Page:H.R. Rep. No. 94-1476 (1976) Page 113.djvu

 : in a barber shop, and should be completely exempted like them. The industry buys some 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 has been, for some time, a declining business, and a great many locations are now operating at a loss and are kept going only through profits from other coin-operated vending machines. Jukebox operators could not sustain licensing fees comparable to those paid in other countries.

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 Commission.


 * 4. The $8 per box annual compulsory license fee represents a compromise figure adopted in 1967 and, as a compromise, it is acceptable as the rate to be specified in section 116. The Committee was impressed by the testimony offered to show that shifting patterns in social activity and public taste, combined with increased manufacturing and servicing costs, have made many jukebox operations unprofitable.

Limitations on exclusive right

The compulsory licensing provisions in section 116 have been patterned after those in section 115, although there are differences. One difference occurs in the first subsection: section 116(a) not only provides “the operator of the coin-operated phonorecord player” with the opportunity of obtaining “a compulsory license to perform the work publicly on that phonorecord player,” but also exempts entirely under certain conditions “the proprietor of the establishment in which the public performance takes place.” As provided by clause (1), the proprietor is not liable for infringement unless he is also “the operator