Broadcasting (Oct 1931-Dec 1932)

i[^©AD€ASTD The NEWS MAGAZINE of VOL. 3, NO. 5 WASHINGTON, D. C THE FIFTH ESTATE SEPTEMBER 1, 1932 $3.00 PER YEAR — 15c A COPY Copyright Fees on Percentage Scale Forced By SOL TAISHOFF NAB Under Duress Accepts 3 -Year Contracts of 3, 4, and 5% Plus Sustaining Fee; Schuette Given Plenary Powers LEFT WITH NO alternative, the broadcasting industry has accepted "under protest" the percentage formula of the American Society of Composers, Authors and Publishers fixing the payment of royalties for the right to perform the copyrighted music controlled by that monopoly. Drastic revisions upward of the present scale become effective Sept. 1 for all stations with more than 500 watts power and Oct. 1 for all others. The ASCAP proposal was accepted involuntarily by the NAB board of directors at a special meeting in New York Aug. 24, when it became evident that the i copyright group would not agree to anything other than the percentage basis, holding broadcasters at their mercy under threat of suits for infringement if they failed to accede. The new contracts will require payment of "sustaining" fees, to be readjusted in the cases of some stations, but to net ASCAP approximately the amount it now receives on a fiat rate basis, plus "commercial" fees on a percentage basis for all stations. This latter fee will be 3 per cent of each station's "net receipts" for sale of time for the first year, 4 per cent for the second and 5 per cent for the third. Schuette Given Powers COINCIDENT with the board's action accepting the new scale, it conferred upon Oswald F. Schuette, director of copyright activities, plenary powers to deal with all further phases of the copyright situation and to represent the industry in the drafting of the new individual contracts with ASCAP. The negotiating committee, con * sisting of P. W. Morency, WTIC, Hartford, chairman, Edward Klauber, CBS first vice president, and A. L. Ashby, NBC vice president and general attorney, was dissolved,, as was the plenary committee, comprising A. J. McCosker, WOR, chairman, F. M. Russell, NBC Washington vice president, and H. C. Butcher, CBS Washington director. These committees have grappled with the copyright problem since last April. Their functions were given Mr. Schuette by formal resolution. * Under the arrangement all stations will be accorded identical Statement by Mr. Schuette "THE EFFORTS of the National Association of Broadcasters to protect the industry against extortionate copyright fees were not abandoned Mr. Schuette when the board recommended the acceptance of the percentage basis demands of the American Society of Composers, Authors and Publishers. "For the moment, that protection must be found in an equitable revision of terms of the proposed contracts with the individual stations. Mr. Mills, the general manager of the Society, has agreed to cooperate in that revision. "The acceptance of the percentage contracts was forced by the threat of infringement suits on a scale that would have destroyed the industry. That is an unsound basis for any negotiations. The contracts which are finally made must be free from any implication of racketeering. They must represent fairly and equitably the value of the actual use of the compositions controlled by the Society. "Any other basis for compensation would be unfair to the broadcasters, to the members of the Society, to composers who do not belong to the Society, and to the public. "More than ever, this situation calls for a united front on the part of the broadcasting industry." treatment in the "commercial" licenses. The networks will not be dealt with as separate entities, but will pay the royalties on the net sales of each station which they own or operate, rather than on their receipts as networks. Stations subscribing to network programs will pay the percentage rate on network, as on local commercials. While the new contracts become effective as of Sept. 1, except for stations of 500 watts or less, which have been accorded extensions of their present contracts until Oct. 1, assurances have been given that stations will not be "stampeded" into signing them at once. Infringement suits will not be instituted against stations that have expressed willingness to accept contracts once the final terms are agreed upon, E. C. Mills, ASCAP general manager, has notified Mr. Schuette. It is suggested that broadcasters consult their local attorneys before signing the new contracts. Suits Threatened MR. MILLS declared he expected the new contracts to increase the royalties paid by broadcasters from the present annual figure of $966,000 to $3,000,000 in 1933, $4,000,000 in 1934 and $5,000,000 in 1935. His estimates were based largely on present business and on the assumption that there would be no reduction in the "sustaining" license income of ASCAP from stations. His estimates are considered high by broadcasters. Indications were given that several larger stations might attempt to test the legality of the new contracts. There also was talk of instigating action in the Department of Justice against ASCAP as an illegal monopoly, and of petitioning the Federal courts to grant injunctive relief until the legality of the new contracts can be tested. However, only vague and indefinite suggestions of such procedure reached Broadcasting up to press time. The fact that the NAB board recommended the acceptance of the ASCAP formula does not definitely close the door for the next three years to possible readjustments in the interim. It was pointed out that Mr. Schuette, as executive secretary of the Radio Protective Association, representing independent set manufacturers, forced RCA to reduce the percentage of royalty it charged set manufacturers for the use of its patents through negotiation and without a court decision to hold such royalties excessive or illegal. It is even possible that, in the ensuing negotiations with ASCAP, which began Aug. 30 in New York between Mr. Mills and Mr. Schuette, some reduced basis may be worked out. While for the time being the commercial fee of 3 per cent for the next 12 months seems to be fixed, there will be readjustments of the "sustaining" license, in some instances. Practically since the negotiations began in April, Mr. Mills has declared that the fees paid by some 310 "smaller" stations would be substantially reduced through readjustments of their "sustaining" fees. This he reiterated upon acceptance of the percentage basis, and on Aug. 25 at a preliminary conference with President Harry Shaw of the NAB, Managing Director Philip G. Loucks and Mr. Schuette, he agreed to sit with Mr. Schuette to work out revision of the "individual" sustaining fees. Big Station Increase BRIEFLY, according to Mr. Mills, about 130 large stations will pay heavily increased fees. A number of them may be requested to accept increases in their "sustaining" licenses. Some 310 small stations, he pledged, would be given sharp reductions in these "sustaining" licenses. High power stations in poor markets, he indicated, would not be asked to pay "sustaining" fees equal to those of stations of the same power in thriving markets. He declared that the cases of individual stations will be gone over carefully in the conferences with Mr. Schuette. Just what the term "net receipts" embraces is now the subject of considerable misunderstanding. The new contract form of ASCAP, now being prepared, and shortly to be served on all stations by ASCAP agents, will describe it as "the full amount received by or paid to the station for any of its time on the air, less commission not exceeding 15 per cent, if any, paid to the advertising agent or agency not employed or owned in whole or in part by the station." Mr. Mills implied to this writer that no other items would be deductible. The NAB negotiating committee, however, informed the board of directors that this term September 1, 1932 • BROADCASTING Page 5