Statement of Record Industry Association of America, Inc.

1. Introduction.

The so-called "compulsory license" for the recording of music has been part of the law of the United States since the present Copyright Act was passed in 1909.1 The Register of Copyrights recommends in his Report on the General Revision of the U. S. Copyright Law that the compulsory license "should be eliminated."" The Record Industry Association of America, Inc. ("RIAA") opposes this recommendation and respectfully submits this statement in support of the statutory license system.***

In essence, the statute provides that once a copyright proprietor permits any record company to use a particular musical work, all other record companies also are free to use it upon payment of a royalty specified in the law.***. The statutory license means that phonograph record manufacturers have equal access to copyrighted musical compositions on non-discriminatory terms. This is the system under which the phonograph record industry of the United States has operated, prospered and continuously improved the quality of its product for a period of over half a century, i.e., almost its entire commercial history, consistent with "the ultimate purpose of copyright legislation" under the Constitution which, as the Register's Report points out, "is to foster the growth of learning and culture for the public welfare.""

RIAA is a non-profit membership corporation organized in 1952; no other trade association in the United States has a membership

•Notes identified by numbers appear at the end of the text of this Statement, preceding the Appendix.

• The section of the Register's Report dealing with the compulsory license is reproduced in Appendix A.

*** See Appendix B for list of members of RIAA.

**** The compulsory license provisions of the Act of 1909 are reproduced in Appendix C.

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consisting only of phonograph record manufacturers. The members of RIAA, ranging from the largest to some of the smallest companies in the industry, and producing all types of recordings, account for over 80% of the total U. S. sales of phonograph records, which in 1962 amounted to an estimated $570,250,000 at retail (including imports).

The RIAA position, in essence, is that elimination of the statutory license provisions would require such fundamental changes in the operation of the phonograph record business that the continued existence of many manufacturers would be threatened; and that it would tend to encourage the growth of monopolistic practices which would undermine the economic health of the entire music industry and be contrary to the public interest.

It is submitted that the reasons advanced by the proponents of this drastic change in the present statute are delusive and unconvincing, especially when balanced against the reasons that led Congress to enact the statutory license system in the first place and the positive accomplishments which the industry has made under existing law.

The following is a summary of the arguments presented in detail in the succeeding sections of this statement:

Summary of RIAA Position

The phonograph record industry of the United States consists of several hundred companies producing sales of over half a billion dollars at retail in this country and exerting a tremendous influence throughout the world by means of the export of duplicate master recordings which are used to manufacture replicas of the American product in numerous foreign countries. Records are played in the home, on juke boxes and by radio broadcasting stations to such an extent that the average person today hears music most frequently in the form of a phonograph record.

The dissemination of music creates special problems as compared with other types of copyrighted material because music ordinarily reaches the public only in the form of a performance. Furthermore, the rendition of a given musical work varies depending upon the style and skill of the performing artists. As a practical matter, performers require free access to musical material on non-discriminatory terms, whether it is to be performed "live" or for recording purposes.

Extracts from the Certificate of Incorporation and By-Laws of RIAA are set forth in Appendix D.

Before the Copyright Act of 1909 went into effect, musical copyright proprietors had no right to prevent the mechanical reproduction of their music on devices such as phonograph records; manufacturers of records were free to use all music without licenses or royalty payments because mechanical devices did not constitute infringement of copyright. When Congress determined for the first time to grant recording rights as part of the 1909 copyright revision, it deliberately attached to the right a condition permitting accessibility by all competing manufacturers on equal terms in order to avoid the danger of monopolistic practices in the music industry.

This statutory condition, which has become known as the compulsory license, permits the copyright proprietor to withhold a work from recording altogether; but if it is licensed to one record company, any other has the right to make similar use of it on payment of a speci fied royalty. It is undisputed that the compulsory license system has led to a tremendous outpouring of music in recorded form, both popular and serious, with the public receiving the benefits of lower prices, improved quality and the opportunity of choosing among performances by various artists.

In the analogous field of performing rights, private licensing organizations came into existence to meet the practical demands for free accessibility to musical material for performance purposes. But subsequently it became necessary to institute federal governmental controls through antitrust decrees in order to prevent discriminatory practices in the licensing of performing rights. As a result, performing rights organizations now operate pursuant to what is tantamount to a compulsory license system, under federal court supervision and Department of Justice scrutiny. This experience points up the wisdom of solving the parallel problem in the recording rights area by legislative means and constitutes an added reason for maintaining the statutory license provisions in the Copyright Act.

Many foreign countries have adopted statutory license systems for recordings that closely resemble our law. More significant, recent copyright revision studies in a number of important countries have resulted in recommendations to retain the statutory license provisions and several countries already have adopted new legislation that does so. In countries without a statutory license system, an alternative has been developed in the form of a private licensing organization, thus demonstrating the economic necessity of the free accessibility principle in the field of recording rights; but the monopolistic private organization and its highly restrictive standard contract would not be acceptable in the

United States because they appear to be incompatible with our antitrust laws.

The arguments advanced in support of the Register's recommendation to repeal the compulsory license provisions can be classified under four headings:

(a) Copyright should be exclusive in the recording field just as it is in other types of copyright protection.

This is a philosophical argument which has no foundation, for Congress may attach conditions to the rights it grants and it deliberately chose to do so with respect to recording rights for reasons that have continuing validity.

(b) The copyright owner is unable to prevent distorted versions of his works on phonograph records.

This objection is meaningless, because the copyright owner has a remedy under existing law to halt arrangements that exceed proper limits. Furthermore, if this problem is so serious that the law needs clarification, that can be accomplished without eliminating the entire statutory license system.

(c) The copyright proprietor has no effective means of collecting royalties from financially irresponsible record manufacturers.

We have no desire to protect "deadbeats"; but obviously this is another problem of limited scope that is capable of solution without scrapping the statutory license system in its entirety.

(d) The monopoly problem that motivated Congress in 1909 does not exist any longer.

This argument is based on a fallacy. It is illogical to claim that because the statutory license provisions were successful in avoiding the growth of monopolistic practices, it is unnecessary to continue the statutory system in order to prevent monopoly today. There can be no assurance that tendencies to concentration and integration would not be activated immediately if the statutory license provisions were to be eliminated.

There have been conflicting predictions about what might happen if the statutory license provisions were repealed: Either there would be a vast upheaval in the operations of the music industry-and, if that is so, there certainly has been no evidence presented to justify the repeal and its drastic consequences; or non-exclusive licenses would be granted freely to all reputable record companies, so that there would be practically no change in the present system—and, if that is so, it seems unnecessary to eliminate the statutory license and risk the possibility of restrictive practices as a result.

RIAA fears a variety of discriminatory agreements throughout the entertainment industry would follow if the statutory license provisions were repealed. Record companies could acquire copyrights and block competitors from recording particular works for a variety of selfish reasons. Some music publishers and some record manufacturers could insist on special treatment, to the detriment of less favored competitors. A musical composition could be frozen for all time in terms of one artist's two-minute version of it. The music industry would be driven in the direction of concentration and restrictive practices that could lead to another wave of antitrust litigation such as we have seen in performing rights and in motion pictures. The number of record companies and the supply of recorded music and literature would diminish.

In brief, no public benefit could flow from the elimination of the statutory license provisions and the proponents of this radical alteration in the law have failed to justify the drastic upheaval in the phonograph record industry which is the minimum effect that it would create.

2. The Recording Industry.

The performance of a musical composition ordinarily is an ephemeral event; it endures, if at all, only in the memory of the listener. The business of a phonograph record or tape manufacturer consists essentially of preserving musical performances in tangible form and marketing the resulting product, so that the performance can be reproduced at will (on suitable apparatus) at any time. The basic function of a record company therefore is to arrange for the performance of selected musical compositions by suitable artists for recording purposes.

At the turn of the century, the most familiar form of phonograph record was the cylinder introduced by Thomas Edison. The flat disk record did not supersede the cylinder until 1913. In 1925, electrical recording was introduced and the use of a microphone soon replaced the older method of singing or playing directly into an acoustic horn. Long-playing records of the type that is so familiar today first appeared in 1948. The seven-inch 45-rpm record was introduced in 1949 and now has become the accepted standard for "single" records (one composition on each side), the form in which current popular songs generally reach the market."