed by the cable subscriber. Thus, we will contribute to a situation where the viewer who subscribes to cable, very often as a matter of necessity, will pay more for "free" overthe-air signals simply because the over-the-air operations cannot deliver to him an acceptable service in either diversity or quality. It may well be that such fees should be paid by the broadcast stations themselves in return for their enlarged audiences.
However, the cable industry has advanced beyond these thoughts and my basic purpose in writing at this time is to bring to the attention of you and the other members of your committee the extent of the very heavy burden already placed on cable by various government regulatory bodies and to ask that you bear these amounts in mind in setting the levels for copyright fees under S. 1361. For instance, our company, Sterling Manhattan Cable Television, already pays the equivalent of 15% of its gross subscriber revenues as a result of governmental regulations. New York City charges a fee of 5% of subscriber revenues while the State has recently added an additional fee of 1%. The FCC, as you know, requires a payment of $0.30 per subscriber and New York State regulation authorizes payment of a fee to landlords in principle and past practice has led to an average of an additional 2.3% for that purpose. In addition to our franchise fee, we are required to pay a business real estate tax that amounts to another 7% and additional amounts to both the city and state as business income taxes regardless of our overall profit and loss.
Your proposed bill does establish a graduated scale for the copyright fees. But, in fact, a company of the size of Sterling Manhattan, which grosses approximately $5 million a year in subscriber fees, will not be substantially aided by the proivsions in S. 1361 for payments at 1% and 2%. Its practical rate of payment will be the maximum of 5%. This means that the copyright payment on the approximately $5 million revenue we receive a year will amount to an additional $250,000 annually. Thus, our company will be paying a total of approximately $1 million or 22% of our subscriber income off the “top" of our revenue before we begin meeting our own expenses, much less obtaining a profit.
Senator, you and your associates will recognize that it is extremely difficult to operate a successful business on this basis. In fact, Sterling Manhattan Cable Television has been operating at a substantial loss since its inception in 1965. It has accumulated losses of over $17 million. In its last fiscal year, it lost some $5 million on operations and another $5 million in a write-off of capital assets.
Our company has been engaged in cable television because of our faith in the future of the industry and it is our intent to continue to develop the southern Manhattan franchise. But at the same time, I am compelled to suggest to your committee that the mounting burdens placed on this industry by government regulation will greatly handicap our continued development in Manhattan and will certainly act as a general deterrent to development of cable television in the more densely populated areas of the country. That depressing effect on the future of cable may be exactly the goal that vested interests in the media are seeking. But I would note that the development of cable in this country has been recognized as a matter of public interest by most members of the Congress and declared officially a goal of public policy by the Federal Communications Commission.
Thus, I ask that you review carefully the schedule of payments listed in the bill before your committee. I earnestly urge you to reduce the levels now contemplated to a maximum of three percent. Under no circumstances could we possibly conceive of a revision upward as will probably be suggested by some of the witnesses who will appear at your hearings.
I am of course prepared to respond to any questions you or your associates may have in regard to the matters covered in this letter. Sincerely yours,
BARRY ZORTHIAN, Chairman of the Board, Sterling Communications, Inc.
New York, N.Y., August 9, 1973. Re: S. 1361 Hon. JOHN MCCLELLAN, Chairman, Senate Subcommittee on Patents, Trademarks, U.S. Senate, Russell
Senate Office Building, Washington, D.O. DEAR SEI ATOR MCCLELLAN: I have followed with great interest your recent hearings on S. 1361. Because I believe that the resolution of this issue will have a profound effect on whether or not the concept of broadband communications and community CATV expression reaches their full potential, I have decided to write you stating my views on behalf of TelePrompTer.
First, let me begin by stating that Teleprompter is in favor of an omnibus statutory copyright provision which would impose reasonable copyright fees on operating CATV systems. We are in favor of passage of S. 1361 if provision is made for compulsory licensing of CATV systems for carriage of broadcast signals, in accordance with FCC rules and regulations, and if there is a statutory system of fees of the nature set forth in the statute. However, in view of the comprehensive nature of FCC regulation in this area, the regulatory features contained in Section all of S. 1361 can and should be deleted.
S. 1361 currently contains a formula of statutory fees based on a sliding scale ranging from 1 to 5%. Subject to periodic review of this formula, we note at the outset that such a level is on the high side and imposes substantial economic burdens on CATV development. Illustrative of the severe impact of the proposed fee schedule of TelePrompTer is the fact that the copyright payments due for the first six months of 1973 would have amounted to approximately 17% of TelePrompTer's after tax CATV income for that period.
As you know, TelePrompter is the leader and innovator in what is now the CATV industry but what has promise of becoming a new "broadband communications" industry serving all parts of the country, both rural and urban. Since the industry is heavily capital-intensive and since TelePrompter and the rest of the industry are financed in large part by the public equity market, an impact on income of the magnitude that the proposed fee schedule of S. 1361 would impose would have a highly leveraged, adverse effect on TelePrompTer's ability to finance its future plans. As a result, TelePrompTer would not be able to finance and build systems, and deliver on the promise of broadband and community-oriented communications, as it is now in the process of doing. Although I most definitely agree in principle that a comprehensive bill containing a sliding fee schedule is just and should be implemented, I respectfully submit that a fee schedule at least 50% lower than that presently contemplated by S. 1361 would be just and appropriate. Very truly yours,
WILLIAM J. BRESNAN, President.
Washington, D.O., July 31, 1973.
ing, U.S. Senate. DEAR MR. CHAIRMAN : Thank you for giving me the opportunity to present my views with respect to certain aspects of S. 1361, a revision of the Copyright Law, title 17 of the U.S. Code.
I am pleased to submit for inclusion in the hearing record some brief comments on certain provisions in the bill which are of substantial interest to me. Sincerely,
JOAN V. TUNNEY.
STATEMENT BY SENATOR JOHN TUNNEY Mr. Chairman: I welcome these additional hearings because : hopefully they will bring us closer to the enactment of the copyright revision bill. The decades since the enactment of the Copyright Act of 1909 have seen the invention of radio, television, cable television, and many other new technologies which have radi.
cally enlarged the range of communications. These new inventions have led not only to obsolescence of the old technologies of communicating literary and artistic works to the public, but have also greatly increased the complexity of the economic forces which guide the production and consumption of such works. One basic goal of the copyright law, however, remains unchanged: To encourage the creation of literary and artistic works by providing financial reward to those who create them.
Copyright is a concern to all the inhabitants of the United States, but it is of particular importance to the people of California. Most programs are produced there and constitute the lifeblood of motion picture theatres, television stations, and cable systems throughout the nation. Copyright protection is an important incentive to the production of motion pictures. I have watched with great concern the shaping of copyright law revision dealing with the protection of copyrighted works when they are retransmitted from broadcasts by cable systems for profit without the consent of their copyright owners and without payment to the creators of these works. Let me add that this concern is shared not only by the producers of motion pictures and other producers of copyrighted television programs, but by the actors, writers, directors, composers and by all the members of the various crafts and trades which contribute to the production of these programs. These talents and workers do not hold copyrights of their own. They must necessarily look in part to the copyright fees collected by the producers for their own compensation, be it by way of initial payment or, under union agreements, as residuals based on the use and reuse of these programs on television. It is obvious, therefore, that if the producer collects nothing or little for the use of the program, those who contribute to the production are also deprived of fair compensation.
I do not have to dwell here on the financial difficulties encountered by many of the producers of motion pictures in my state. Nor would it appear necessary to mention details regarding the severe unemployment which exists in the motion picture industry.
Also of enormous importance to my state and the nation is the cable industry. While still in the development stages, predictions are that within the instant decade cable television may supersede broadcast television to the extent of sixty percent or more. While I do recognize that many cable stations have realized little or no profit as yet, to date even those cable systems which are in the black have not made any contribution to the cost of producing the films and tapes contained in the broadcasts whose signals the cable systems retransmit to their subscribers. A recent decision of the Second Circuit, now on appeal to the Supreme Court, mandates the principle of copyright payments for retransmission of films and tapes. I also understand that the principle of copyright payments was included in a Consensus Agreement entered into last year between the CATV and motion picture industries. The Consensus Agreement specifically provides for arbitration of royalties in the event that the parties should be unable to agree on the amount of the payments in time for inclusion into the copyright bill.
As the situation has evolved, cable operators and copyright owners have not been able to agree to a fixed fee and they have not arbitrated what the appropriate royalty should be. S. 1361 provides, in section III (d) (2), for a graduated system of fixed royalties which the copyright owners say are too low and the cable industry say are too high but acceptable. It is a fair and reasonable royalty rate under the compulsory license, but a wiser course for the Subcommittee to follow would be to provide for an independent rate-setting agency such as the Copyright Royalty Tribunal in the Library of Congress, the creation of which is already foreseen by the bill S. 1361 for the purpose of adjusting copyright rates.
There is ample precedent that similar responsibilities of the Congress in setting rates have been delegated appropriately and successfully to independent ratesetting agencies who proceed to fact-finding, hear economic evidence and then prepare or approve schedules submitted by the parties. This road has been followed both on the national and state level. Air fares are set by the Civil Aeronautics Board, railroad rates are approved by the Interstate Commerce Commission both for passenger and freight transportation, telephone rates are subject to approval hy the Federal Communication; gas and electric power rates are approved by public utility commission. What all these rate-setting procedures have in common is that they involve complex facts and economic impact considerations which would make it too burdensome for the Congress to devote the time and staff efforts necessary to do justice to the parties concerned as well as to the public.
It seems to me that this principle is acknowledged by Sections 801 and 802 of the bill S. 1361 which provide for a readjustment of the royalty rates in periodic intervals. Surely, if the Congress has the power to delegate to the Tribunal the readjustment of the fees, it should have equal power to entrust this Tribunal with the setting of the rates from the outset.
Without such careful investigation which only a body having the time and expertise to weigh the facts and economic arguments before it can afford, the rates assessed may be either too high too low. If they are too low, they would do unjustifiable harm to the program producing industry. If they are too high, they would be doing unnecessary damage to the cable industry.
The creative segment of our society has always enjoyed the special care and solicitude of the Congress because their talents and skills constitute a national treasure which would be dissipated only at the peril of reducing the vitality and quality of our cultural life. I, therefore, urge that very careful consideration be given to the need for adequate compensation of all those who create copyrighted works, and that where payments by cable systems are concerned, the best method to achieve this result will be to entrust the Copyright Royalty Tribunal in the Library of Congress or a similar Tribunal with the difficult task of setting rates from the outset.
COWAN, LIEBOWITZ & LATMAN, P. C.,
New York, N.Y., August 7, 1973. THOMAS C. BRENNAN, Esq., Chief Counsel, Subcommittee on Patents, Trademarks and Copyrights, Russell
Office Building, Washington, D.C. DEAR MR. BRENNAN: At the hearing held on July 31, 1973 in connection with the revision of the Copyright Law a point a rose on which we would specifically like to comment for the record on behalf of our client, The William & Wilkins Company.
Both Sen. McClellan and Sen. Burdick expressed concern as to how a copyright licensing program in the area of library photocopying could work without undue administrative headaches. The Williams & Wilkins plan is one solution to the problem. It works as follows:
Individual subscribers are charged the basic rate ranging from $10 to $60 and averaging $30. Local libraries would be charged an institutional rate which would be the basic rate plus a photocopying license fee. This photocopying fee ranges from $1 to $10 above the basic rate, depending on the size of the journal and its vulnerability to photocopying, and averages $3.65. This fee would be paid at the time the subscription was ordered or renewed and would permit the library to make within the library single copies of articles for its normal patrons. It should be noted that this is not an annual fee. It is paid once and lasts for the 56 year life of the copyright of each volume. If a library states that it does not photocopy, the $3.65 will be refunded. If the library does not have a work to photocopy, it can order a photocopy from one of some 500 lending libraries in the inter-library loan complex which would have a broader blanket license to photocopy, for a rate which would be up to twice the institutional rate.
Thus, this plan requires no bookkeeping. If a student in North Dakota wanted a copy of an article published in a Williams & Wilkins journal he would have no trouble in obtaining it. The library may charge him its expenses, as some do now, for obtaining the copy and might choose or not to add a few cents extra to help defray the cost of the subscription.
This simple plan is not presently in effect because the library community refuses to consider it until the Williams Wilkins case is decided by the Court of Claims. Other publishers have not proposed licensing plans because of the hostile reaction to the Williams & Wilkins proposal. However, if the Court decides in Williams & Wilkins favor, fair use in this area will have been defined and publishers and the libraries can easily work out satisfactory licensing arrangements. After all, if a way could be found to collect music royalties from every bar and grill in the United States this relatively simpler problem can, we are sure, also be resolved. Very truly yours,
ARTHUR J. GREENBAUM.
Stamford, Conn., August 9, 1973.
marks and Copyrights, U.S. Senate, Washington, D.C.
Xerox copiers do have a counter to count the number of photocopies made. However, Xerox copiers do not have now—nor do we foresee the future technology having—the capability to discriminate automatically so as to classify copies made of works now in print in terms of source or of copyright status.
I would appreciate it if you would accept this letter as part of the record in order to clarify the situation insofar as Xerox Corporation is concerned.
In addition, I would like the letter to you of November 30, 1972 from C. Peter McColough, Chairman, Xerox Corporation, (a copy of which is enclosed for your ready reference) be made part of the record. I conclude by reiterating the last paragraph of the letter from Xerox' chief executive:
"Today, with a greater sense of urgency, we encourage you and the Subcommittee in your efforts for enactment of copyright revision by the 93rd Congress.” Sincerely,
ROBERT L. SHAFTER,
Stamford, Conn., November 30, 1972.
marks and Copyrights, U.S. Senate, Washington, D.C.
Xerox Corporation recommends the expeditious enactment of the pending general copyright revision since the bill, as a whole, is a sufficiently substantial advance over the present law-dating from 1909—to warrant prompt and favorable action by the Senate.
We also commend the voluntary efforts, albeit unsuccessful, of several publishing and library representatives for a detailed consensus on library photocopying. But we do not propose any changes in connection with the bill. Of course, if re. vision hearings are held by the Senate or the House, Xerox may request the opportunity to submit a statement.
We believe that statutory improvements, even those that may reflect pragmatic compromises, continue to be the necessary next step towards resolution of the challenging copyright problems surrounding the generation and prompt dissemination of information. In 1965, Xerox wrote the House Judiciary Committee : "We view with a sense of urgency the need to provide (copyright) legislation that is meaningful and effective ... the protection of legitimate rights of authors is vital to the dissemination and exchange of information ... sound copyright legislation is indispensable to the enrichment of our society ..."
Today, with a greater sense of urgency, we encourage you and the Subcommittee in your efforts for enactment of copyright revision by the 93rd Congress. Sincerely,
C. PETER MCCOLOUGH,
New YORK, N.Y., August 8, 1973.
and Copyrights, Senate Office Building, Washington, D.C.