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During the year engineering and research programs brought into being new Competitive models in our pianos, key and action products, electronic planos, elec tronic organs, and coin-operated products. Research programs in progress promise further important advances for the future. Manufacturing capability has been improved in all of our U.S. plants through the introduction of new methods and specially developed machinery. Manufacturing operations were started at the new Wurlitzer plant in Levern, Germany and a subassembly manufacturing operation was started with an associate firm in Guatemala, C.A. Final steps in the closing of the manufacturing plant at DeKalb, Illinois were completed early in the year, and manufacturing operations at Logan, Utah are improving steadily. Marketing operations have been strengthened by careful training and assignment of skilled personnel at both wholesale and retail levels. At Cheshire, England a new sales office and warehouse building was completed at the Parkgate Industrial Estate for Wurlitzer Limited, our subsidiary for keyboard product sales in Great Britain. Marketing operations in Europe were realigned for improved sales coverage in various Common Market countries. A major decision was reached to discontinue manufacture and sale of coin-operated phonographs in the U.S., a move which is expected to enhance future earnings.

Consolidated net sales on a world-wide basis for the year were $90,609,712, an Increase of 75% over the previous year's sales of $83,842,546 and the highest ever achieved. The U.S. sales accounted for 81% of the total and foreign sales for 19%. Important growth occurred in all products except coin-operated phonographs.

Electronic organ sales continued its vigorous growth pattern of recent years showing an increase in dollar sales volume of about 24% over last year largely in our medium and higher priced organ products manufactured at Corinth, Mississippi. Two new electronic organ product line programs were undertaken by the Company during the year with manufacturing responsibility placed at the North Tonawanda Division. One is the Sprite organ line, a moderately priced series of organs with wide popular appeal. This product line, introduced at the June 1973 convention of National Association of Music Merchants, was an immediate success and produced a very substantial backlog of orders. At North Tonawanda intensive effort has been devoted to getting production underway on Sprite products to satisfy dealer demand. A second product line was also initiated during the year consisting of a series of low priced organs including battery-operated table mode's. Distribution has been primarily through non-Wurlitzer dealer channels. Acceptance of this line has been good and the future growth possibilities look attractive.

The Wurlitzer electronic piano is becoming a very popular product, and the Increase in dollar sales over last year was 13%. Wurlitzer conventional pianos also showed an increase in dollar sales volume over last year. Sales of the widely accepted Wurlitzer cigarette and vending machine line in Europe continued to grow in the amount of 15% over last year.

Although our keyboard products business is profitable, vigorous, and growing rapidly, the overall operations of the Company resulted in a loss. Fortunately, many of the problems producing this result are now behind us and improved earnings for the future are clearly in prospect. The major trouble area affecting the earnings picture during the past year was our coin-operated phonograph business which has been unsatisfactory from the profit viewpoint for the last few years. At a Board of Directors' meeting on March 5, 1974 it was decided to discontinue phonograph manufacturing and selling operations in the United States, It was also decided to continue to manufacture and sell phonographs and related prodnets outside of the United States through our German subsidiary, Deutsche Wurlitzer, as well as other subsidiaries engaged in sales on a worldwide basis, The decision to discontinue U.S. phonograph operations was a difficult one to make, but it is expected to enhance our financial position in the future in a number of beneficial ways.

The consolidated net loss for the year ended March 31, 1974 was $7.702,682 or $6 23 per share after a pre-tax provision of $11.366.000 for losses on disposal of our U.S. coin-operated phonograph business. This provision was a direct result of the decision to discontinue the coin-operated phonograph business and is believed to be adequate to cover the expected losses and costs associated with Horidation of the U.S. phonograph operations. We expect overall company op erations for the year ending March 31, 1975 to be profitable.

Consolidated not earnings in the previous year ending March 31, 1973 were $2.191.171. or $1.77 per share before an extraordinary charge of $313,747 and $1,877,424, or $1.52 per share after the extraordinary charge.

The achievement of record dollar sales this year is evidence of the wide acceptance of Wurlitzer products all over the world. We believe world-wide interest in music is being stimulated partly by the new types of sounds and musical features available to the public. Products such as the Wurlitzer Orbit series of electronic organs with synthesizers and the Wurlitzer electronic piano have been a part of the growth of interest in new sounds, and it is expected that the trend will accelerate.

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R. C. Rolfing, Chairman of the Board of The Wurlitzer Company, reported that the Company's directors decided at their meeting today that the coinoperated phonograph segment of the Company's business in the United States should be disposed of by sale or liquidation. The importance of this product in United States operations has diminished, and it is no longer profitable. Sales volume in the current fiscal year is estimated at approximately fifteen per cent of the Company's over-all volume. The decision does not affect the Company's European operations, where Deutsche Wurlitzer coin-operated phonographs, cigarette and other vending equipment and accessories will continue to be produced for sale throughout the world.

Mr. Rolfing said that as a result of this decision it is expected that the Company's operations for the current fiscal year ending March 31, 1974 will result in a loss, inclusive of losses from liquidation of approximately $7,000,000 after tax benefits.

Mr. Rolfing added that the action taken would materially strengthen the Company and improve its operations, and that he is optimistic as to future earnings in its continuing manufacture, distribution, and sale of electronic organs, pianos, electronic pianos and related equipment at wholesale and in its 47 retail stores.

AGO KOERV, Treasurer,

Mr. KASTEN MEIER. Thank you, Mr. Patterson. Just for clarification, Mr. Patterson, you said the law review article suggests it would not be in the economic best interest of the industry to provide performing rights for artists. To what industry were they referring when using the term "industry"?

Mr. PATTERSON. Well, they are talking primarily about the record industry and the tape industry, and they do not touch on the constitutional implications of the creation of what I would characterize as an anomalous copyright, because I can conceive that, if Al Hirt could collect a performing artist royalty, by the same token Jack Nicklaus could copyright his swing, and the same with Mark Spitz, or Chris Evert, and I do not think that a literal reading or even an updating of the copyright clause to our present times would cover that as a proper vehicle for utilization of the copyright clause.

Mr. KASTEN MEIER. Mr. Mawdsley, do you wish to make your statement?

[The prepared statement of Mr. Mawdsley follows:]

STATEMENT OF RUSSELL MAWDSLEY, IMMEDIATE PAST PRESIDENT AND CHAIRMAN OF THE LEGISLATIVE COMMITTEE OF MUSIC OPERATORS OF AMERICA, INC. Mr. Chairman, I am Russell Mawdsley of Holyoke, Massachusetts. I appear here in behalf of Music Operators of America, Inc., the national organization of jukebox operators which has members in every State of the Union. I am the immediate past president of the organization and presently serve as chairman of its national legislative committee.

I have been a member of MOA for 20 years, and I have served on its board of directors and as an officer in each of its several offices over the past 13 years.

I am also vice-president of the Massachusetts Coin Machine Association, the state-wide organization of jukebox operators, and vice-president of the Western Massachusetts Music Guild, a local association of jukebox operators in the western part of the State.

In my city of Holyoke, I am presently a director of one of our leading commercial banks, and I am a member of the Holyoke Planning Board, having served as its chairman for two years.

I have been a member of the board of directors of the Holyoke Chamber of Commerce. I am a past president of the Holyoke Kiwanis, and a former trustee of a local savings bank.

I am president of Russell-Hall, Inc. a firm which operates jukeboxes, amusement machines, and a full line of vending machines, in the greater western Massachusetts area, an area which is centered around the City of Springfield,. Massachusetts. My firm operates about 100 jukeboxes, 150 amusement machines, and 700 vending machines, in about 450 localities in this area.

THE JUKEBOX INDUSTRY

I would now like to give you a comprehensive view of the jukebox industry, nationwide. According to industry estimates, which we believe to be substantially correct, there are about 7500 jukebox operators, and about 450,000 jukeboxes on locations throughout the United States. We also estimate that jukebox operators purchase about 75,000,000 records each year for play in their machines. Prior to 1974, there were four manufacturers of jukeboxes in the United States, including Rock-Ola, Rowe-AMI, Seeburg, and Wurlitzer. In the spring of 1974, however, Wurlitzer discontinued its manufacture of jukeboxes, due to a significant decline in jukebox business.

ECONOMIC CONDITION OF THE JUKEBOX INDUSTRY

We would also like to give your Committee as clear an understanding as possible regarding the current economic condition of the jukbox industry.

Like most other industries, the costs of our equipment and materials have been rising drastically. New jukeboxes cost up to $2500 each, as compared with a maximum of about $2000 ten years ago when this Committee held hearings on this subject (Hearings on H.R. 4347, 89th Congress, Part I, page 561). Our singles records now cost on the average 75¢ per record, which is a marked increase from the 60¢ which a typical operator reported to this Committee at its hearings in 1965 (Hearings, Part I, page 570). Wages of our electronic and mechanical technicians and our other costs of operations have risen even more drastically, and are continuing to rise.

On the other hand, jukebox operators are unable to increase prices per play so as to keep abreast of their increasing costs of operations. In some businesses prices can be increased merely by changing the price tag, and the change may not be noticed. In our industry, it is a matter of reducing the number of songs a customer can play for a quarter, and also of changing the coin receiving mechanism on every one of the operators' machines. Also, the location owner must be consulted and his consent obtained, for he may object that a raise in the cost to play music will be detrimental to his business. Prices of two plays per quarter have been established by operators in some areas, but this is by no means generally accepted. In many areas, rates are still at 10¢ per play or three plays for a quarter, and there are even some areas where the rate remains at 5¢ per play. These conflicting and continuing pressures have necessarily and inevitably resulted in a general reduction in the level of operators' income from operation of jukeboxes. While we do not have statistics on operators' revenue throughout the United States, I think we can state with reasonable certainty that revenues are declining. As a general average, gross receipts do not exceed $25 per jukebox per week. I know that in my own area gross receipts average only $24 to $25 per machine per week. And I would like to stress that these figures are gross receipts before they are divided between the operator and the location owner, which is done usually on a 50-50 basis. Thus, the operators' gross revenues average something on the order of $12.50 per week. It is out of this small figure, of course, that we must pay for our equipment and all of our costs of operations. This economic picture explains why almost all operators have diversified their activities by adding amusement and vending machines to their jukebox operations. In fact, I am quite certain from my own experience that most operators cannot afford to operate jukeboxes unless they also operate amusement

and vending machines. It may be asked, then, why do operators continue to operate jukeboxes. The answer is that location owners usually require jukeboxes to be installed as a condition to having amusement and vending machines placed in their locations. And they insist on having jukeboxes in their locations so as to attract customers to their amusement and vending machines. This situation reflects the fact that jukeboxes provide the principal musical entertainment which most working people can now afford. Jukeboxes are, indeed, as someone has said, "the poor man's orchestra."

EFFECT OF H.R. 2223 ON THE JUKEBOX INDUSTRY

H.R. 2223 will have a serious impact on the jukebox industry. It must be noted that the jukebox industry has never before been subjected to copyright performance royalties. Thus, any new royalty will impact severely upon the industry, and will necessitate economic readjustments throughout the industry. The $8 royalty under Section 116 will add a completely new burden in the total sum of at least $4,000,000 per year. Over and above this, there will be at least $4,500,000 in mechanical royalties on the 75,000,000 records (at 6¢ per record under Section 115) which jukebox operators buy each year. This amounts to an increase of at least $1,500,000 per year in mechanical royalties over the existing rate of 2¢ per recording (4¢ per record). We understand that a study made for the Record Industry of America (RIAA) indicates that the increase which would result from the proposed new 3c mechanical royalty would amount to at least $5 per jukebox per year, or to some $2,250,000 more than the existing mechanical royalty. Thus, it is evident that the royalty burden imposed upon jukebox operators by H.R. 2223 will amount to at least $8,500,000 per year. We hope the Committee will agree with us that this is more than a fair return to copyright owners from this industry of small businessmen who serve as promoters of records, as well as being the largest single industry consumer of records.

THE JUKEBOX INDUSTRY POSITION ON H.R. 2223

We would like to summarize the position of Music Operators of America, Inc., on the jukebox royalty provisions of H.R. 2223 as follows:

1. We support the proposed new $8 jukebox royalty as provided in Section 116. 2. We oppose any increase in that proposed royalty.

3. We also oppose any provision for readjustment of that royalty through a Copyright Royalty Tribunal, or otherwise.

4. And finally, we oppose any fee for registration of jukeboxes.

Our reason for supporting the $8 royalty is the fact, as your Committee is well aware, that our representatives made an agreement with the other interested parties to accept this royalty at the time the General Revision Bill (H.R. 2512, 90th Congress) was under consideration by the House of Representatives. It was, and is, our understanding that this compromise was intended to be a complete resolution of royalty claims against our industry. We have stood by this com promise in the expectation that all other interested parties would likewise do so. We oppose any increase in the proposed $8 royalty for whatever reason, whether because of adjusments in the Consumer Price Index, or otherwise. As we have shown above the jukebox industry simply cannot withstand any further increase in copyright royalty burdens.

Our opposition to any provision for a readjustment of the proposed statutory royalty rates rests upon the same grounds, that is, that the jukebox royalty is an agreed compromise which does not include any provision for such readjustment, and further that the jukebox industry cannot withstand any royalty increases, and should not be exposed to the uncertainties of such open-ended liabilities.

We continue to oppose any fee for the registration of jukeboxes, again, for the reason that such a fee would be inconsistent with the agreed compromise, and for the further reason that the administrative costs of registering jukeboxes should be borne by the beneficiaries of the new royalty, rather than by the jukebox operators who bear the burden of the royalty. In this connection, we would like to ask your Committee to delete from Section 118(b) (1) (A) the phrase which appears at lines 4 and 5 of page 24 of the Bill, and reads as follows: "and in addition to the fee prescribed by Clause (9) of Section 708 (a)". That phrase was left in the companion Senate bill (S. 1361, 93d Congress) through oversight when the registration fee that was then provided by Section 708 (n) (9) was deleted from that Bill. We understand there is no objection by the Copyright

Office to this request and that the staff of your Committee already have been advised of this needed correction.

THE MECHANICAL FEE

Section 115 would increase the existing mechanical fee from 2 to 3 per recording. This new royalty would have its most burdensome effect upon the jukebox industry, as this industry is the largest user of phonograph records. Thus, the jukebox industry faces a doubling up of new royalties under both Sections 115 and 116. This goes far beyond the proposal offered by our representatives in the 1965 hearings when they recommended an add-on to the mechanical fee to be paid by Jukebox operators (Hearings, Part I, page 583). In 1966 and 1967, this Committee recommended an increase in the mechanical fee from 2¢ to 21⁄2¢ (H. Rept. No. 83, 90th Congress, page 74), and that was the amount of the proposed mechanical fee when the $S jukebox royalty was agreed to and adopted. We urge the Committee to require music publishers and composers to come forward with proof that any increase in the existing royalty is needed to compensate them fairly for the music they produce. In the absence of such persuasive proof we urge the Committee to retain the present rate of 2¢ per recording.

RECORDING ARTS PERFORMANCE ROYALTY

Although H.R. 2223 does not include any provision for a recording arts performance royalty, we note such a proposal has been made in H.R. 5345, a bill which we understand is also before this Committee. We are opposed to this proposed new royalty for the reason that it would upset the compromise agreement by which the proposed $8 jukebox royalty was first established. We also oppose any such new royalty as a matter of principle because we believe that there should be but one royalty for any one performance, and that if Congress creates any new kinds of musical copyrights they should be shared in a single royalty among all of those who claim to have contributed to the finished product.

CONCLUSION

In closing. I would like to state to the Committee that within the jukebox industry there have been, and still are, many who vigorously oppose conceding any performance royalty to copyright owners. This is because they believe jukebox operators perform a compensating service to the benefit of copyright owners. Any new proposal to increase the royalty rate, or to subject it to further revision, would substantially intensify that opposition and would make it increasingly diffcult for the industry's leaders to preserve support for the provisions of the Bill as they have been agreed to.

We earnestly urge your Committee, therefore, to approve the provisions of H.R. 2223 relating to the jukebox industry in their present form, with the excep‐ tion of the minor change in Section 116(b) (1) (A) discussed above, and excepting also any increase in the mechanical royalty under Section 115.

Thank you for giving us this opportunity to present the views of Music Operators of America, Inc.

TESTIMONY OF RUSSELL MAWDSLEY, CHAIRMAN, LEGISLATIVE COMMITTEE, MUSIC OPERATORS OF AMERICA, ACCOMPANIED BY NICHOLAS E. ALLEN, COUNSEL

Mr. MAWDSLEY. Yes.

Mr. Chairman, I am Russell Mawdsley of Holyoke, Mass. I appear here in behalf of Music Operators of America, Inc., the national organization of jukebox operators which has members in every State of the Union. I am the immediate past president of the organization and presently serve as chairman of its national legislative committee.

I have been a member of MOA for 20 years, and I have served on its board of directors and as an officer in each of its several offices over the past 13 years.

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