minute that you hear your song you do not know that four other people have put in the nickel and so you only get one performance in a case like that for the quarter, and not for the nickel.

This is the only practical way to do that.

Mr. FORRESTER. That is one jukebox?

Mr. FINKELSTEIN. Yes.

Mr. HARRIS. May I introduce at this point the statement of five of the recording companies-Capitol Records, Columbia Records, Decca Records, MGM, and RCA Victor Division of the Radio Corp. of America?

I would like to introduce the statement at this time because I would like to ask a question based on it of Mr. Finkelstein.

Mr. BRYSON. Do they favor the bill?

Mr. HARRIS. They are opposed to this bill.

Mr. ROGERS. Let us have them state their proposition and, if we went to ask Mr. Finkelstein a question, then we can ask him to come back.

Mr. BRYSON. If there are no other questions, we thank you, Mr. Finkelstein.

Mr. FINKELSTEIN. Thank you, Mr. Chairman.

(Statement of Mr. Finkelstein is as follows:)

STATEMENT OF HERMAN FINKELSTEIN

My name is Herman Finkelstein. I am a member of the New York and Connecticut bars, and am general attorney for the American Society of Composers, Authors, and Publishers, on whose behalf I am appearing in support of H. R. 5473.

It is submitted that H. R. 5473 should be enacted for the following reasons: (1) All other commercial users of copyrighted musical compositions are required by law to pay royalties to copyright owners;

(2) The so-called coin-operated machine exemption in the 1909 law was never intended to cover the machines known as jukeboxes;

(3) The performing right (that is, the right to receive royalties from performances of works in public for profit) is the most valuable right that an author of musical works possesses and is his most important source of income.

(4) The jukebox industry derives more income from public performances of copyrighted musical works for profit than any other industry (radio, television, wired music, etc.) and yet pays nothing to those who write the songs that make this income possible.

(5) H. R. 5473, unlike prior bills seeking to repeal the 1909 jukebox exemption, contains provisions intended to protect the user

(a) by fixing a low statutory royalty, and

(b) by exempting the small-tavern owner, who is the outright owner of only a single machine, and imposing liability upon the operators and distributors of jukeboxes and those who own more than a single machine. (6) Enactment of H. R. 5473 would help to bring our copyright law in line with that of other leading nations.

Since the present copyright law of 1909 was enacted, there have been such great strides in the arts of mass communication that large industries have been built up on the strength of their ability to profit from the use of literary and musical works—particularly the latter. If the music of our Nation is to keep pace with our industrial development, the author of today must look to those industries to pay royalties which will encourage him to continue to provide these users and the public with new works. The House Judiciary Committee recently had occasion to review this situation in considering a recent bill (H. R. 3589) which was designed to give performing and recording rights to authors of nondramatic literary works. The report of Congressman Rogers on this bill (Rept. No. 1160) is pertinent here. The committee there said:

"The failure to extend performing and recording rights to literary works such as books and poems, at the time the copyright law was enacted in 1909, was due to the status of the arts at that time. The development of improved technical

devices has demonstrated a gap in our law not now found in the copyright law of other leading nations. Today, the hearing public as a market for literary work is becoming as important as the reading public."

It has long been recognized that the purchase of a sheet of music does not carry with it the right to perform the composition publicly for profit and that the purchase of a phonograph record does not carry with it the right to perform that record publicly for profit. Section 1 (e) of the existing law authorizes the manufacture of phonograph records upon the payment of 2 cents to the copyright proprietor (if the composition has previously been recorded with the consent of the copyright proprietor) but it expressly provides that the payment of the 2-cent royalty shall not free the device (i. e., the record) from further contribution to the copyright owner when the record is used for the purpose of giving public performances for profit.

If the 1909 act had stopped at this point, it would be clear that the jukebox industry would have to compensate authors for the use of their works. just as do the radio and television broadcasters, the wired-music services, and others. However, because of the existence of a novel reproducing device at that t me which was featured in penny arcades and which permitted patrons to hear a composition by means of earphones upon the deposit of a coin, there was a question as to whether this type of use was a public performance for profit. It certainly was not an important or widespread means of communicating music. Congress resolved the difficulty by providing that, if a fee was charged for admission to the place where such reproduction occurred the performance was to be deemed a public performance for profit, whereas, if such a fee was not charged, then the performance was not to be regarded as a public performance for profit.

At that time no one could anticipate the present jukebox. The device which made the machine in the penny arcade attractive was the earphone, which gave a private audition to each person depositing a coin. The present-day jukebox operates on exactly the opposite principle. The deposit of a coin makes it possible for everyone on the premises to hear the performance. In other words, whereas the performance in the penny arcade was essentially private and was not to be deemed a public performance for profit unless an admission fee was charged to the arcade, in the case of a jukebox the performance is necessarily a public one because of the use of loud-speakers. The loud-speaker serves a threefold purpose:

(a) It enables everyone in the party of the patron depositing the coin to hear the performance.

(b) If several patrons in different booths deposit several coins for a particular composition before it is actually played, the first playing of that composition satisfies all the customers who have deposited nickels, and in that case these several nickels are paid for a single playing. In other words, a single playing of the record releases all of the nickels; if five nickels are deposited by different people for the same composition the record of that composition is played only once and not five times. In such a case a quarter is actually paid for a single playing of the record instead of a nickel.

(c) It furnishes music gratis to those patrons who do not deposit nickels and, in the language of Mr. Justice Holmes, in Herbert v. Shanley Co. (242 T. S. 591), it gives "a luxurious pleasure not to be had from eating a silent meal." This pleasure is reflected in more liberal spending for food or liquor.

Thus, the present-day coin-operated machine known as the jukebox, unlike its predecessor of the penny arcade days, is intended to be used in giving performances which in fact are both public and for profit; and Congress should place the jukebox industry on a parity with other commercial users. II. R. 5473 accomplishes this purpose by eliminating the so-called coin-operated machine exemption.

Unlike previous bills to repeal the coin-operated machine exemption, H. R. 5473 couples repeal with certain safeguards which (a) will enable the distributor, owner, or operator to obtain a license to perform recordings of the popular compositions used in jukeboxes at a low royalty rate without negotiating with the copyright proprietor or his representatives and (b) will safeguard the interest of the small-tavern owner by providing that, if he owns his machine outright and if no one else has an interest in the machine or in its receipts, the performance is exempt. If the tavern keeper is not in complete ownership or control of the machine or the receipts therefrom, then he remains exempt from any obligation to pay royalties; but the distributor or operator who owns or controls more than one machine or the receipts therefrom is liable for the payIment of royalties.

H. R. 5473 makes it optional with the distributor or operator or other owner of several machines to pay the statutory royalty to each copyright owner, or if for reasons of administrative facility he does not wish to deal with many separate copyright owners he can negotiate for a single license for very large repertories such as those represented by the American Society of Composers, Authors, and Publishers and by other organizations authorized to license performing rights of many copyright owners.

The individual tavern keeper is, for all practical purposes, relieved from any obligation to deal with the copyright owner. Thus provision is made for payment to authors by the branches of the jukebox industry representing the larger operators and distributors. On the other hand, although authors cannot freely bargain for the licensing of their works in jukeboxes as they do in other fields, the statute assures them of a royalty in this important field which has heretofore been denied to them.

It is submitted that H. R. 5473 should be enacted to

(1) Pemove an exemption which Congress did not intend to grant in 1909; (2) Enable authors to secure a small part of the huge revenues which the jukebox industry obtains from the public for the use of authors' copyrighted works:

(3) Place the jukebox industry on a parity with other commercial users of music engaged in giving public performance of copyrighted works for profit; (4) Provide a reasonable method for the payment of royalties in this field; (5) Impose the obligation to pay such royalties upon those who are in the best position to make such payment and who furnish the devices which make the performance possible.

There is appended to this statement an analysis of the provisions of H. R. 5473.

EXPLANATION OF PROVISIONS OF H. R. 5473

The principal purposes of H. R. 5473 (and its companion bill S. 2186) are: (a) To close the loophole in the copyright law under which those who control. jukeboxes are the only commercial users of musical instruments exempted from obligation to pay just compensation to copyright owners for performing their music publicly for profit.

(b) To provide for a statutory licensing system for the use of recordings in jukeboxes at a fixed and low royalty rate.

(c) To exempt proprietors of small taverns or other establishments where jukeboxes are placed from the obligation to pay any royalties except where they charge an admission fee.

(d) To impose the obligation to pay royalties upon the owner-operators who customarily control jukeboxes in several establishments in one territory by various devices.

A sentence-by-sentence analysis of the bill follows below:

1. Elimination of present exemption

"That section 1 of title 17 of the United States Code is amended by striking out the last paragraph of subsection (e) of such section

* *

Subsection (e) of section 1 of the Copyright Act (17 U. S. C. sec. 1 (2)) provides in the last paragraph that the reproduction or rendition of a musical composition by or upon coin-operated machines shall not be deemed a public performance for profit unless a fee is charged for admission to the place where such reproduction or rendition occurs. This exemption was enacted in 1909 long before the jukebox industry became one of the major users of copyrighted musical compositions. Most establishments where jukeboxes are located do not charge admission. Nevertheless, substantial profits are derived from the playing of musical compositions from the money deposited in the jukeboxes by the patrons of the establishment. In addition, there is an indirect profit to the establishment through increased patronage.

The elimination of the last paragraph of section 1 (e) of the Copyright Act would make the playing of a musical composition by means of a recording on a coin-operated machine a public performance for profit by the owner of such machine regardless of whether or not admission were charged to the place where the jukebox is located.

2. Juk box performances deemed public performances for profit

* * and by adding at the end of such section a new subsection as follows: (f) The public reproduction or rendition of a musical composition by or upon a coin-operated machine shall be deemed a public performance for profit

by the owner or operator thereof whether or not a fee is charged for admission to the place where such reproduction or rendition occurs'."

Although the elimination of the last paragraph of section 1 (e) of the act closes the existing loophole for jukeboxes, the bill would leave no doubt as to the legislative intent by specifically providing that any playing of a musical composition on a coin-operated machine is a public performance for profit by the owner or operator of such machine, regardless of whether or not a fee is charged for admission to the establishment where the machine is located or the playing Occurs. Under this introductory paragraph of new subsection (f) of section 1 of the Copyright Act, public performance for profit of a copyrighted musical composition through the playing of recorded music on a coin-operated machine would require a license from the copyright proprietor subject to the conditions and exemptions hereinafter set forth.

3. Statutory licensing provision

To minimize the fears of the jukebox industry that a change in the law would subject it to undue hardships, the general provision of subsection (f) is restricted by conditions setting up a system under which a license is automatically granted upon the payment of a low and readily computable royalty. This automatic licensing system obtains:

"Whenever a disk or other device for mechanical reproduction of a copyrighted musical composition, the playing time of which is 4 minutes or less, has been lawfully manufactured in accordance with the provisions of subsection (e)

* * * ""

The purpose of this provision is to subject to statutory licensing any disk or other device such as a wire or tape recording of the kind used in jukeboxes. The usual device is a disk on which the playing time of any particular musical composition is 4 minutes or less. The language is intended to embrace such recordings. It would also apply to a so-called long-playing record or to a wire or tape recording on which are recorded one or more musical compositions, each with a .playing time of 4 minutes or less.

4. Compulsory license limited to establishment where no admission fee is charged 66* * * any person may perform, reproduce, or render such musical composition by use of such disk or device in, by, or upon a coin-operated machine at a place to which no admission fee is charged

* *

Where a playing of a musical composition occurs on a jukebox in a place to which an admission fee is charged, there is no statutory exemption under the existing copyright law, and the compulsory licensing provision of H. R. 5473 does not apply. In such cases, the public performance is now, and would continue to be, an infringement of the copyright unless the owner of the machine had previously obtained a license from the copyright proprietor. In the more common case, where no admission fee is charged to the place where the jukebox is located and the performance of the musical composition occurs, the owner of the machine would not have to obtain a license in advance.

5. Low royalty provision

66* * * upon payment by the owner or operator of such coin-operated machine to the proprietor of the copyrighted composition, of a royalty computed as follows * *

The playing of a recording on a coin-operated jukebox at a place where no admission fee is charged would be permitted without the necessity of negotiating a license with the copyright proprietor, provided the owner or operator of the jukebox pays to the copyright proprietor, within a prescribed period, the royalty fixed by the legislation.

6. Computation of royalty

* * For each such copyrighted composition on a disk or device the sum of 1 cent for each week (or fraction thereof) of consecutive time during which such disk or device shall remain in the machine."

The royalty payable under this bill is computed on the basis of 1 cent for each copyrighted composition (with a playing time of 4 minutes or less) on each disk or other device for each week (or fraction thereof) that the disk or device remains in the machine available for playing. Most standard records of the type covered by the compulsory licensing provision have only one copyrighted composition on each side. In most cases, therefore, the total royalty payable would be 2 cents for each week that any particular record is in the machine. If a longplaying record or a medley should be used, more than one composition would be recorded on the disk, and the royalty would be correspondingly increased.

A copyright owner would be entitled to the royalty not for each time a record containing his composition is played but for each week or fraction thereof that the record is in the machine available for playing. Thus, even if a record were played in a jukebox 50 times during 1 week, the copyright owner would only be entitled to a royalty of 1 cent. One side of a standard disk recording can be played in a jukebox at least 40 and perhaps hundreds of times before becoming so worn that it requires replacement. Improvements in the materials used in manufacturing records have resulted in records which are good for more than a thousand playings.

7. Method of payment of royalties

"An cwner or operator shall be entitled to the benefits of this subsection by furnishing, on or before the last day of each month, a report to the proprietor of the copyrighted composition stating the amount of royalties due during the previous month, and by paying the royalties so due on or before the last day of the next succeeding month."

Further to simplify the payment and collection of royalties under the compulsory licensing system applicable to the standard type of record, the bills provide that the owner-operator of the coin-operated machine must submit a monthly report to the copyright owner 'stating the amount of royalties due. Furthermore, the royalties must be paid within the following month. Royalty reports and payments will, in most cases at the option of the owner-operator, be made to performing-right associations by entering into agreements with them. 8. Eremption for owner of single jukebox

"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 person 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."

The bills would limit the obligation to pay royalties for public performances of copyrighted musical compositions on jukeboxes to a person who owns, operates, or has any interest in the particular machine or the receipts therefrom and also owns, operates, or has any interest in one or more other machines or the receipts therefrom. This limitation prevents the obligation to pay royalties from falling upon the proprietor of a single establishment which in practice has only one jukebox.

9. Duty placed on multiple owner

The definition of those upon whom the obligation to pay royalties falls, whether under the compulsory licensing system or otherwise, is intended to prevent those who actually and effectively control the playing of records in jukeboxes and share in the financial benefits from avoiding the payment of royalties by juggling their financial or legal arrangements with the proprietors of taverns and other establishments in which the jukeboxes are placed. It covers not only one who owns a machine but also the operator or distributor of the machine or any other person who controls the machine, directly or indirectly, or participates, directly or indirectly, in the receipts of the machine. Thus, those owners, operators, or distributers who effectively control jukeboxes in a territory could not take advantage of the exemption for the owner of a single jukebox by the use of cloaking devices worked out with individual proprietors of the establishments in which the machines are located and so make it impossible for the copyright owner or his agent to enforce the payment of royalties.

10. Collection of royalties limited to one owner

"The proprietor of a copyrighted composition may not collect royalties from more than one owner, operator, and/or distributor of any such coin-operated machine for said composition on a disk or device in said machine during any particular period of time."

Since the definition of those upon whom the obligation to pay royalties falls might cover in any particular instance more than one party in the various arrangements leading to the actual playing of the record, it is p.ov.ded that ro, alties may be collected from only one such person.

Mr. BRYSON. Mr. Merrill.

91 99-51-ser. 11. pt. 1- 4