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for that value should go to the persons who originated the property and who are responsible for contributing the value the public derives from it.

C.

The OTA concluded that

[A]lthough home taping may reduce the recording
industry revenues, a ban on home audio taping
would be even more harmful to consumers, and
would result in an outright loss of benefits to
society, at least in the short term [in the $2-
3 billion range.] The longer term consequences
of such a ban are less clear, and would depend
on [a variety of factors.]

The Copyright Office Study:
Audio Transmission Services

Copyright Implications of Digital

On October 1, 1991, the Copyright Office submitted its report on

the copyright implications of digital audio transmissions. 29

In its Notice of Inquiry the Office posed two sets of questions about compensation for copying in the context of digital audio broadcast and cable technology.

1.

2.

Would a copyright owner have the practical
ability to negotiate with the owners/operators
of digital audio services for compensation of
his/her works? If not, could representatives
of copyright owners, such as performing rights
organizations, accomplish this task?

Should a royalty be placed on recording
materials, such as blank tapes, or on digital
recording equipment itself, to be distributed

28 U.S. Congress, Office of Technology Assessment, Copyright and Home Copying: Technology Challenges the Law, OTA-CIT-422, p. 207, (Washington, D.C.: U.S. Government Printing Office, October 1989).

29 This report was in response to a request for a study for the Chairman of this subcommittee, Senator Dennis DeConcini and the Chairman of the House Subcommittee, Representative William J. Hughes.

The American Society of Composers, Authors and Publishers (ASCAP) supported imposition of a domestic royalty system that could also be implemented internationally. ASCAP volunteered its services in administering such a system. In specific reply to the first questions set out above, ASCAP claimed it is not feasible for individual copyright owners to negotiate with audio service providers to compensate them for losses due to home taping. It also asserted that the performing rights organizations have "the ability to undertake the licensing and distribution activities on behalf of the creators and copyright owners of the works rendered, if asked and authorized to do so. 31 In addition, ASCAP states that it is not the DAB service providers that will be making unauthorized copies of works, but rather, home tapers, whose activity cannot practically be monitored. "[I]n all fairness, it is the listeners who are ultimately profiting from the recording and who should, therefore, pay for it." 32

ASCAP believes that the fairest solution for all parties would be payment of royalties on taping equipment and blank recording tape. It notes that such systems are already in effect in many other nations, and have been suggested for establishment in the coming years for members of the European

30 Question three and four in the Office's Notice of Inquiry. 55 Fed. Reg. 42,916, 42,917 (1990). Note: All comments were submitted to the Copyright Office before the agreement that the recording and electronics industries reached on July 11, 1991.

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Community.

Songwriters, performers, and music and sound recording rights owners would benefit from such a system. If approved by Congress, "existing music licensing groups could easily handle the collection and distribution of these royalties. 33

Broadcast Music, Inc. (BMI) also stated that copyright owners or representative performing rights organizations do and will continue to have the practical ability to negotiate with digital audio services' owners or operators. BMI has already completed negotiations with two digital cable audio services for payment to its clients for transmissions of their works, and similar agreements could be made with digital broadcast service 34 owners. BMI suggested that royalties "to account for whatever home taping is likely to result from DAB transmissions could be imposed upon either blank tape or digital recording equipment manufacturers or sellers to be remitted to the Copyright Royalty Tribunal or other appropriate agency for distribution..." based on an "industry-negotiated formula for division among participants.” 35 In its reply comments BMI stated that compensating artists by placing a royalty on blank tape and/or recording equipment would encourage and compensate artists without placing unfair burden upon consumers. 36

In its comments the Copyright Coalition urged Congress to enact legislation to establish a home audio taping royalty system. A royalty

32

system would not interfere with introduction of new recording technologies, nor would it unduly impede consumers' abilities to tape at home, according to the Coalition. Systems are in place internationally that seem to work, and could serve as models. If not a royalty, a compulsory license could be established to authorize the practice of home audio taping in exchange for modest royalty on recorders and/or blank tapes. The license rate could be 37 set by the Congress, or by the Copyright Royalty Tribunal to ensure fairness to all interested parties. Administration of the system could be conducted by existing performing rights societies. The Coalition stressed that the mechanical Serial Code Management System (SCMS) alone, even if implemented, could not curb home copying from digital sources, but that SCMS may be effective as part of an overall compensation framework.

The Recording Industry Association of America (RIAA) did not propose any particular royalty system in its comments, but instead lobbied heavily for a performance right in sound recordings, saying that "performance royalties from the countless broadcasts of these recordings (referring to recordings that don't become "hits", but continue to get airplay) would #38 In provide deserved and needed income to .. artists and musicians." general the AFL-CIO Department of Professional Employees, American Federation of Musicians, and American Federation of Television and Radio Artists supported RIAA's comments.

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Strother Communications, Inc. (SCI), a proponent of a terrestrial, over-the-air digital audio broadcasting system, supported the idea that performers and copyright owners should be fairly compensated for transmission of works by DAB operators. However, SCI maintained "that the existing mechanisms by which such compensation is determined and paid by radio stations will continue to be adequate for that purpose. Thus, in the case of recorded music programs, performers' and copyright owners' compensation can be handled under the auspices of ASCAP and other performing rights organizations, exactly as it is today. 39

CD Radio, Inc., a developer of integrated satellite and terrestrial delivery of digital audio services, also claimed that copyright owners and their representatives can negotiate compensation for digital programming in the same manner as is done today for AM, FM and TV transmission. 40 The firm stated said that "royalties should not be placed on tapes or recording equipment if this discriminates against the development of digital audio radio. 41 General Instrument Corporation, a manufacturer and supplier of electronic products, systems and components, took a similar view regarding negotiations for compensation, commenting that it is too early to tell whether or not royalties on hardware or tape are needed.

The Home Recording Rights Coalition (HRRC) was opposed to the concept of imposing royalties on recording media or digital recording

39 SCI comments at 2.

40 CD Radio comments at 3.