Page:Copyright Law Revision (Senate Report No. 94-473).djvu/96

 The following summarizes the principal arguments made by jukebox operators and manufacturers for retaining the present exemption:
 * 1. The exemption in section 1(e) was not an accident or anomaly, but a carefully conceived compromise. Congress in 1909 realized that the new royalties coming to copyright owners from mechanical sound reproductions of their works would be so substantial that in some cases fees for performances resulting from the use of mechanical reproductions would not be justified. Automatic phonographs were widely known and used in 1909.
 * 2. The present law does not discriminate in favor of jukebox operators, but removal of the exemption would discriminate against them: jukebox performances are really forms of incidental entertainment like relays to hotel rooms or turning on a radio in a barber shop, and should be completely exempted like them. The industry buys more than 50 million records per year which, under the present mechanical royalty of 2 cents per composition or 4 cents per record, means that jukebox operators are indirectly paying copyright owners over $2 million a year now and would be paying them more under any increased mechanical royalty in the bill. No one has shown why this is not ample. Moreover, jukeboxes use hit records rather than hit compositions, and the composition is usually not the most important factor in the success of a record; jukeboxes represent an effective plugging medium that promotes record sales and hence mechanical royalties.
 * 3. The operation of coin-operated phonographs is a declining business.

Conclusions reached by the committee

The committee’s basic conclusions can be summarized as follows:
 * 1. The present blanket jukebox exemption should not be continued. Whatever justification existed for it in 1909 exists no longer, and one class of commercial users of music should not be completely absolved from liability when none of the others enjoys any exemption.
 * 2. Performances on coin-operated phonorecord players should be subject to a compulsory license (that is, automatic clearance) with statutory fees. Unlike other commercial music users, who have been subject to full copyright liability from the beginning and have made the necessary economic and business adjustments over a period of time, the whole structure of the jukebox industry has been based on the existence of the copyright exemption.
 * 3. The most appropriate basis for the compulsory license is a statutory per box fee, with a mechanism for periodic review and adjustment of the per box fee. Such a mechanism is afforded by the Copyright Royalty Tribunal.
 * 4. This committee in 1958 recommended an average annual per box payment of $19.70. The most recent hearings on the jukebox question did not provide any indication that the committee’s decision in 1958 was unwise or the rate of payment unreasonable.  In providing in this legislation for a total payment of $8 per box the committee has been greatly influenced by the desire to conform to the rate provided in the copyright legislation passed by the House of Representatives during the 90th Congress.