2

1 "§119. Limitation on exclusive rights: Exemption for cer

2

3

tain video recordings

"Notwithstanding the provisions of section 106, it is not

4 an infringement of copyright for an individual to record copy

5 righted works on a video recorder if

6

7

8

9

"(1) the recording is made for a private use; and

"(2) the recording is not used in a commercial nature.".

SEC. 2. The table of sections for chapter 1 of title 17 of

10 the United States Code is amended by inserting after the

11 item relating to section 118 the following:

"119. Limitation on exclusive rights: Exemption for certain video recordings.".

O

Senator DECONCINI. Our first witness today is Prof. Leon Friedman of Hofstra University. Is Professor Friedman here?

[No response.]

Senator DECONCINI. If not, we will proceed to the next witness, Mr. Joseph Waz, the deputy director of the National Citizens Committee for Broadcasting.

Mr. Waz, would you please come forward? Would you please identify yourself and proceed to summarize your statement?

STATEMENT OF JOSEPH WAZ, DEPUTY DIRECTOR, NATIONAL CITIZENS COMMITTEE FOR BROADCASTING

Mr. WAZ. My name is Joseph Waz. I am deputy director of the National Citizens Committee for Broadcasting, which is a consumer group concerned with issues in the electronic media headquartered here in Washington.

As noted in the testimony, copies of which will be provided, we enjoy the support of some 8,000 citizens and consumers here in the United States. Our board is chaired by Ralph Nader, and former FCC Commissioner Nicholas Johnson is also on our board.

We appreciate your invitation to present our point of view on the interests of consumers before this committee as it addresses one of

the many difficult issues to which recent advances in home electronics have given rise.

NCCB believes the interests of consumers are best served by a communications system which allows the greatest number of consumers to enjoy the broadest possible range of services at the lowest possible cost.

Today's video marketplace, if aided by governmental policies which protect the interests of consumers, promises to offer an age of video abundance, a genuinely diverse and democratic system of communications.

If this marketplace continues to flourish, it can expand access by artists and producers to new and appreciative audiences. It will allow the pluralism of our national culture and the many sides of our national debate to circulate more freely without the artificial bottlenecks of the present system.

Consumers want and deserve access to this video diversity that is taking place today with the advances in technology. Consumers want access to the widest available range of over-the-air television services, including new drop-in TV stations and the proposed lowpower TV service. Consumers want access to the new bounty of programing delivered by other media, including cable TV, subscription TV, MDS, and in the not too distant future, direct broadcast satellites.

Consumers want access to home video tools that not only allow them to view prerecorded programing, either on tape or disc, but also allow them the option of producing their own video or the convenience of making copies of programing for their private use.

Of course these interests of consumers are best served by a vigorously competitive video marketplace, one which provides the proper incentives for the investment of energy, creativity, and capital, which in turn yield that very valuable commodity, the television program. With an estimated 3 million video cassette recorders [VCR's] in use and estimated 1.5 additional recorders expected to be in use by 1982, this represents a sizable investment by the American consumer.

VCR's are useful tools with many functions. With a hand-held camera a mother can capture her daughter's first steps on video. After a trip to the public library or the video rental store, a family can watch a recent feature film or a Bogart classic in the comfort of their living room. A laborer can set the timer on his VCR before leaving for work on second shift, return home after midnight, and watch several hours of prime-time programing in his own prime time. Consumers deserve protection in all these endeavors.

Many of the uses of VCR's raise no copyright questions whatsoever, and many uses of copyrighted materials raise no questions as to their fairness. In the long run, no good whatsoever can come from banning the VCR, as some would suggest. Indeed, the injunctions suggested as a possible remedy by the ninth circuit court would be laughably unenforceable, as many newspapers have suggested around the Nation.

For the time being, the relief offered by S. 1758 is both appropriate and realistic. The bill would remove any stigma of apparent liability from a practice which is, in and of itself, harmless to the gen

eral public and useful to individual consumers. This relief should not be delayed or denied.

However, the legislation before this committee should not be considered an ultimate solution to the many thorny copyright issues surrounding home video recording and consumer electronics in general.

There are important issues of fair compensation for producers and artists which must in time be addressed, perhaps in subsequent legislation. Moreover, the impact of unrestrained home recording from various programing sources has to be assessed as it affects the total video marketplace from which consumers may choose.

Copyright is the mechanism by which we assure a continued flow of video productions to the marketplace. While it is desirable that as many Americans as possible should benefit from the wonders of video, it is unrealistic to think that these wonders emerge from some inexhaustible source. If video artists and producers do not perceive opportunities to benefit fairly from the use and enjoyment of their products, they will be disinclined to create them.

If there is a demonstrable loss to artists and producers as a result of home video recording, and if this loss is so significant as to endanger the wealth of viewing options available to Americans, then the public interest cannot be served by permitting home recording without some suitable compensation to holders of copyrights.

There are many questions that have to be considered in this context: What is the measure of loss suffered by a copyright holder? What constitutes fair compensation for this loss? Who should bear the cost of this compensation, and in what manner should this cost be imposed?

The most frequently discussed method of compensation, as suggested earlier today, is a tariff of some sort on videotapes and/or home recording equipment. This tariff system would seem to be the most equitable and the most administratively efficient mechanism available. If the cost of compensation is spread widely among all in the video recorder user group, the cost of home video products need not be rendered prohibitive.

What are copyright holders actually losing to home taping? The available studies on the habits of VCR owners vary wildly in their conclusions. A PBS study shows that once a consumer tapes an over-the-air program and views it, he almost invariably erases the tape or tapes over the earlier program and almost never makes any commercial use of the recording. Yet a UCLA study commissioned by Paramount reportedly shows that 85 percent of those who tape do so for library purposes-that is, to keep a show for future viewing.

Clearly, any accurate determination of just how much home taping is going on and how much of this taping is not fair use for copyright purposes must await an objective and thorough survey of the user public.

There may also be some merit in the argument advanced by Senator D'Amato that no one in the TV programing chain, whether it be the program producer, the broadcaster, or commercial sponsor, loses at all when a program is taped for home use. This too has to

be weighed into any determination of the loss suffered through home videotaping.

A compensation system based on equipment and tape tariffs and administered by an organization like the Federal Copyright Royalty Tribunal or the private music licensing agencies makes the most sense if indeed there is a loss to be compensated.

It would be advisable to put such a mechanism in place to deal with the predicted proliferation of home recording equipment, but there are a number of considerations in constructing such a scheme, some of which I have tried to highlight already, that may have important consequences for the consumer.

First of all, such a system of compensation should not be seen as a way to compensate for the loss of revenues from the so-called piracy of video recordings. Piracy is the unauthorized reproduction and sale of copyrighted materials. It is theft, and it warrants tough penalties.

However, the innocent consumer should not be expected to compensate for a loss for which he has no responsibility. Indeed, it is likely that consumers who may buy a pirated tape or disc have no reason to suspect they are not buying a legitimate product.

Second, a compensation system should only reward those who would stand to lose other opportunities to market programs being taped by home users. A movie producer whose product is shown on network TV might reasonably be expected to take advantage of secondary markets at some subsequent point. Independent TV stations, cable local origination channels, and prerecorded disc or tape distribution comprise some of these markets.

Senator DECONCINI. Excuse me, Mr. Waz. I am very sorry to interrupt you. We have a vote on, and the 7-minute bell just went off, so we will have to be excused for about 10 minutes. We will just take a little recess here and be right back.

Mr. WAZ. Very good. Thank you.

[Recess taken.]

Senator DECONCINI. The committee will come to order, please. Mr. Waz, we apologize. It may happen again this afternoon for our other witnesses. Would you please continue?

Mr. WAZ. Fine. Thank you, Senator.

I was going to raise a second consumer issue that would be implicated in any attempt to draft a reasonable compensation system, and that is that a compensation system should only reward those who would stand to lose other opportunities to market the program being taped by home users.

A movie producer whose product was shown on network TV might reasonably be expected to take advantage of some secondary market at a subsequent point. Independent TV stations, cable local origination channels, and prerecorded disc or tape distribution comprise some of these markets. Therefore, the movie producer might have an interest to be protected through this compensation mechanism.

By contrast, a sports team which holds the copyright to its regular season ball games may have no secondary market which it could reasonably be expected to exploit in future-for example, tape-delayed TV showings at a substantially later period or com

mercial videotape distribution. Therefore, this particular copyright holder may suffer no loss whatsoever from home videotaping.

A third point is that any process to determine the level of royalties to be paid should have effective public scrutiny or legislative oversight. The process of establishing compensation levels should not resemble the closed-door negotiations between the cable and broadcast TV industries over compulsory licenses and syndicated exclusivity.

A similar bargaining session between the tape equipment industry and producers which leaves consumers out of the equation could adversely affect consumer choice through artificially restricting the availability of programing and could boost the cost to view

ers.

The proper way to set compensation levels and protect consumers' interest is through an administrative or legislative process which includes full and effective participation by affected consumer

groups.

It is reasonable and consistent for consumers to desire the convenience of home video recording and the benefits of choice that come from an expanding marketplace and from fair and equitable compensation to producers and artists.

There is no desire on the part of consumers to kill the golden video goose, but there is clearly a need for a new copyright regime to accommodate the proliferation of consumer electronics.

The issues are not unique to home video recorders. Important questions about the entitlement of consumers to receive and use programing transmitted over the air and the entitlement of producers to be paid for these uses also arise in the context of backyard satellite earth receive-only stations, receiving and decoding equipment for subscription TV and multipoint distribution service transmissions, and home audiotaping of radio music broadcasts. Both the Copyright Act of 1976 and the far more antiquated Communications Act of 1934 have thus far been inadequate to deal with these many new problems.

We urge the Congress to put an end to the perception that home videotaping is in any sense criminal. This bill satisfies that goal. However, Congress should treat this bill as an interim measure, prefacing an attempt to come to grips with the new media and their many legal implications.

An approach which attempts to render new technological breakthroughs illegal is ill-advised and probably unenforceable. Wherever possible, Congress should avoid reducing these problems to considerations of legality of consumer use and rather look to the methods of just compensation to artists and producers if their interests are demonstrably affected.

NCCB again thanks the committee for the opportunity to discuss these important issues. I would be pleased to answer any questions. Senator DECONCINI. Mr. Waz, thank you very much. I have a couple of questions, and then I will yield to my colleagues here.

Under the current situation we have before us today, home video recording off the air is illegal, and the Government does not seem to be able to enforce any such violation. The result, in my opinion, is another situation in which the Government appears inept because it cannot enforce its own laws. Many honest Americans are