they work differently there, because there, almost all of the-well, not almost all, a great many records are produced under the compulsory license. This is not the case here. The compulsory license sets the parameters, but almost all records are produced under negotiated license. Elsewhere, their compulsory license is vigorously used, and there are bodies, Government bodies, that regulate them. And in that type of situation, I think it is easier to have a percentage that would be fairly administered.

Moreover, I think that the pricing of records is more orderly in other countries than it is here.

The time may come when patterns in the music industry and the legal and administrative framework in which they operate make it advisable to shift from a flat rate per record to a percentage of price, but it does seem clear that this time has not yet arrived.

So, if I may, I would like to come to the final and most difficult question of what the rate per record should be, assuming all of these other givens. The 1909 law provides for 2 cents; the 1965 bill, which was supposed to be a compromise, provided for 3; the House bill, which is the bill reported by your committee, Mr. Chairman, in both 1966 and 1967 and also the bill that passed the House in 1967 compromised at 212 cents. The Senate brought it back up to 3 cents in 1974, and that is what is the fee in the bill you have before you.

However, this year, the Senate Judiciary committee on October 7 last month knocked it back to 21⁄42 cents. So our conclusions on this delightful question are stated on pages 40 to 46. It is a rather long conclusion, but it is a very difficult question.

Let me read our basic position, and then try to endorse pretty much the principles that your subcommittee adopted in 1967 as a way of approaching this. Our basic position is that the royalty rate should be a statutory rate, at the high end of a range within which the parties can negotiate now and in the future for actual payment of a rate that reflects market values at that time. It should not be so high, however, as to make it economically impractical for record producers to invoke the compulsory license if negotiations fail. This was our position in 1965, and I think it still remains our position.

You, in your reports in 1966 and 1967 also said something with which we agree. In the significant debate over whether the statutory fee is a ceiling or a rate, there appears to be some validity to the arguments on both sides. The fee is certainly a ceiling, in the sense that no higher amounts are ever paid, but the record producers may well be right in asserting that the statutory fee establishes a base with stereotyped variations downward that for practical business reasons is used as the rate in most written agreements. In this sense, there may be relatively few negotiated agreements in the real sense of the term, but this does not necessarily mean that if the statutory maximum were increased somewhat, the prevailing rate structure would immediately be increased the maximum without negotiations.

Obviously, if you peg the fee higher, there will be negotiations, because everything is at 2 cents or below, and as far as existing negotiated licenses are concerned, it will remain at 2 cents. This point has been made, but I think it needs to be made again.

Operating on these premises, the House Judiciary Subcommittee in 1966 undertook a thorough analysis of the testimony and statistical data that had been presented to it at the 1965 hearings and that it had been able to collect on its own. It concluded that 2 cents was too low, that 3 cents would be too high. It adopted 211⁄2 cents, but not necessarily as the prevailing rate now or in the future. The 1966 and 1967 House reports emphasized that the half-cent increase is intended merely to widen the copyright owner's bargaining range, without destroying the value of compulsory licensing to record producers. This issue, needless to say, was immediately transmitted to the Senate, which was having hearings at the time the House passed the bill, and the Senate engaged the Congressional Research Service of the Library of Congress to make a study of all of the testimony that had been presented in both Houses. And the House subcommittee's response to the testimony it had heard, and 113 page report dated June 30, 1969, was prepared by an analyst in the Congressional Research Service, and he concluded, to paraphrase his statement, that the data was insufficient to draw a real conclusion from. He said this study has attempted to evaluate whether or not the Congress has the information it needs to render a final judgment on the mechanical royalty controversy. Unfortunately, it must be said that the findings to date remain inconclusive.

Specifically, he made two points directed rather pointedly at both sides. He said first, that the record industry, which opposes any increase in the current mechanical rate ceiling, has not provided the Congress with a complete and meaningful picture of its financial condition. And second, similarly, the music publishers and the composers they represent, who advocate an increase in the ceiling rate have demonstrated a clear reluctance to provide the Congress with the type of financial information that will be needed to evaluate that position. And this, I think, was not intended in a pejorative way. It was just a statement of his conclusions, which I think were probably correct. He recommended additional independent factfinding, and identified two principal areas of inquiry that should be thoroughly explored before a definitive conclusion was reached; first, the obtaining of complete, definitive, accurate information about all aspects of the financial characteristics of the music recording industry, using the following guidelines, and he listed three which I have got here on page 43, and they reflect his criticism of the value of the statistics that the record industry put forth. And the second, obtaining full knowledge of the many important changes that have taken place in the economic structure of the music publishing and recording business since the end of World War II, and particularly since the middle 1950's, with special attention to certain economic implications which he enumerated, and they are on page 44.

I think this was in 1969, and believe it or not, the record industry, the business has changed substantially since 1969, and you would have to add or elaborate on these criteria.

After reviewing the Knight report and the various economic data submitted to it during and after 1967, the Senate subcommittee reported the revision bill, as you had, with the rate pegged at 211⁄2 cents.

Then-and I have tried to document this in the paper, an effort was made in the Senate to get the rate raised, simply on the ground of inflation, that is 212 cents was a fair rate in 1967 or 1969, then certainly more, just on the simple basis of inflation, would be fair today.

Apparently accepting this inflation argument, the full Senate Judiciary Committee raised the rate back up to 3 cents in 1974, and the bill passed the Senate on September 9, 1974, with the 3 cent rate which was carried over into your bills, and it has just now been knocked back to 22 cents in the Senate Judiciary Committee.

If I may, I would like to read from page 45. It is obviously much too late in the game for Congress to undertake the kind of thoroughgoing review urged by the Knight report. Moreover, the bill, in its present form, creates a copyright royalty tribunal which, for the future, could undertake the kind of exhaustive study Mr. Knight contemplated, particularly if it were given subpena power.

However, Congress must decide now on the specific fee that the tribunal will be reviewing later. The Copyright Office believes that the 212-12-cent-per-minute adopted by the House of Representatives in 1967 was well thought out and fair in 1967. We take no position as to whether it is sufficient in 1975, because the copious testimony and data submitted to the House subcommittee on September 11, 1975, is in sharp conflict and by itself does not provide a sufficient basis for a definitive conclusion.

Let me add here, Mr. Chairman, that I am not really saying that it is impossible-I am not sure I agree with Knight that you need to, for our purposes, to be comfortable with a rate, to go into an enormous economic study. I think that-I do not share his sense of hopelessness about being able to obtain independent data and trying to evaluate them in some way. It is a painful process, but I think it can be done, and we are starting to do this in the office now, on the basis of trying to review what you were presented at the hearings and so forth, but this is not something that can be done easily and, as Knight says, the results are problematical; there is no question about it.

We are not opposed to the 3-cent, 3/4-cent-per-minute set in your bill, the bill now under consideration by you, either. In other words, we are saying that 212 cents was, we consider, fair in 1967. We are not saying that 3 cents is unfair in 1975. We cannot agree that the factor of inflation taken alone is automatically sufficient to justify the increase, but we equally cannot agree that inflation of the sort we have seen in recent years can be discounted entirely.

Although these points have been made many times, it bears repeating that the mechanical royalty is compulsory only on the copyright owner, not the recordmaker, that it has a ceiling but no floor, and that the real market value of mechanical rights in this country has never been established, because ever since those rights were created in 1909, the bargaining power has all been one way.

In a typical case at present the individual authors-I am not talking about the total copyright owner group, but the authors of a songwill divide 1 cent per record, which would be $1,000 for a hit record song, 100,000 copies. Now, we are talking here about-I am talking about inflation, and we are talking about individual songwriters, not corporations. And the impact of inflation on them since 1967 has been real. The cost of making records has risen dramatically in the last 10 years, but so have the prices of records.

It may be true, as the RIAA claims, that corporate profits in the record industry have decreased because of inflation. I have no basis for arguing with that. The fact remains that, of the various individual human beings that are involved in making a record, the individual songwriters are the only ones who have received no increase in their remuneration to make up for the rise in their individual cost of living.

The range of rates under discussion in the two Houses at present at 21 cents and 3 cents. The Copyright Office believes that Congress has enough information before it to enact a fair rate within this range, recognizing that the rate's relation to true market value, and its effect as a ceiling will be thoroughly examined by the royalty tribunal.

I would add, in response to Mr. Wiggins' point about the floor, I have thrashed around in my own mind for a long time as to whether or not there might be some way of doing as the songwriters have suggested and establishing a floor, but you cannot have a floor in a compulsory license of this sort. You could have a compulsory license that sets a rate, period, and provides negotiations between those, but this would have to supersede any free negotiations, and as long as this is the alternative to free negotiations, you just cannot have a floor. It just is not possible with this kind of compulsory license. You would have to restructure the compulsory license very radically.

I think that there are cases where it is necessary to negotiate down, perhaps even below 1 cent, in certain cases, in order to sell your song, and I do not think it would be possible to take that right of a free negotiation away from the songwriters under this kind of compulsory license. I am not saying that your basic point, I am not saying is ill taken, but I think it argues more for doing away with compulsory licensing altogether rather than trying to restructure the present

system.

This is the end of my presentation.

Mr. KASTEN MEIER. Do the members have questions of Ms. Ringer at this point?

Mr. DRINAN. I want to thank you, Ms. Ringer, for this presentation. But I have a lot of trouble with the setting of this fee. And that, as you point out so well, was a happenstance of history, and you say on page 36 that the compulsory license has taken solid root in U.S. copyright law. We have passed the point of talking about free negotiations in this area. Well, that is not so if a majority of this subcom

mittee say so.

Aside from all of the historical tradition and the apathy in Congress, what do you think of the merits? I have great difficulty in saying it is 2 cents or 4 cents or whatever. Why should we be in this business? Ms. RINGER. Let me say in principle I agree with you.

Mr. DRINAN. All right. Thank you. Where do we go from there? Ms. RINGER. I think that one must recognize the realities.

Mr. DRINAN. The realities, ma'am, are that there are lobbyists out there who are pouring mail into me and all the members of the committer and they want something. And I do not want to give them something that is going to downgrade the consumer and do nothing really for the authors and the composers as you say here. So I am not going to be trapped. I will vote no. I just will not come. I will delay the thing until somehow we get what you say is correct.

MS. RINGER. I cannot argue with you in principle. In speaking of realities I am speaking not so much of the realities of lobbying as the

realities of the music business. I think it would send a shock wave through the music business if we took away the compulsory license immediately.

Mr. DRINAN. It would what?

Ms. RINGER. I think it would send a shock wave through the music industry.

Mr. DRINAN. That is what Congress is supposed to be doing. Well, on the asumption we are trapped by something that never should have been devised, why can we not at least do what you suggest on page 39, invent a fair and more flexible approach which they do in other nations. Then you say giving up the ghost on page 40, it seems clear, however, that this time has not yet arrived. Why not?

There are people here, the majority of the subcommittee, who have never been through this difficult area before, and I am prepared to send shock waves if that is the just thing to do.

Ms. RINGER. Let me respond by saying that in the 1963 preliminary report, preliminary draft bill, we had a section like this. And I think it would be well to look at it again and see what you think of it. I do not think that the Hart bill was satisfactory in the sense that it spoke of the established list price which is a chimera.

Mr. DRINAN. But you would agree that the basic approach in the bill as it exists now, and in 2223, is less fair and less flexible than it could be.

Ms. RINGER. If you want a yes or no answer, the answer is yes. Mr. DRINAN. Thank you very much. I do. I like that type of answer I like.

Now on the question that-assuming we cannot win on those two basic issues that we have to decide how many pennies we are going to give, and that the Knight report here sets it out very clearly that we have none of the information that we need if we are going to pretend that this is just; and that the Knight report, 150 pages, and no one has attacked the objectivity of that. He is apparently a researcher and the industry had not heard of him over there in the Library of Congress. And he says that--and I agree totally with him-that we have none of the information that we want.

All I know is you go out there and you pay $6.95 or $8.95 for a record and you say, well, my God, why does this cost this much? And on page 43, you say, according to Mr. Knight, it says the Congress should require disclosure of the financial records of all music publishing and record firms. And we do not have that and they do not want to give it. And the next you say the publishing and recording business should give us that and they have not. And then even the artists or the recording people, or the composers, they have not given us. So we have no knowledge, we do not know what we are doing.

And I think you admit that on the bottom of page 44. You in effect say, and so it goes, and that means to me that Congress does not know what it is doing. That is the way it comes out to me. And you go back and forth on these things, the various economic data submitted, and we have only fragmentary evidence which, as you suggest, is totally in conflict which we received in the previous weeks; and that you say,