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I should have made that clear but did not. One of my colleagues called my attention to that during the lunch hour.
Mr. ROGERS. But are you not allowed to make a contract for more than 2 cents?
Mr. FINKELSTEIN. Yes, Congressman Rogers. The only thing is that any other record company could then reproduce the work on paying merely the 2 cents, so that the first manufacturer, of course, could not economically afford to do that kind of thing.
I should have thought of that this morning.
The second thing that I would like to try to make clear is that this bill as drawn would affect really the wholesale operator in this field, the man who owns a very large number of machines within the definition of the bill. For all practical purposes the tavern owner himself would be insulated against any liability, the responsibility resting only on those who own two or more machines, and in this field there are large operators who own anywhere from 50 machines upward. They would be the ones on whom the responsibility would rest.
Almost no tavern owner owns his own machine. They are leased out by the operators to the tavern owner on some basis of distribution between them, generally on an equal basis, 50-50 of whatever nickels are taken in.
So that any obligations imposed by the statute would be obligations resting on the operator who deals in a multiple number of machines. Mr. ROGERS. Generally that is the operation now, and you hope that will continue in the future, but there is nothing to keep the man from changing the operation tomorrow of selling machines to furnishing a service.
Mr. FINKELSTEIN. That is true. That is one of the risks we must run, authors, or anybody.
Mr. BRYSON. Those are practices indulged in by other agencies than jukeboxes, like shoe-repairing machinery and gasoline pumps.
Mr. FINKELSTEIN. There is a provision, Mr. Chairman, in this bill, that if it is used as a cloak or device to cover up the ownership or cover up participation in the receipts, then you would pierce that veil and go behind to the true ownership, and in that case you would be able to go to the operator who, in effect, controls the machines or controls the receipts.
I would like, if I may, just to give a summary of the reasons why it is felt H. R. 5473 should be enacted.
First, in 1909 when the present exemption was adopted it was impossible to foresee the development of the jukebox with the loudspeaker and something that was in fact a public performance, whereas in the penny arcade with the use of earphones there was a great deal of question as to whether that could have been a public performance
The second thing is that with the development of the field of mass communication the jukebox today is one of the largest users of music there is. Whatever the figures are, whether they are the minimum of $230,000,000-that seems to be the minimum-or the maximum estimate of $500,000,000, in between those two extremes it still is the largest industry that derives income solely from the use of copyrighted music.
Now, all other industries that do use music for public performances for profit do pay, and there seems to be no reason why the jukebox industry should be exempted merely because as a matter of history the art developed since 1909 and they can take advantage of the existing loophole in the 1909 law.
The bill that is now presented is one that takes into consideration the problem of the jukebox industry far more than any other bill previously introduced for outright repeal, because this bill does have a statutory measure of the value of the use which would apply in the absence of agreement between the parties, and any agreement that might be made would take into consideration that the value fixed here is 1 cent per week for each composition that is on the record and with the maximum number of records in any machine today-in any large machine except for that single machine that has 100 compositions or 50 records-the maximum statutory rate for all the compositions in the machine would be $26 a year.
Finally, to borrow from what was said in the recent report on H. R.. 3589, on the bill to give performing rights to poetry and to literary works other than dramatic works, this bill would bring the copyright law in accord with the progress that we have had since the 1909 law was enacted.
It would also bring our law in harmony with the law of other democratic nations.
Mr. HARRIS. Mr. Chairman, may I ask a question or two for the record?
Mr. BRYSON. Yes.
Mr. HARRIS. Mr. Finkelstein, how many performing right organizations or associations are there?
Mr. FINKELSTEIN. I think in the United States today there are only three. There is the organization that I represent; there is Broadcast Music, Inc.; and the third is called Sesac, Inc.
Mr. HARRIS. Are they all in favor of this bill?
Mr. FINKELSTEIN. I understand that Broadcast Music, Inc., is in favor of the bill, and a memorandum is being submitted to that effect by their general counsel.
I have not heard anything about Sesac.
Mr. HARRIS. Do you think a performance in a jukebox is a public performance?
Mr. FINKELSTEIN. I can see no question about that, because today with the loud-speaker anybody can hear that performance, not merely the person who drops in the nickel, but anybody on the premises can hear it, and that makes it just as much a public performance as in the case of Herbert v. Shanley Company where people sat around in the restaurant and listened to the artist singing Sweethearts, at that time. I think it is identical to that.
Mr. ROGERS. Would his cover one that is in my home? Suppose we have a couple of jukeboxes at home, as this is written it says the public reproduction or rendition of a musical composition by or upon a coinoperated machine.
Mr. FINKELSTEIN. Of course, Congressman Rogers, if you used that machine in your home you would be exempt.
Mr. ROGERS. If it is coin-operated?
Mr. FINKELSTEIN. Yes.
Mr. ROGERS. How would it be exempt?
Mr. FINKELSTEIN. As the bill is drawn, here is the language of the bill:
The obligation to pay royalties under this subsection as to reproductions or renditions specified in this subsection shall be limited to the owner, operator, and/or distributor of two or more such coin-operated machines and/or other persons having an interest in or relationship to such machine designed to control or obtain, directly or indirectly, participation in the receipts of the machine, except that this limitation shall not apply to any owner, operator, and/or distributor if a fee is charged for admission to the place where such reproduction or rendition occurs.
Now, in that case you, owning your own machine, would be exempt from liability.
Mr. ROGERS. Even though I may have clients in to entertain them, hoping that I may get a fee there?
Mr. FINKELSTEIN. Even though you require those clients to drop in nickels before they hear anything, that is correct; you would be exempt, and so would they.
Mr. ROGERS. I know of friends who have slot machines in their basement to pay their way.
Mr. HARRIS. Mr. Finkelstein, I take it you prefer outright repeal of this limitation?
Mr. FINKELSTEIN. I think we live in a practical world and we must be practical. I think outright repeal would create many problems. I think that in the world in which we live we must take into consideration the fact that the small tavern owner must be insulated against liability as far as possible.
If you had outright repeal, that would not be possible. He would be liable; he would be an infringer.
I think one of the merits of this bill-and I am very happy that the authors are willing to go along with it is that it does give protection to the small-business man and imposes liability on one who is a large owner of these machines, and who can afford to pay whatever is necessary.
Mr. HARRIS. Objections have been voiced to this bill on the ground that it would require an accounting system that would place an oppressive and unreasonable burden on the operators. How do you feel about it? Can we dispense with the monthly report?
Mr. FINKELSTEIN. I really do not think so at all, because you provide here that you give a special privilege really to this type of user. You say you shall have a privilege that no one else has-that is, except in the case of the manufacturer of the phonograph record, but no other commercial user for profit has-that the rate shall be determined by statute: but, if you want to pay the statutory rate rather than bargain about the use, there has to be some kind of enforcement.
Now, one of the earlier bills provided for these reports being made under oath, and I understand that there is some objection to swearing on the truth of the report made, and that provision was taken out. So, these statements are not required to be under oath, but at least one who has a number of machines, and these people who have anywhere from 50 up, should be required, if they are given the benefit
of this type of statute, with a rather nominal provision for royalty, to make a report and make payment, I think.
Otherwise, there would be no method of enforcement at all.
I was asked earlier if there was any provision for practical enforcement. I think that is it.
Mr. FORRESTER. They would have to keep those records?
Mr. FINKELSTEIN. They would have to.
Mr. FORRESTER. That is why I have been trying my best to get you to answer that question.
Mr. FINKELSTEIN. Yes; they would have to unless any other arrangement was made.
Mr. FORRESTER. Unless you had a blanket arrangement?
Mr. FINKELSTEIN. Yes.
Mr. FORRESTER. Now I want to talk about that blanket arrangement. Mr. FINKELSTEIN. I think, so long as we have our concepts of freedom of contract, if two people want to get together and make any kind of agreement that is not against public policy, that the laws of the Nation will permit them to do that; and this blanket license would be that kind of thing where the user and the author-the author through his organization-get together and say, “Well, we can find a simpler way than the statute provides"; and, if they meet on common ground, have a simpler way, I should think that Congress would not want to interfere with an agreement arrived at on that basis.
In doing that, they bear in mind, and they would have to, the royalty that the statute sets up.
Mr. FORRESTER. No matter what kind of blanket arrangement you have, this thing says "1 cent a week."
Mr. FINKELSTEIN. And they would have to bear that in mind in fixing whatever the rate is.
Mr. FORRESTER. That is your lawful rate.
Mr. FINKELSTEIN. That is the value that Congress places on it. Mr. FORRESTER. How would they change it?
Mr. FINKELSTEIN. I suppose as in the case of the phonograph records where they do change it. For instance, today a record company will say to a publisher, "We will record 15 of your compositions instead of just 1 if you will change the basis of payment.' Mr. FORRESTER. That is on private contract.
Mr. FINKELSTEIN. Yes.
Mr. FORRESTER. There is a law we deal with now.
Mr. FINKELSTEIN. There is a law there that says that, when a copyright owner authorizes one company to manufacture a record, then the other company can manufacture that record on payment of the 2-cent fee per record, and rarely do they ever rely on the statute. They have an agreement on some other basis rather than rely on the statute. They also have reports there they have to make and they have to file notice of user.
Mr. FORRESTER. In other words, if this is made into a statute, you think most of it would be solved by the blanket arrangement; and, if it were not solved that way, it would be solved this way?
Mr. FINKELSTEIN. I think it would be solved this way and, if this did not work out to the satisfaction of the users, they would at their option avail themselves through the other channel of the blanket license.
I do not think I have answered your question.
Mr. FORRESTER. The thing I am struggling with is that, if it is going to be 1 cent a week, then that is what it ought to be. That is the way I see it.
Mr. FINKELSTEIN. I think that would be completely satisfactory to the authors and the copyright owners.
Mr. FORRESTER. Provided they cannot make a private contract? Mr. FINKELSTEIN. No; without any reservation whatever, that would be entirely satisfactory. I think, in the practical channels of commerce, the user would probably say, if there is some way instead of making these reports and all that.
Mr. FORRESTER. If you did not make some of these blanket contracts, how in the world would you ever be able to collect 1 cent a week from all these jukebox operators all over this country?
Mr. FINKELSTEIN. The territory is divided, you know; you have only a certain number for different machines in different territories. There are not too many of them.
Mr. FORRESTER. There are a lot of them in Georgia.
Mr. FINKELSTEIN. But they could file their reports and make their payments under the statute.
Mr. BRYSON. If that is a difficult and impossible task, that is up to you?
Mr. FINKELSTEIN. I should think so.
Mr. FORRESTER. Not entirely. It is up to the Congress, too.
Mr. HARRIS. Is it not true that these arrangements you make with these associations or individual owners will be based on the law, that 1 cent, and you are trying to be as realistic and practical as possible? If it is practical, it will be exactly so. If it is impractical, you will try to come as close as possible to it?
Mr. FINKELSTEIN. I think the answer is clearly "Yes."
Mr. FINKELSTEIN. That is correct, sir. That would be impossible. Mr. FORRESTER. What one thinks is excess and what one thinks is not excess are two different things. That is where we fall out.
Mr. FINKELSTEIN. But then you have this law where the operator of all these machines can say, "Well, Congress has protected me on this. I will pay under the statute, and that is the end of all the discussion."
Mr. FORRESTER. I have no further questions.
Mr. HARRIS. May I ask another question, Mr. Chairman?
Mr. BRYSON. Certainly.
Mr. HARRIS. Do you think, Mr. Finkelstein, that this royalty which is payable on the basis of retention of record rather than on the basis of the times the particular record is played is a broadening of the performance rights established in these cases?
Mr. FINKELSTEIN. I do not think it is broadening of the rights. I think it is a matter of being practical. You have to draw the line somewhere. You could require them to put one of these counters on the machine, which some of them have, to indicate each time the record is played. But even then, you know, if you are in a restaurant or tavern, or whatever it might be that has a lot of these wall boxes, and let us say five nickels are put in almost concurrently for the same composition, that does not play five times. That plays once, because the