good and most importantly success would mean a system based on the guiding principle that i set forth earlier -- all creators receive fair pay on all platforms wherever their music is used. in closing, mr. chairman, the american music industry represents some of our best talent and our most cherished assets. all we're asking for is something pretty simple -- that those responsible for bringing these treasures to life be treated fairly when someone else profits off of their work. thank you, mr. chairman. >> thank you. >> chairman goodlatte, ranking members conyers and nadler and members of the subcommittee, thank you for the opportunity to testify today, my name is david frooer, i'm the executive vice president and chief financial officer of sirius xm. sirout xm is one of the largest radio providers in the united states, we have over 25 million subscribers. subscribers residing in every congressional district in the continental u.s. and we employ 2,100 people around the nation.

sirius xm is well positioned to offer testimony on these copyright issues. in 2013, we paid approximately $325 million in royalties to record companies, publishers, song writers and artists. we have paid over $1.8 billion in music royalties since we launched service 11 years ago. i'd like you to take away four key themes from my testimony. first, parity. radio is radio whether it is am, fm, satellite. all companies should pay for the music they use on the same ba s basis. continuing to exempt the terrestrial radio companies that dominate radio listening with over 90% of the market and generate over $15 billion in revenue is bad policy. copyright law does not distinguish between am and fm radio based on technology and it should not distinguish between am, mf, satellite, or internet radio based on technology. second, today's copyright act creates an unfair digital

disadvantage. drawing any distinction based on the claim that some radio services are digital while others are not is based upon a false premise and produces a distorted result. terrestrial radio began broad katzing digital signals over a decade ago and they have routinely made digital companies in the ordinary course of their broadcast corporations since the 1980s. similar services, regardless of the mechanism or medium through which they are delivered should be treated similarly. with each rate-setting proceeding, the digital disadvantage between terrestrial radio and other radio services just gets wider. the two pending bills to songwriter equity act and the respect act will only further widen this digital disadvantage. third, protection from market power. the music business has never been more concentrated than it is today. three companies control nearly 90% of the market for distribution of music, the same three companies control nearly 70% of the music publishing

market. two pros control over 90% of the musical performance rite and one collective controls the sound recording performance rights. the consent decreakreecrees are to protecting against non-competitive rate demands. they don't interfere with competition, they prevent activities that would otherwise constitute clear violations of the antitrust laws. recent attempts by copyright owners to partially withdraw from ascap or bmi in an attempt to cherry pick entities relying on their pro license for access to those publishers' works are troubling. especially light of the publi publish publishers' refuse al to provide the catalog data that would allow the services to remove the catalog from the air in the event they couldn't reach agreement on the fees. fourth and finally, fair rates. the willing buy/willing seller standard can have meeting only where marketplace transactions reflect the workings of an actual free market. there is no functioning free

market in music licensing because of the unprecedented concentration in the music industry and the aggregation of power in the pros. congress should instead adopt the 801b rate-setting standard for a broad away of music licensing purposes. that standard provides the copyright royalty board with wide latitude to ensure that both copyright owners and users are treated fairly, including potential new users like terrestrial radio. the 801b standard is also a matter of simple fairness. congress adopted that standard in recognition that services subject to those standards founded their services at a time when there was no sound recording performance right at all. to change the standard now would fundamentally undercut the reliance interest of those services. so in summary, while the $15 billion am and fm radio industry pays the pros rocketly $300 million a year they don't pay a penny for sound recording. radio companies like pandora and

sirius xm are less than one-third the size of am and fm in terms of revenue yet we'll pay more than two and a half times, nearly $800 million in music royalty this is year. it is simply bad public policy to reward the biggest entities in the radio field with a competitive cost advantage while penalizing innovation and emerging services that increase economic activity and create jobs. as you consider new legislation, it's my hope you will recognize the unbalanced playing field for the music licensing today and craft an equitable and durable solution. i thank you for the opportunity to testify. >> thank you mr. frear, i appreciate that. i want to thank the panelists and i don't want to abuse the five-minute rule and for that i'm appreciative to you. we try to comply with the five-minute rule, too, so if you all could keep your responses as tersely as possible we woeb appreciative to you. ms. cash, let me start with you with a simple question but i think it may be pertinent.

do you believe that the music licensing system should be set up in such a way that makes it easier or at least more simple for artists to understand how they're being paid and who's paying them? >> i do. i think that transparency is essential and that's the -- the lack of transparency is a huge part of the problem. for instance, that was petition going around not long ago from pandora asking musicians to sign it and it was very enthusiastic about how that would benefit us. we found that to be somewhat manipulative, not transparent and, in fact, they lobbied for lower rates for us. so if fans are confused -- which they are, they come to me all the time and say "how do i buy your record, what is the decent thing to do? how can i support you so you keep making records?" then if they're confused and

we're a bit confused i think transparency would go a long way towards clearing some of this up. >> ms. cash, you opened the transparency door so let me walk through that door. i'm going to put this question to mr. harrison and mr. williams. transparency a word this subcommittee has heard repeatedly. quite a bit of -- including transparency of ownership, transparency in who pays what and transparency in how royalties are divided. how should the congress in your opinion consider the issue of transparency as we consider potential changes to our music licenses laws? >> if i get the gist of what you said -- and my hearing is not the best -- >> nor is mine so i can relate to it. >> but your question i think as much as i could hear was related

to transparency and ascap is very proud of our transparency. we have a database for our members at any -- if the "love boat" theme that i wrote is being played in lithuania right now, i can jump on line and find out that east it's being played. we have -- i must -- i have to disagree with mr. harris. i think he was perhaps misinformed in something of what e involved in the pandora case with sony. i want to straighten that out first of all. we're very proud of the fact that we are open and transparent on all cases. when pandora requested information on licenses, for example, we -- two days before the end of their -- the trial, we immediately gathered that information and after two days when we had it all together we reached out to pandora and said "would you like that information?" we never heard back from them. i understand the communication in a multibillion organization sometimes is not the best, perhaps i didn't reach the head

office. but we had the information that they wanted and we have it today and i have to tell you, mr. chairman, that i believe that any business that we do -- any licensee that we do business with has the right to know what they're getting for their money so we have that information, it's open and available. we are proud of our transparency on all levels and incidentally there was never any finding of any improper coordination between ascap and any of the publishers. if there had been i'm sure the very capable judge would have brought it to our attention and would have filed on it. there was never any such filing. >> thank you, sir, mr. harrison? >> yes, transparency is a key part, as mr. frear indicated to any free and competitive market. the ability for users to understand who owns the content that is supposedly being licensed and our ability to access that information with due respect to mr. williams, i don't

want to get into a debate about what happened in a trial, there's 136-page opinion that's very detail bid judge cote and if the chairman would like it i'll be happy to provide it for you. >> let me try one more question. with the world going digital and the need to update our laws for the digital age is the time to finally resolve music license issues once and for all before us? >> definitely. the opportunity has never been greater. it's when the system is inn crisis that there's an actual opportunity to bring people together to actually try and make a difference. that time seems to be now. >> anyone else want to add very briefly to that? i'll open the door if you want to because my red light is about to illuminate.

>> i've heard a lot of testimony about the -- what do you call it? the free -- the free air play for free promotion system has served the industry, served everybody well and it's -- you know, it's a good thing. let me say i find argument incredible. in a capitalist system, it may be somebody's judgment that not paying people for their performances because they get compensated through promotion, et cetera, that may be a judge. it may be correct. it may be equitable. but it should be the decision of the person whose services is being broadcast. you won't go into a store and say "i decide that the price of that is fairly such and such and therefore i'm going to take it

far price." someone who perform cans not be told -- i don't know see how in any rational way they can be told "we have decided that for all these reasons you should be happy with just promotion." i don't see how equitably or morally anybody has the right to make that decision. and certainly not congress. so all the arguments based on that are simply non-starters as far as i'm concerned. lots of debate on everything else and balancing considerations but there's no balance for saying "we're going to take your work and not pay for it." it's not a balance. it's not a consideration. mr. huffy, many have said it's time for a unified comprehensive approach to address the licensing problems of the music industry. do you agree? if so, what steps should congress take to help bring that about? >> mr. nadler, first off, thank you for your comments on promotion. i could not agree more. the concept that the broadcasters believe they can take that right and not pay for

it is as ludicrous as suggesting a book could be made of a movie and yet the author of the book does not have to be compensated or that the nfl can broadcast games on national tv but yet the nfl doesn't have to be compensated. in terms of unification, aagree with you. we need to streamline the system of licensing. one of the benefits of the statutory license that sound exchange operates is under that it is a system that is transparent and efficient. we are the most efficient at what we do. 90% of the royalties that come into our shop are out the door within 75 days. and we have the lowe esest ad m rate. >> and briefly, somehow the lack of a public performance impacted artists and the overall music place? >> artists are losing hundreds of millions of dollars over the course of the past several years, not only in the united states where radio makes $17 billion but compensates artists zero but they also lose

royalties overseas -- >> because of a lack of reciprocity? >> lack of reciprocity. >> if they got that money what impact would that have on the broadcast industry? >> the overseas money? >> here. >> it depends on what the rate is, mr. nadler. but if they got that money it would go a long way towards compensating the artists who deserve to be paid for the central feature they play in these services. >> thank you, ms. cash, would you comment on that question? >> i agree. the idea that i'm patted on the head and said "well, it's promotional; it's good for you," is -- i would rather have control of my copyrights. and rather be paid for that. i'm a songwriter as well so i live in both worlds but the fact that they can use my songs on the radio, my sound recordings, to make billions of dollars for themselves and basically use my work to sell ads is not only

ludicrous, it's insulting. an artist should have control of their copyrights. >> thank you, mr. frear, you said there's no reason satellite ray owe and internet radio should pay while terrestrial radio enjoys an exempt from that obligation. should i take it that you would agree that everyone should get paid or that no one should get paid? >> i actually do feel everyone should get paid. >> thank you. let me ask -- there are different rate-setting standards applicable to different uses of music. some were established under the 801b standard which many argue produce below-market rates while others are set under the being buyer/willing seller approach. web castings rate are set according to the willing buyer welling seller standards. how will these different standards justified? i'm not sure who i should have ask that of. >> they really shouldn't be justified.

everybody should be paying on the same rate standard regardless of the platform chon the music is appearing. it doesn't make sense to have different standards for different platforms. it's having congress pick winners and losers, which is not what congress ought to be doing. >> would anyone on the panel disagree with that? >> if i may, the fact is there are so many different -- it's paul williams. down here. [ laughter ] you know,s ascap license miss different platforms or our music, radio, television, cable, satellite and happily now pandora. we operate -- we're one of the most efficient performing rights organizations in the world. we don't operate at the percentage that you do, sir, at sound exchange because we have a much rider group of people that we're servicing with our music. the fact is that trying to operate under the consent decree as it exists right now is crippling to us. we operate at 12%.

12%, which is -- would come down considerably if we could be relieved of some of the millions and millions and millions of dollars we spend in -- >> i'm sorry. what do you mean you operated a 12%? 12% of what? >> let me ask if pandora will be kind and help me on this 12% is our operating -- 8 cents of every dollar we collect goes to our writers. i'm a song writer so that 12% takes care of a large group of people trying to keep track of everything that is going on. we do it more efficiently than anybody probably in the world. we're one of the most efficient, this rigorous honesty is a part of my recovery and my oath today. but i'm proud of the way we operate. when you look at a system where, you know, the recording labels and the artists receive 12 to 14 times more for the exact same thing that we get, something is broken. you can do two things for us in congress. first of all, you can support our efforts with the department of justice and you can pass the

songwriters equity act which will allow us to go into court and present both sides of -- both copyrights and the information around what they're both being paid. the huge, huge -- what congressman collins and jeffreys have offered is not a comprehensive -- it's not going to fix everything but it's a beautiful in road to putting some balance into the way we operate. we're so grateful for that and i think that what we all want is to see -- i mean, i want want dora not to survive, i want them to thrive. i made albums even my family didn't buy. i love the idea that he'll make it available for anybody if they mightexpired. i yield back. >> thank you, mr. chairman, i'd first like to ask unanimous consent to insert into the hearing record house current resolution 16 which is the local radio freedom act which states in part that "congress should not impose any new performance

fee, tax, royalty or other charge relating to public performance of sound recordings on a local radio station for broadcasting sound recordings over the air." local radio stations provide promotion of the music they play at no cost to the listener. this concurrent resolution has 225 bipartisan co-sponsors, including myself which is more than a majority in the house and i think it's important to at least mention -- i know we've had some kind of disparaging remarks about the recording industry from some of our panel members and i certainly understand that but i thought that should be at least part of the record. i would also -- just a couple comments before i get to the question, mr. huppe -- is that correct? >> yes, sir. >> i just wanted to thank you.

i think we're at something like 7% approval now and to say congress actually did something right, we don't hear that much around here. >> happy to oblige. >> thank you very much. >> and mr. williams, we've had an opportunity to meet a number of times over the years, you're a national treasure, thank you for everything you've done to make life better. you've got some amazing songs, thank you. >> thank you. >> mr. frear, being an old codger, i enjoy some of -- we've -- sirius was in our car when we got it, we kept the service and we enjoy it, especially when you're kind of traveling around the country. >> thank you, congressman. my daughters thank you as well. >> my cousin brucy in particular and her man herman's hermit's p noon, we can relate to that, that's interesting. and now to a -- i guess one

question i have, this is a very large panel. we usually have four or something like that, we've got nine and a lot of interest. is there any particular interest that probably should have been added or that we could have added that either got overlooked -- i'm -- anybody have any comment on that? on the panel? is there anybody else that perhaps we could that thought of that didn't get in? either overlooked or whatever? >> i want to say one thing congressman. we have obviously a large panel here and we have great performing artists, representatives, obviously two artists to my right, one very important constituency of sound exchange, the two leading unions in our industry, amf, the american federation of musicians and sagaftra. and they represent another important group of non-featured art itselves, background

vocalists who have a very important voice in this debate. >> and during the copyright hearings that we've had, we've heard the term "free market" obviously used a lot from every different side of the debate. i'd kind of like to hear how a recording artist views a free market system work iing. do artists believe a free market model to be a better alternative than the licensing system that we have today? with so much consolidation in the industry do you believe it's even possible for music to truly become a free market? mr. williams? >> it's exactly what we're seeking. we're seeking a free market because the free market will dictate what something is worth and the last thing you know -- the last thing we need is less control of our music. the one area where you could really get a sense of what the free market is is in one of

our -- is in sync licenses. everything else is basically controlled under our agreement with the consent decree with the department of justice. but if you look at sync licenses which are straight ahead free market, it's about a 50-50 split. i think that we -- in a sense this is the united states of america, we can trust businesses to work things out. i want to thank pandora right now. you're getting a classic example of the two of us working together. i can't hear what you're asking and he's telling me and i'm trusting him to tell me the actual questions. [ laughter ] >> the question is what's the performance right? >> kind of a little david and goliath moment here sitting between giants of the industry i left my sling at home, what i brought is the truth and the truth is i represent 500,000 songwriter, composers and publishers and what an honor to share this time with roseanne. we reach into the center of our chest and try to write something

that will affect people's lives, that will comfort them in sad times. all i wanted was to write something that would make a young lady say yes when i ask her to marry her and three times thankfully that happened. [ laughter ] so we can all work together. i can turn pandora for help. i thank you so much for examining this system. the system is broken. most of our money has always come from traditional -- from bars and grills, radio, wonderful radio, amazing relationship we've had with radio through the years. they give us a piece of their advertising money in a fair -- and a system we've always been able to work out. you sit down, roll up your sleeves and strike a deal. it's a great way to work. but the fact is the world is changing. people don't want to own their music anymore, they want to stream it thanks to people like pandora and spotify i can hear my music anywhere in the world. i can -- in my car, whatever. it's -- it's a wonderful -- it's a wonderful time.

it should be the golden age of music. for the music listener who is the person we care most about, this is a time that they should celebrate. the stream is a dream it should not be the nightmare for the men and women who create music. >> thank you. paul, you should have brought the infamous stack of foam books that we talked about a couple times. >> yeah, exactly. that's right, i did, i conducted an orchestra for dick clark standing on a bunch of phone books. in this room i'd stand on the bible [ laughter ] >> thank you. as co-chair of the creative rights caucus i firmly believe that artists should be fairly compensated across all platforms but we know this is not the case in the u.s. in fact, let me tell you about the story of yanita who provides a contrast between finland and the u.s. she is a recording artist originally from finland who lived there for her first 18 years, became a professional

singer at a young age in her home country. she was paid for her performances on the radio in finland which was about a third of her income. then she moved to new york when she was 17 to take the next step to n her career. she achieved success with having two billboa"billboard" magazine u.s. radio hits but was shocked to find out that the u.s. didn't pay artists for radio air play. she thought perhaps finland was an exception in paying artists and that the rest of the world didn't pay artists their radio royalties but it turns out it was the other way around. the u.s. was the exception in not paying radio royalties. while there are two other countries -- iran and north korea. last summer yanita proudly became a u.s. citizen but in doing so she is now a citizen of a democratic country that doesn't honor am/fm radio pay for its artists. and she suffers a loss of

significant income. this is not the american dream she envisioned. her story show we need to fix the disparities to make sure artists are fairly compensated. if we don't, we lose innovation from creators like yanita. so paul williams, one area of agreement between you and the music licenses on the panel appears to be the importance of preserving the voluntary collective licensing model that ascap pioneered. you have made a compelling case that this is at risk of crumbling. that would be a bad result for music licensees. what that mean for ascap song writers and composers, particularly your smaller, independent, and up-and-coming members. >> it would be devastating. first of all thank you for your advocacy. you've been a great friend to

music creators and we appreciate that. if the consent decree isn't modified we're looking to withdraw our rights and that fragments the system, it becomes more expensive and less efficient i think what we have to do is look at the very, very quick adjustment to this system but e seine tlishl entire consent decree is at this point -- it's not like going into into battle with one hand tied behind your back that you'll fight with. it's one hand tied behind your back that you're going to feed your family with. incidentally, sparse the performance in a sound recording, i absolutely believe everybody should -- it's a sad, sad story to hear somebody losing their loss of income when they become an american citizen. you know, we absolutely believe that everybody that contributes to the performance of music, the creation of music should be honored. it's not an excuse to pay less to the people who create the music, though. we need to find a balance and i

think trick is to let the fair market decide that for us. >> thank you for that. my next question is for both chris harrison of pandora and roseanne cash. last year pandora embarked on a campaign to rally artists to sign a petition to congress in support of internet radio. but it was during the time when the internet radio freedom act was being debated in congress which would have actually resulted in a cut to artists' royalties. pandora's letter to artists stated that they simply wanted to have the artists' voice heard and yet from what some artists discovered, this was not the actual intent, the implication for the artists signing the petition at that particular time was that they were supporting cuts to themselves. so mr. harris can you tell us why pandora enlisted the help of artists and ms. cash can you tell us what you and the creative community felt when this was happening? >> part of my opening remarks i

noted that pandora plays 100,000 recording artists every month and 80% of those recording artists don't get played on terrestrial radio. there is actually a large group of independent primarily recording artists and singer/song writers who do value pandora because it is the only outlet, the only distribution platform available for them to find an audience that loves their music. >> ms. cash? >> that is what a lot of us are calling the exposure argument that we are seduced into thinking if we allow these performances without pay that we will get exposure therefore drive consumers to buy our records. that may or may not be true but the point still remains we don't have control over those copyrights and we are not paid fair compensation, we are not paid fair market rates. as i said before, there's no

transparency about this. it's somewhat manipulative. and i feel that we end up subsidizing these multibillion dollar companies. they use our music as something like a loss leader to draw people in and then they make the money. and to confirm what mr. williams said, the place that artists have the most control are sync licenses. i've given my songs for free, my choice, to college students making their first film who want to use my song. that's great. i want to support them. then i've negotiate a fair rate with a popular television show that wanted to use my song. i have control over those things and that is the bottom line. that and fair compensation. >> thank you, i yield back. >> thank you. i'm going ask some questions now or more so make some statements

and then hopefully you can respond. first of all, i would like to give each member of the distinguished panel an opportunity to respond to my question -- this question, if following question in writing if you care to do it because there are too many and we're not going to get through my couple of minutes. if you would be so kind as to tell me in your opinion what a free market is and what a fair market is, comparing the two. because i hear those terms thrown around "free market," "fair market." i asked the last panel to do this and i'm asking you to do the same and get that to me in writing if you care to do so. i've been having meetings, my staff and i have been meeting with people that have a dog in this fight continually. we've been doing it for months. if someone has not been invited to a meeting please contact my office. i'm congressman tom marino, i

vice chair this committee. let us know. because i think we've covered all the bases but there are many, many people involved in this. i'm trying to get a consensus. i don't want congress to sit down and have to sort this out and i'll show you why in a minute. this is very complex. i've been studying this for months and talking to many people and here's the reason why i do not want congress to sit down if we can get a consensus among everyone who has skin in the game. i'm going to read to you a list of those individuals and i probably missed one or two. these are the parties that we've come to the conclusion that are involved in this. excludeing the public. song yiers, movie score composers, performance rights, organizations, pros such as bmi and ascap, royalty collectors for digital music, sound exchange, artist/performers. terrestrial radio, broadcasters,

satellite radio, cable tv video, digital radio, streaming, digital download, providers like itunes record labels, copyright oerchers, music promoters, consumers, listeners, collective music organizations, music publishers, music academy, grammys, recording engineers, copyright offices, groups that may hold exemptions such as libraries, universities, churches and i'm sure i missed someone so you see the litany of names and individuals in groups and entities that we have involved here now what i'm going to show you for the record and without objection i'd like this schematic thattive in front of me, it's a schematic of the music licensing marketplace and the publishers/song writers and anyone else involved in the litany of names that i just read off. i have a beautiful color display here on my ipad, you're not going to see it but i'm going to

hold this up. you may be able to understand some of it. this is an example of the breakdown -- and these are on both sides, so i have three documents here of the breakdown of the schematic just like a corporation would be set up. president, ceo, vice president, et cetera. this is the complication of the legislation that we have and those involved. look at the subcategories, undermete the subcategories underneath the subcategories on both sides of these documents and the third one that i hold up here as well. then we get into issues such as payment. who's going to be paying, how are they going to be paid. what will the courts do about this? and i do not even have the court schematic here showing the process that one would go through if there are appeals so i think i got my point across here about how complicated this is, how complex this is. but we're also talking about

fairness and unjust to song writers and writers and individuals not being kpn sated, particularly those because of the legislation from 1972 prior to 1972 and that had something to do with state law which is an issue that i think can be dealt with today. so as trying to be an individual that is learning as much as possible about this hearing from everyone, some are you are disappointed because i haven't sid which way i'm leaning on this. as a prosecutor, i want all the information at my fingertips because i make a decision but also i am asking everyone that i mentioned here today to please, please think about sitting down with us in a group face to face. it's real difficult, it's more difficult to sit face to face

and look at each other eyeball to eyeball and say no as it is instead of over the phone or an e-mail. so maybe we can get together and you folks can help us get a consensus on this and that will resolve the issue. it's a monumental task but we will attempt it. my time has run out thank you very much. >> mr. conniers? >> thank you chairman marino. let me ask paul williams this question. do that you believe the consent decree system severely limits ascap's members from achieving competitive market rates for their works? >> congressman conyers, you absolutely go to the heart of the reason that i'm hear and to address something you just spoke about, one of the things we're denied because of the consent decrease is the right to bundle

rights. you go to all these different places for all the abuses of our music, one of the things by changing the consent decree you'll give chief justice would be hoping you'll give us is the right to bundle these rights. it's exhausting for people to go to one place to another to another for these rights. we can handle this -- there are two copyrights. there's a copyright for the original material, there's a copyright for the recorded material. i think it's incredibly complicated what would be a great solution is to bring it back to -- and let us control our future, let us control our copyright. the last thing we need is there-to-throw more into the government's lap to deal with it for us. >> so the decree hasn't accommodated the rapid and dramatic changes technologically that we're all talking about? we have to end up in a rate court on top of it all and i

think that this is the new situation that we've been in since the decree and i'm hoping that all of our members on the committee will take this into account. now, i want to say to broadcast radio's played an important role in the lives of people all across the country. broadcasts have educated listeners to important events, emergencies, and a lot of new music, including jazz, i might add. . we will hear -- we want to work with the broadcasters to continue to do this work to all the communities. now i just want -- if there's anybody of the nine witnesses

here that oppose creating an am/fm performance right, would you just raise your hands so i'll know who you are? okay, we've got a couple hands raised and now that you've been identified and branded appropriately -- [ laughter ] but i thank you for your candor and frankness about this let me just ask, has the lack of -- i'm going ask this to -- i'm going ask one of the hand raisers, warfield, has the lack of a public performance right for terrestrial radio impacted the

overall music marketplace? >> mr. conyers, i would say i've been in this industry for over 37 years and what's always been true during that period of time is the relationship that radio stations and record companies have had. we've supported one another consistently through that period of time to the point we're looking at a recording industry even with the challenges it has just like the radio industry has its challenges. still the strongest recording industry in the world. i've heard remarks about who we can be with that we're not proud of but we have a recording industry here that's larger than any industry, any recording industry in the market. >> thank you. let me get one question into ms. cash before my time expires. it's about the respect act that i introduced with our colleague congressman holding.

do you think it would address the payment disparity and do you think it important that we fix the loophole in the copyright protection for sound recordings before a 1972 which refuses to pay the older pa eer artists? >> i thank you for introducing that bill. of course i think that we have to fix that loophole. the example i gave you about my father, his royalties going to someone else who did a cover version of his song, it just -- it's hard to even understand how that could be possible. but these legacy artists, some of them they're growing older, they're kill, the ones who are still around, they have to go on the road when they would rather not to make up the money they would have received from these royalties. it's heartbreaking. i see this all the time. i know these people in that generation before me who are still around. >> thank you so much. mr. chairman, i yield back.

>> mr. conyers, even though you have exposed certain catalysts i think you'll be able to walk the halls safely. >> i'm more worried about them then me. [ laughter ] >> i won't go there. the state will recognize mr. issa. >> thank you, mr. chairman. chairman goodlatte has said he wants to do comprehensive copyright reform and i'm going to take this opportunity today to challenge all of you since you sort of represent, no kidding, the spectrum, the width and breadth of the problem in music both written and obviously the broadcast of the performance and we'll just go back as we often do here, especially for the non-lawyers who are here on behalf of the constitution to the cause and i'm leaving words out because i only want to have the part related to copyright, not the part related to patent.

the constitution clearly says that we have two promote the progress of useful art for limited time on behalf of the authors exclusive right to the respective writings. now, it doesn't actually talk about the performance but we've all come to appreciate that that a performance is, in fact, part of that structure of writing. the constitution is an interesting document to go back to because sometimes it's illustrative of all the mistakes we on this side of the dais and presidents have made during their time during our job. we've totally screwed up your industry relative to the constitution. if i read the constitution very clearly, although to promote does say that in fact what we do in the way of granting you

exclusive rights for a limited time is for the purpose of, in fact, enhancing commerce. i don't believe that the founders ever thought that the promote would be to exclude a performance from being paid if, in fact, the ownier of that who had the exclusive right, which to me is the right to exclude, didn't want it to be played for free. and yet we don't have that right and i've joined with mr. conyers for years in trying to rectify that. but i think there's a bigger problem here today and i'd like you all to comment on that from your respective positions starting with ms. cash. if, in fact, the intent has always been exclusive right -- and i'll read that back words -- right to exclude -- belongs to the author or to the performer or to be honest to the many people that are part of that collective process that we'll just call a right, if that right

were to be restored, wouldn't we essentially eliminate all of these court decisions, all these consent judgments and most of the laws that we've helped perpetuate, including the exclueses? and we'd be down to congress determining that there had to be a fair use under free speech and so on, we'd want to have that sampling but not sampling as a ring tone necessary, those kinds of things. and wouldn't we then empower all of you to come together, mr. williams, come together and decide collectively you're going to offer your right us there pooling or individually you're going to retain your rights if you're just, say, the beatles. isn't one of the fundamental things we should consider here scrapping generations of legislation that now cause us to infinitely, try to figure out whether, in fact, pandora can

effectively compete against broadcasters effectively compete against satellite effectively compete? because i'm seeing all of you wanting to get a level playing field but not giving up the playing advantage you have, if you have one. and i don't think congress can do that. i'll start down at the end and just say how do you see possibility of us scrapping almost everything we've done and giving the opportunity an -- industry an opportunity to rebuild against the original intent of the constitution? >> can i just say the question itself gave me hope? so thank you, that was so well stated. i would hope that exactly what you just said that restoring -- although i don't know if restoring is the right word because it was never there, performance royalty would solve so many of these problems that you could then build from the ground up to create a new paradigm. i don't know but i hope so.

i know a that for every mick jagger in the world there are 10,000 musicians who are in the trenches. >> they're all younger. >> they're all younger, too. and they depend on the royalties they're not getting and the lack of a performance royalty -- i'll just say this quickly -- is -- it's kind of a way of saying music should be free. if music should be free i'm willing to have that discussion when musicians aren't the only ones who aren't being paid. >> i really do want to hear from the broadcasters, too, because you've inherited your business model, you didn't create it, your companies' owners bought based on a value that we put in that when mr. conyers and i tried to change the law to a certain extent we're taking away value and i want to be sensitive to everyone at the table has inherited an unfair deal in some

way. >> the red light has illuminate sod we'll hear from two witnesses? >> who's most motivated to answer? [ laughter ] >> it touches on what mr. marie know was talking about. a fair market is a free market with a level playing field that adequately compensates that serves the public trust. so if we start from scratching that will be the guiding princip principle. how do we make sure small creators, big creators and the public all of their interests are well-balanced? >> i think it's something that the congress should consider and, you know, and as part of

that conversation, please take into account the concentration of ownership in the music industry and as you think about who's sitting across the table to cases, it isn't ms. cash. it's universal music, it's sony. it's warner. the concentrations i go out every day and try to negotiate direct licenses, and over the last six years, i have negotiated 100 direct licenses with the music industry, none of them with major labels. >> gentleman's time -- sorry to cut you off, but the time has run out. >> my questioning time ran out, but answering time, i thought was unlimited. i'm only kidding. thank you. >> thank you. the distinguished gentleman from florida. >> i thank you, mr. chairman. thanks for holding today's hearing. it's reamy easy to decide for some that the way things work today is the only way that they

could work in the future or that the -- what is by all accounts an absurdly complex system that has developed over the past 100 years deserves the credit for the thriving musical legacy. some aspects of the musical system have helped, but many know that it has grown stronger by working around too frequently revisions over the previous decades have been reactive and all too often parochial, preserving one element without making enough effort to look at music licensing as a whole. while it's tempting to point fingers and there's been plenty of that today, i think it's helpful to recognize that everyone has the opportunity, everyone, everyone at this panel, our previous panel, has the opportunity to benefit from new growth in market if, as mr. marino said earlier, we could agree on a basic framework

that incentivizes and rewards creators while give companies that profit from the mudzic a fair and transparent way to do it. everybody has to have an opportunity to succeed together, and new entrants have a chance to continue transforming the way we listen to muchic in the future, so that's, i think, how we ought to approach this. there are some issues that jump out at us. before i get into my questions, i wanted to throw out one example of what i think represents a failure of the past systems, specifically the pre-72 distinction. this, for the youngsters in the crowd, is an album. this album that is neil young's harvest, which includes legendary songs like old man and heart of gold. it was released on february 14th, 1972. the precise cut-off for pre-'72 recordings is february 15th, 1972. that means that any track from

this album, this best selling album of 1972 can be played without paying for it. but if it had been recorded on february 16th, released on february 16th, just a day after its release, neil young's songs from this album would be covered with full federal copyright protection. now, you said earlier in exchange with mr. nadler, you say everyone should be paid. why shouldn't that include legacy artists? >> well, where believe it should. i think congress has had two shots at this and has rendered in opinion both times. first back in 1972 when it decided to distinguish for reasons i'm not familiar with, between recordings between that date and after it. and then the second time, 20 years ago, when it granted the sound recording performance right and did not extend that right to pre-'72. >> so if congress acted today, you would acknowledge that that's consistent with what you said earlier that everyone should get paid?

you're supportive of those others. >> i would be supportive of closing the loophole that mr. conyers referred to. that includes treseral radio. >> let me get to mr. christian who said something earlier i appreciated. i think it helps us focus a lot on what we're dealing with. you said in your testimony that with particular reference to the recurring demand by the recording industry for sound recording performance right to be imposed on terrestrial radio, understand the radio industry is not the vast pot of riches that can be tapped as a bail-out for the recording industry that addressing a decline in its own brick and mortar income. congress unambiguously intended for in exchange for support, they should be treated differently from other platforms and that premise hasn't changed. then you go on to explain that any change in our approach will be met with opposition because

it would cripple a radio industry that's been financially treading water for years now. i would respectfully suggest that this is what we're trying to get at today. going from the claim that there shouldn't be a performance right because the music guys haven't been able to figure out their industry, and we shouldn't impose it on the radio industry which you acknowledge is, as you put it, treading water, has been treading water financially for years now, that doesn't help us solve the problems. help us address the position that we're in. and when you, as was included in this document that was referenced, i think mr mr. warfield, in your testimony, it says that conventional wisdom is that radio air play stimulates record sales and that it quotes a study from a law review article from 1974, and it talks about a survey of rock

music buyers that found that albums were purchased because the first track was heard over the radio, but that survey was conducted in 1972, i acknowledge the role of the broadcast radio played. the important role it plays in our communities, but for us to go at this issue as if where we stand today in 2014 is somehow unchanged from the industry as it existed decades ago, i don't think is appropriate, and i don't think it's fair for all of the rest of us new market entrants, musicians and the rest. i hope that as we go forward in this debate, we can acknowledge the important role that everyone in this panel plays in furthering the music industry and providing unbelievable music and outlets for ms. cash's work and for mr. williams' work and all the members, but let's do it in a way that realizes if we only take the parochial view of

our industry, we're never going to come up with something that works for everyone. we're probably going to fail and that might satisfy some of you for a short time, but we're going to be right back at this again in a couple years if we haven't had a chance to take that, and i beeyield back. >> the distinguished man from utah is recognized. >> glad to see sow mane of you are here having this discussion. i particularly have a keen interest in internet radio. where believe it's a big part of our future. it's where i see my kids enjoying music they probably would have never seen or heard otherwise. they wouldn't have gotten it on terrestrial radio. they probably wouldn't have been able to afford the albums or have the chance to understand or see that. i have perbly been exposed today a whole host of artists i now enjoy on a regular basis but i would have never heard of before. i'm also deeply concerned the marketplace for radio isn't working. we can point to one that has been highly successful in pandora. i enjoy them, but it does

concern me it's not much more prevalent than that, and even under their model, they're not making the kind of money even though some people want to attack some of the ownership and some of the others for making money along the way. the reality is, the copyright royalty board has twice tried to set the royalties, and twice the united states congress needed to come in at the last hour and th help save the deal and change it so it would work, so we don't want to keep doing that. anytime you have to go to congress to get a fix, it's probably not going to turn out the way anybody wants it to turn out, so with that, i have deep concerns about how do we make this a viable business model going forward so that everyone can win along the way. and everybody can get paid along the way. we have two standards. the 801-b, and the willing buyer willing seller, which i think is grossly misnamed, to suggest it's willing buyer willing

seller and not have the information at your fingertips is grossly misleading. so my question, let's go to mr. sherman, if i could. from what i have seen, in my limited viewpoint, it's been a little inconsistent. on one hand, you like the 801-b, and sometimes you don't like it, depending on which side of the negotiation you're on. can c could you help clarify that to me. >> we're willing to change it to a willing buyer willing seller, but we want it to be part of comprehensive reform. we don't want to pay on one standard and not get paid on the same standard, but we think the right standard is willing buyer willing seller for all creators across all platforms. >> would that include in the negotiation having all the information available for all parties? is there anything you would withhold from those negotiations? >> certainly, the crb process has all the information available to all parties. how information can be disseminated when there are a lot of private deals with

nondisclosure agreements and so on becomes more complicated. >> that's why i'm asking, what would you do. if you're having willing buyer, willing seller, you have to come to the table with all of the information, not just hide part, which has happened in the past. would you disagree? >> i don't think it's hidden because all of the information becomes available to the parties and lawyers litigating the cases have all the information. a lot of those settlements take place after that information has completely circulated. you know, one thing i would like to comment on is you talk about whether internet radio is profitable and so on and so forth, but you look at a company like amazon, which has a $75 billion profit, excuse me, capitalization rate, everyone would consider them a huge success, but their profit last year was 1%, $274 million on $70 billion revenue. >> this is part of the concern. some of the biggest players into

this music world, it's good to see amazon and apple get into this part of it, but when you saw rolling stone and mtv and these other organizations try to get in the space whose forte into the music industry, they have never been able to make it a go, and they started into this and they had to let go of it. others could not make a go of it. i need to go to mr. harrison. i want to understand what would happen to pan doura if congress had not stepped in and fixed what happened at the copyright royalty board. >> well, the crb rates are obviously part of the public record. they are multiples of what the negotiated settlement was, the pure play rates. i guess you just have to do the math, obviously, if we're paying 60% to 70% of the revenue under the pure play rates, if the crb rates are 2 or 3 times that, i'm not very good at math, but i

don't think at 120% of revenue, we can make it up on volume. >> what do we need to do to insure more transparency, and why don't you have more competitors? >> it's an interesting question. i think you have touched on it a little bet. the rates certainly are an issue. the entrants we have seen recently are all engaged in other lines of business, apple, google, amazon, and music is really an ancillary product that is designed to sell the primary service. we've had east village radio, which is a long standing internet radio service and mr. nadler's district, and that recently went out of business because they couldn't afford the royalty rates. so certainly, if you look at the comments that came in from the copyright offices and others of inquiry from a large number of constituents including mr mr. frear, there are some process improvements that need to be made that would improve the process and potentially

improve the outcome. >> i wish i had an opportunity to hear all your answers. thank you for your never time. >> the distinguished lady from california. >> thank you, mr. chair. my colleague, mr. issa, had asked a question, and i'm not sure everybody got a chance to respond. i just want to ask it slightly different. i believe he said if we were to scrap copyright and start over. what would you like to see chang changed? my question is could you brie y ly explain one provision you would amend in the current law. i know several of you didn't have a chance to respond. maybe you would like to take the opportunity now. >> from the radio broadcasters -- ymg sorry, i know mr. christian and i represent radio. we haven't had much to say here today. a lot has been said about us. we haven't had the opportunity -- >> take the opportunity now. >> to say much. i'm hearing a lot of comments about the industry that provides free play for free promotion, and has done it for 80 years.

we're talking about radio itself has been driving it. i have heard radio that doesn't drive record sales. congress deutsche left, but there's a 2013 study recently issued that indicates clearly more than any other platform, radio air play drives sales. even in digital platform, it drives sales. we have an industry here that has really helped put the other business, give them the opportunity to go out and create a new business model. unfortunately, even on the radio side, we're not able to part in the digital side. we pay in. we pay hundreds of millions of dollars. we pay tens of millions of dollars to sound, and we parl on the digital side, but many broadcasters unfortunately cannot make a go of that as other entrants have found with the way the laws are written today. we can nlt make money. we can spentd money, we cannot make money. that is not a model that is

going to be a healthy one for any of the participants here. from an nab perspective, we would like to see changes made in the streaming rate standards so that all of the participants here who all have concerns there can participate more fully and grow a platform that will benefit artists, writers, performers, labels, all participants here. >> other examples? anybody else? >> i think one of the things we would also like to see from congress is at some point in time, if you all could define what a performance is. nobody's yet been able to tell us what a performance is. if you listen to sound exchange, they'll tell you it's three seconds long. they won't tell you if it's the beginning, middle, or end of what it is so we're subjected to royalties that we can't even get a consensus as to what our royalty payment is for, especially on the digital streaming part of it. on the other part, we really

must ask for oversight, especially in the advent of new performing rights organizations that are forming right now. there are no barriers to entry for performing rights orcizations. you need a catalog, composers, and unless those rights are protected for the aggregators or some oversight, we run the risk of finding as we have with c-sac, where there are anti-trust sites, which is why the 801-b is more homogenous than the willing buyer willing seller. we really do need this oversight for an industry. we have 10,000 different performers -- different licenses. to be administered, which is why the blanket license is important that we keep it in place, which is why the consent to create is important, because otherwise, you can imagine the madness of trying to find a way to deal with individual radio stations ipyour home district, and every district up here to give them a license, a record keeping and everything else.

and we also, one final thing -- >> thank you, and then i want to move on. >> we need a transparency in terms of identification of catalogs. we need to be able to find out on a daily basis on whatever who owns what, who the performers are and what it is. >> thank you, and i believe -- >> thank you. >> you look like you want to respond. >> i would like to respond to our friends at radio. first of all, the concept that this sound recording internet radio business is not working, i'm not so sure that the proper image has been presented to the committee. the fact of the matter is it isn't just pandora who last year alone noticed a non-gap profit, but the head of clear channel announced just a few days ago that the i heart radio that is terrestrial radio simulcast online, had 50 million users, and has made several hundreds of millions of dollars, i believe, or hundreds of millions of dollars, which i assure you is vastly in excess of the content

cost from where we sit. secondarily, we have 500 more services now using this license, the sound of change administers, 500 more than were there two years ago when i last testified before the committee. you know who the majority of those are? the majority of those 500 are broadcasters like mr. warful is speaking about, going online. >> mr. williams. >> you asked what we would change right now. it's thanks to representative collins and jeffries it's been offered to you right now, which is the song writers equity act. it fixes a small part of a really large problem for us. it fixes it immediately. i agree with what mr. christian has said about the value of the blanket license. it's a wonderful way to come together and simplify the system, and for somebody like pandora, 70% of their income that is rolling out for royalty payments, i have to remind everybody that they're getting about 1% or 2% of that. i'm not sure, i won't say it's

1%, but it's very close to that. it's a tiny, tiny part of that. so i wouldn't pretend to tell you how to adjust your business model, but there's some way to do this so music creators who create the one product you have can be properly compensated. >> thank you. >> the gentlelady's time's expired. the distinguished gentleman from georgia, mr. collins. >> thank you, mr. chairman. i think one is sitting here today, one thing i have tried in this whole process and many of you on this panel, but many of you in the second, third, and fourth rows back, we have talked many times, and yes, the song writer equity act is an issue that we have brought forward. there's other issues that have come before from performers roish to others. i have been consistent that the one thing i feel is that the creator in this process and there is a valuable inherent property right there. i think i applaud the supreme court this morning for

inherently seeing that there's a creative property right. now, that does not mean that the broadcasters and i will always get along. probably not, but that's okay. there are things in this debate we can all look at. i was thinking about it just a few minutes ago as i listened to all of you. the one thing i have tried to do in this process is i have had interesting comments, not to me, i heard about it when you go to other places, so yes, it comes back, is i want to take an arm from one and a leg from another and fix this all together, but what i have found in the last little bit is what has to happen in this process is one, bad business model, five years ago could now be the bad business model today. and you don't need congress to come in and prop up either one of you. you need a process in which we can look at this, and we fix it from a holistic approach. this says that everybody is

included. that everybody has a stake at the table. the pie is enlarging. and it was interesting to hear a second ago from my friend from pandora which i listen to. a lot of these went out because they couldn't afford the rates. there's a lot of businesses in this country that go out of business because they can't afford their costs. that's an issue we have to deal with on the broadcaster side and the digital side. the performers and the copyright holders are in the middle. that's the one thing that i am looking at. one of the things that concerns me, though, is that we're wanting many times to fix today's problems, and i have shared this when you come in. that's not my goal. my goal is to fix this problem when pandora was, wow, you still listen to that? unless they have changed greatly, no offense to them, but i think the radio, when i was first listening to an 8-track tape, i told ms. cash, was her dad listening to a boy named sue

live from san quentin, it all developed. the thing you have to understand is we come together, but you've got to remember that the bottom line, there is a profit right interest that many of you at this table make very good money off of. and that has to be rewarded. at all levels. >> i appreciate him bringing in the background musicians and others. the problem is, though, if you continue and if we continue in this round of saying, well, i've got to protect my model and you've got to protect your model and we don't get to that point, my question is where are we at 20 years from now, when this panel maybe looks completely different? where are we at? so i open up a question to you. i don't want your answer for today. for broadcasters say protect our radio, where pandora says look at our rates. where are we going to be so we're not coming back, as my friend from utah said, every time there's a problem at the rate board, we run to congress to fix it. i was an attorney beforehand, the last thing you wanted to do,

and i did counselling and dwrs work. the last thing you wanted was for the judge to make a decision. because in the end when the judge makes decisions, both parties are unhappy. when you make the decision, then we go, mr. warfield, we have 1:10, you have 30 seconds, mr. williams, you've got 30 seconds. tell me what you envision, how we can work this out so we're not propping up bad models either way. >> i think there certainly needs to be a close look at the digital rates that are being charged. we would like to participate and grow there. we think it helps all of the stakeholders here. the one thing i would avlg the committee to keep in mind is the consumer, the user. we talk about terrestrial radio. it's free. it remains free. there's no additional costs. let's keep them in mind as we talk about what the other businesses, how this is going to be more efficient for them and more cost worthy, but the consumer needs to be considered here also. >> time. mr. williams. >> we have a recovery, the song writers equity act.

that's a great beginning. the people we need to think about are the young song write s s starting out, trying to have the life i had. i have a daughter who is a social worker. she got that because i was proper paid for the hard work i was doing. what we can do is give more control back to the song writers. we can move, yes, we don't want the judge to make all these decisions, but we can move back to an arbitration panel which makes it a speeder, more efficient way to deal with our problems. i think that it's a process that's going to take longer than any of us want it to take, but the fact is if we don't fix -- if we don't step into it and make that first adjustment, people are going to wind up getting day jobs instead of writing songs for a living. >> the industry is moving forward, not moving backwards. it's not going to be automatic, as the song says. you have to move forward. you all have to come to the table and talk about this. >> thank the gentleman from georgia. the distinguished gentleman from louisiana. if you promise not to show up at the ball game tonight, i'll give

you ten minutes. >> i think we're ten minutes, all i can do is get in trouble. i'll take the five, but thank you. let me just pick up where my colleague mr. collins left off. that is, you know, and i think mr. freer mentioned congress had two chances to get it right with the 1972 and the legacy royalties, and we didn't. all i can promise you is if we solve this problem, nobody is going to like it. and it's probably going to be wrong. because we're not the subject matter experts on it, the technology moves so fast. and we will probably screw it up. but, i say that to say you all are at the table. you all should be in the room trying to figure out who can give and come to some sort of solution, and the other thing i would tell you all, just to be honest, is that nobody has a better bargaining position. because if we do, we'll probably start from scratch, and nobody will like the results.

so that would just be my recommendation. and you know, the comment was made earlier that for every mick jagger, there's 10,000 artists in the trenches. i think they all live in new orleans, by the way. and i want to make sure that they have an opportunity to continue to do and follow their passion and their dreams, but at the same time, be compensated for it. and i tell people all the time when i speak at schools, follow your dreams, do what you love. if you do it well, you'll make a living doing it. and i want to be able to look those kids in the face in the performing arts schools and things in new orleans and actually mean it. and it has benefitted so many people in new orleans, and i would just like it to continue and to be there for the long term. mr. warfield, let me just ask

you a very direct question because we beat around the bush and nobody says it. what impact would it have to your industry if you all had to pay the performers, the rights and royalties for what you put on the radio? >> i have testified to the financial, potential financial impact to radio broadcasting. i have been in the business for 37 years, i have been in radio stations that have been sold. i worked for a wholly owned minority radio company that at one point was the 22nd largest in the company that no longer exists today, and we made it clear at that point that we could not afford to pay a performance royalty if it was imposed upon the industry. there are severe financial difficults that many broadcasters would experience if that were the case. i have been in this for 37 years, doing it for tlaefrb years, serving the comubts that our station services, the communities i came out of quite honestly in washington, d.c. continue to do that, not to serve the stake holders, but

they benefit from what we do as terrestrial over the air broadcasters for free. >> let me ask you a question. the station you talked about that closed, closed anyway. do you think that this would put, for example, clear channel out of business? >> there are many different sized broadcasters, you know, there are -- >> i'm using clear channel. speaking about clear channel. >> they are contributing and participated in the arena. you could not afford to do that in a major way. we could not afford the cost of participating in it. i think everyone up here would like to see the pie grow. we would like to see the digital platform grow, but not at the expense of our countries. >> you mentioned if everybody was contributing, 1972 was a number that congress picked. are you saying if we decided to pick another number that went back further, as long as everybody had to pay it, you are okay with that? >> quite honestly, on this

issue, we have been open to any number of solutions for years. i have had many discussions with major labels, they don't want to find a way to compromise on the issue, and i'm happy to work with congress, with sound exchange and the major labels to find some appropriate ground in the middle that as i said before, i don't know why the choices were made, and maybe there are other business reasons, good policy reasons why the choices that were made were made, and we're wide open to the discussion. >> well, i see that my time is about to expire. i would just say again that i would love to have balance on this and make sure that everybody at the table continues to thrive. we don't want to put anybody out of business, and we certainly don't want to send anyone to bankruptcy or influence anyone to stop following their dreams. help us help you, and that means get in the room and figure out ways to come to some sort of conclusion. with that, mr. chairman, i yield back. >> thank you. the distinguished gentleman from

missouri. >> thank you, mr. chairman. it's been interesting participating in these review hearings for the last year. serving on this committee, and one common ground i think that i have heard from all of you and the folks that i have been meeting with in the music industry throughout is that we all love music. we just got to find more common ground. and i look forward to working with all of the stakeholders to try to get that common ground, but i do have a few questions. mr. huppe, i think it would be helpful, at least to myself, for you to lay out for us the standards that are used for determining royalties with respect to each copyright for a performance of a song, for instance, who is a willing buyer? who is 801-b, who is set by the rate core? could you tell me briefly who is

subject to which standard for each of the two copyrights? >> sure, thank you, congressman. obviously, a great question and a complicated question. i think the best way probably to answer that is to give you an example. and the example is this, let's say you're driving your car down the road and listening to an excellent rosanne cash recording. and if you happen to be listening to that over your cell phone through an internet radio station, chances are most of those are set according to the fair market standard value, willing buyer willing seller, and the rate that the service would pay for that would be set by the crb, and it would be anywhere between an eighth and a quarter of a penny for that stream. let's say you decided to stop doing that on your cell phone and switch instead to get the exact same awesome rosanne cash sound through satellite radio. that is set by a completely different starbd, the 801-b standard, which we believe is below market value.

so the compensation flowing from that would be set according to different rules, and they would be pay about 9.5% of their revenue pro rata across all of the streams. and then let's say for whatever reason you got out of satellite and had to go with good old am/fm, that would be easy because there's no right, no rate, no crb, and the answer there is zero. that's the same reporting coming out of the same speakers in the car, hitting the same ears, each one of those three is set differently according to different rules and that's just not right. >> okay, mr. harrison, you mention in your testimony that pandora has paid $1 billion in royalties. is that correct? >> yes, the summer we will have paid in total $1 billion in royalties. >> okay. then my next question is, how is the that song writers and artists claim they're not getting paid? >> well, that's an excellent question. today, pandora is the highest paying form of radio.

we pay higher percentage of revenue than either terrestrial or satellite radio. we'll pay north of $400 million in royalties this year alone. to the extent the copyright owners believe there's a different or better allocation of that revenue, certainly we would say that the copy right owners themselves are better situated to make that relative evaluation. >> mr. williams, would you like to respond to that? >> i totally agree that the cover i own has been sold to people to make the decisions and all. you know, i have said it again and again, and i said it in my opening statement. the fact is we are a tiny percentage of the cost. we need to find balance in this. when the song of the year, the grammy winning song of the year from 2011 is performed 72 million times at pandora and the four writers each get less than $1,500 aapiece, there's

something terribly broken in the system. you can take from my comment we have a major problem with pandora. we have a major problem with pandora's balance of payment. we're not going to suggest how they adjust that, but fair market will tell, give us a chance. we don't have the right to say no. this case, we don't want to. we want our writers and copyright owners to be properly compensated. >> the song of the year in 2011, was that need you now? >> i'm going to turn to my contributor. >> the song of the year. >> it was need you now. >> 72 million. >> 72 million performances. >> in other words, for -- give you the exact rate of exchange, we get 9 cents for 1,000 streams at pandora. roughly, i think it's a little less than 9 cents. you just -- you just don't build a kingdom on those kind of dollars. >> ms. cash, would you respond any differently?

>> i'm sorry. if all that money was paid out of pandora, if it was paid in an aggregate, i don't know how it was distributed. it didn't come to artists. not withstanding my harsh words to them, i want them to succeed. i see the future. i want all of us to succeed, but i just have to point out that all of these gentlemen on the panel would not be here had songs not been written. and it's in their best interest to get us paid so we're inclined to give them more songs. >> thank you. >> i thank the gentleman. the distinguished lady from washington state. >> thank you, mr. chair. and thanks to all of you for being here, for all of your time. i think we seem to be clear recognition across the board here that we are seeing a change in business model, definitely towards digital transmission of music, and that's where the industry is headed.

and even broadcasters are talking about the need to move, you know, to streaming, et cetera. i wanted to ask you, mr. warfield, you have folks who are also streaming content and digitally providing content. how are you seeing the business model move even for some terrestrial stations into the digital world? >> we would certainly like to participate more. the rates that we pay for digital streaming is probably double what some other participants do pay. and as i have indicated to the panel here, it is not economically feasible for most broadcaster, particularly the mom and pop broadcasters, not the big guys that everyone tends to focus on, but what makes up most of the broadcast in this country, have not been able to find a way in paying those kinds of rates to be profitable. many broadcasters have made a decision not to stream. >> so you're not seeing folks move that direction, and seeing more of their, you know, their

audience moving -- >> we still reach, congresswoman, we reach over 240 million people a week with radio. we still have the largest audience out there, which is why radio is the number one driver of music sales, whether it be sales in a retail outlet or digital downloads. so our audience is still loyal to what we do. we are free. no additional cost that's there for them, and we provide a lot more than just playing music. so our audience is still supportive of the business model we have and have been able to develop with the record industry. >> given we're talking about music today, do you see a change inwould you say there is a change? we're talking a lot about where, how folks are listening to music today. would you acknowledge there's a change in where things are heading? >> there's change. i think all of us listen to different platforms. i have been in radio for 37 years. i have always listened to radio. i still buy music. so there is a change. we want to participate in that

change occurring, but there's still a basic broadcast industry here that our listeners, our audiences, our communities still rely on, and they still support. >> i have a question, maybe, for anyone who has an answer on this one, which is we have talked a little bit about internationally how our laws are different here versus around the world. are there a particular model you have seen in other parts of the world that you think are, are good examples of where we should be headed? >> international models pay almost in every country of the world with very few exceptions. we should simply follow that model. it's very simple. >> beyond performings, paying specifically, there are other specific unique aspects. >> there are other models in which music publishing rights are paid on a percentage base instead of on a cents based system. we could learn from that.

there are definitely models we could be looking at to try and redefine something for the united states. a lot of the questions have been what specific changes would you make? but the real answer is, we have to change everything. you can't pick one piece. that's what we have done for the last decades, was pick one problem and fix one problem at a time. we do really need a holistic solution. >> yes, mr. williams. >> if i may, one of the things the europeans have that we don't have is a limited grant of rights. for us, as rights holders to be able to license some of our rights directly would be a great improvement. >> yes, sir? >> and then just to echo what cary sherman was saying, it is that we don't have a broadcast right here that's the big difference. we do need a broadcast right, and it will also unlock lots of money from those international markets with reciprocity.

our creators here will be able to get paid for their performances overseas. >> okay. thank you varmuch for your time. i yield back my time, mr. chair. thank you. >> thank you, mr. sensenbrenner. >> i thank you, mr. chairman. this brings me back to what i attempted to do and succeeded in about 15 years ago. with the fairness of music licensing act, which was put in the copyright extension law. and that was easy compared to this because the people who were for my bill were those that didn't have any content over music, like retailers and restaurateurs, but they ended up getting nailed with a licensing fee, and everybody else was against it. and you know, i do remember very vividly that my good friend m mr. koval had a hearing in nashville on that subject and i had to be driven back to the

airport in the car of the united states marshal who was a little worried ability my safety. and he stayed with me until the wheels were up. now, i did have a long series of debates with our late colleague sonny bono, and that ended when he was kind of shedding tears about the changing the music licensing law before an audience of the national restaurant association, which was very sympathetic to my standpoint, and he was very eloquent, i got up and turned around and said what mr. bono is telling you is called, i got you, babe. now, with this background, here everybody at the table has a different viewpoint on this issue. and i think that getting you all together and getting on one page will happen probably two days after the sun rises in the west.

now, you know, that being said, let me ask mr. warfield a couple of questions. and it basically goes, under the current system of licensing and royalty payments, have record sales gone up? and do you believe that the free over the air music that you and your members broadcast have a lot of people going and actually buying music and paying the royalty on the music that they buy? >> from what has been recorded by the recording industry, music sales have gone down, i believe, in terms of hard copies. not through the fault of anything that radio has done. we continue to freely promote and play this music, and our audience does continue to go out and buy the music. within that system, between radio and records, we're still

driving our consumers, our listeners to go out and buy music. there's no other way to do it. not recording what we're doing on the air, stealing that c content by recording it and listening to it. there are alternatives. they could go to digital platforms. if they go there, they have to pay just for the right to listen to what is there. there's no charge to do what we do. there's a digital model out there that none of us has really found a way to make it work. and i think we can all sit here and agree there's a challenge there that we have as a business model that can hopefully grow the various platforms, benefit all of the stakeholders, the recording industry also, not taking anyone away from radio. >> you know, i'm kind of a simple country lawyer. and what you say that the existing system is that you give them free advertising by putting their music on the air, but you don't have to pay for giving them free advertising?

>> free air play, free promotion. >> promotion and advertising are kind of synonymous, aren't they? okay. so what i'm hearing from some of the other folks is that they want you to pay for giving them free advertising. is that kind of a simplistic way to get to the bottom of this? >> i have heard that from some participants, but the one thing that i will say relative to what radio does, radio has helped develop, helped the record industry develop, being as vibrant as it is today, even with the financial difficulties it has, we have always supported the writers of the music. we also helped to develop the careers of the artists we're talking about in some cases today, to develop careers that in many cases today they may not be supported by record labels because of air play that we're doing over the air, free, continued to promote what they do, they can still tour.

whether they choose to tour or not, that's a personal decision, but they have the opportunity to do that. we continue to support those artists in many ways. >> my time is almost expired so i yield back. >> i thank the gentleman. the distinguished gentleman from new york. >> i thank the chair, and let me also thank each and every one of the witnesses for your presence today and in particular, mr. williams and ms. cash for your advocacy, for the creative community, and on behalf of your fellow artists and your fellow song writers. let me turn now to the subject of internet and/or satellite radio, and let me first say that i believe the success of internet radio is critical for the overall music ecosystem in terms of providing a viable, meaningful alternative to the piracy that was previously taking place and was extremely rampant. that's a point i believe cannot be overstated. i do believe there are a few

issues relative to the compensation structure and the business practices that i wanted to explore. so let me start with pandora, and mr. harrison. now, i believe you testified earlier today that one of your business practices is to insure that artists receive a fair share. is that correct? >> first of all, congressman, thank you for the kind words about our service. what i was speaking about is the value that statutory blanket licenses have, not only for services like pandora that allow us to license content efficiently but the song writers and artists actually participate directly in the royalty streams. >> okay. now, am i correct that pandora, however, not withstanding what you just indicated, currently refuses to pay for the use of pre-1972 recordings under either state or federal law? >> we do not pay under section 114 for the performance of

pre-'72 sound recordings which is federal law. >> but you're also contesting the rights of recording artists to receive any compensation in state court as well, correct? >> we do have pending litigation in the state of new york and yes, we disagree with the claims that the record labels make in that case. >> pre-1972 recordings are an important part of your business model, true? >> yes, they are. >> you have, for instance, '60s oldies channel, is that right? >> yes. >> and a motown channel, correct? >> i believe so. >> '50s rock 'n' roll channel, true? >> i believe so. >> golden oldies. >> you're aging out of my demographic, but i believe so. >> a do wap. >> i believe so. >> a classic soul channel, correct. pandora doesn't pay anything for any of the sound recordings played on any of these six channels, true? >> if the recordings were may

after 1972, that would be correct. >> okay. before 1972. correct? >> correct. >> okay, so for instance, respect, which was reported by aretha franklin in 1965, every time respect is played, on pandora, aretha franklin doesn't receive a dime, correct? >> well, pandora would not pay performance royalty to the record label. she would be paid if she were a song writer. >> okay, so my girl was recorded by the temptations i believe in 1964. the temptations don't receive a dime of compensation from pandora every time this extremely popular song is played, correct? >> again, if you're talking about a payment to the record label, that's correct. if they're songwriters, they would get paid. >> okay, the same would be true for soul man, recorded by sam moore in 1967, change is going to come, recorded in 1964 by sam

cooke, stop in the name of love, recorded in 1965 by the supremes. i would suggest that the failure to pay recording artists for pre-1972 recordings is not a fair business practice, and in the context of this overall discussion, it's a problem that should be voluntarily resolved, but if it's not voluntarily resolved, congress should act. let me turn quickly to sirius xm, which i believe you also refuse to pay recording artists for pre-1972 recordings, is that correct? >> there's no public performance right and under the law, there is no amount due to them. >> under federal law, but under state law, you're also in litigation, i believe, in california, trying to prevent compensation under california state law, correct? >> it's clear from litigation there's no public performance right in state law either. >> in that california state court proceeding, i believe you

stated that granting a -- your company, granted a pre-1972 public performance right would produce a pure windfall to recording artists without any commensurate benefit to the public. that was in your case, correct? >> under the way the policy is written, that statement is true. >> how would you suggest a windfall is defined as an unexpected, unearned or sudden gain or advantage in compensating artists for their creativity, even if it was recorded prior to 1972, it's not a windfall, it's the american way. i'll yield back. >> i thank the gentleman. the distinguished gentleman from rhode island is recognized. >> thank you, mr. chairman. and thank you to the witnesses. i'm proud to come from the state of rhode island, which was the birth place of the creator of the national endowment for the arts and humanities center,

clayburn powell, who i think reminded us that the strength of our nation was not simply the power of our military or our economic resources but our ability to honor the creative artists and the culture of this country and protecting the work of our artists is an important part of protecting our democracy. so i thank all the witnesses for this really important testimony. i want to really begin with you, mr. frear. you mentioned, you said i believe everyone should be paid. i assume you believe everyone should be paid because they created a product and they're entitled to be compensated for it, and that argument applies to creators before 1972 and after 1972. based on this notion that people are entitled to value for what they've created. >> i'm not a copyright lawyer. i'm just a history major. and it doesn't make a whole lot of sense to me that the dish ti

distinctions made in the past between pree and post1972 -- let me finish, they granted the sound of performance recording rights, that they did not give it to pre-1972 artists and it makes no sense that terrestrial radio gets a free walk. >> and you agree it should be compensated and in a fair amount driven by the market. >> i agree, it has to be a working competitive market. >> okay, and you spoke about the value that pandora provides to hundreds of millions of americans as a result of your service. but would you agree that there is some danger that if that product is provided without compensation, that the very product you sell could be in peril? >> i don't think i understand -- >> well, you rely on a product that you at least part of your

inventory, you don't compensate the artist for. >> if you're referring to sound recordings before 1972. >> the example ms. cash used where someone rerecorded her father's songs would be compensated, but someone who is playing the original, a recording, would not be required to compensate her. >> that strikes you as inconsistent, nonsensical, not good public policy, i take in. >> i am a copy right lawyer, and they make dish tinctions like this all the time. a musical work written by wc handy in 1920 is part of the public domain and isn't compensated, utbut if a modern day recording artist would record the song, they would receive a royalty. having said all that, pandora would be in favor of following the recommend algz, which is fully federalizing the pre-'72

recordings to allow them to benefit under fair use, allow recording artists to exercise their rights to terminate their transfers, so i understand the argument, sir, but if congress makes the decision to fully federalize pre-'72, we would be happy to pay. >> does anything think that is a bad idea? does anyone think this distinction of '72 makes any sense? >> we agree that the distinction ought to be erased. there are complications in terms of how to do it. and we have expressed a perfect willingness to figure out with the copyright office and other stakeholders how to federalize pre-'72. meanwhile, this legislation which deals with legacy artists who need money now, there's no reason why action couldn't be taken on that immediately while we figure out the federalization. >> mr. christian, if i may ask you, you argue that this existing model ought to continue with free use of music and

am/fm, and it strikes me, i'm new to this committee, but it's a curious argument that i can't think of in another context where the kind of creative results of musicianal artists should whole scale be appropriated, used to build up a business, and generate revenues without any compensation. i'm wondering why you don't think the marketplace, you know, assuming there's some value to promotion, which i'll concede, that the artists would have an ability to understand what the value of that is and negotiate a price that made sense for you as the consumer of that music, and for the creator and artist who created it, why would the marketplace not provide the kind of context for a fair exchange of that? and why would we ever permit this practice to continue where that asset created, that creative product created is just used for the revenue generation of a private enterprise at the

expense of the people who created the product? >> you're speaking of the pre-1972? >> yeah. >> that really isn't applicbible to the radio industry as we don't play performers, we do pay for performers, composers and publishers rights. >> i'm talking about performers post-'72. >> after '72? we believe what we have right now, and that the promotional values applied to them, our product is free. for instance, we can't charge for our product. please understand that. we provide a free product to listener across the united states, hundreds of millions of people. and we do this in marketing, and it's also brought up in the advertising, but there's also promotion. >> i understand that. my question is, i recognize your argument that it has promotional value. but why is it not in the context of a free market, an exchange between the artist and you as the broadcaster, to say this has

some value for promotion, so this is what i want to charge as an artist. this is the value it has to you because it helps to generate revenue for your country. why will not the results of that be a fair price where the artist is compensated and you make money? >> the gentleman's time is expired. you'll be brief with your response. >> one response, i would be inclined to deal with your directly. >> thank you. i yield back. >> the gentlelady from texas. >> chairman, thank you so very much for this hearing. i'm excited to see so many of you i have worked with. i almost feel like calling the role. ms. cash, thank you for the music i enjoy of your dad and i'm sure of your entire family. good to see mr. sherman, mr. warfield, we have worked together before. mr. christian and mr. paul williams and i could be considered brothers and sisters we have worked together so much. thank you so much for what you do for children and teaching children about music.

chris harrison, mr. huppe, i believe the name is, or did i add a perx-e on? >> that's perfect. >> thank you, and mr. frear. let me put on the record i hope this committee if it's appropriate will have a hearing on the directv at&t merger for the fact the content is included in that as well. to the witnesses here, my delay was provoked by the fact that this is a year anniversary of the shelby case, united states supreme court case, that in my opinion dismantled the voting rights of the country and there's a hearing going on in the united states senate that is very important and i would almost say many of the artists your represent, performers benefits on their opportunities to vote because of the voting rights act, so i apologize for my delay in coming to the meeting, but this is no less an important hearing, one of the reasons why i dashed in here to be mere. we have gone through this before, and i think i have made

clear that i think that we have an issue that should draw the interest of all and the recognition of the talent of the artists, but also to understand, i have tried to take some time to understand the workings of radio and the expense that they incur, and so i'm prepared to be in this fight for a way forward. and i will pose my questions in that context. so i would ask both mr. warfield and the representative for pandora, first of all, does the xm deal sound attractive in its construct for the pre-1972 artists inthe pay structure, and i'll just say this in the early morning hours of coming here and listening to radio. i heard that diana ross, i think she's got some music pre-1972,

was going to be at one of our venues here in this area. and apparently, they said something about national tour, and apparently, they felt confident it would be standing room only. these artists are attractive. they're still bringing in crowds. we still love their music, as we will do in years to come for those who are now. so mr. warfield, if you would, i would appreciate it. >> we have not taken a position on the pre-1972.

before they have told us how they're going to use the music. you know, to prepare, you know, an appropriate bill. this is what your rate is going to be. we need information, people begin using our music before we have that information. so the consense decree has

elements that could be changed for your support and our efforts at the doj are going be incredibly important. we need a faster and a cheaper rate setting process, to go to rate court costs millions and millions of our members' money. and arbitration would be so much simpler, a huge part of that. to allow our members, right now, we're existing under an all in or all out rule that's been imposed upon us so the major publishers who want to go directly and license certain rights separate, and it's a right i believe they should have, are not allowed to have that. >> the gentlelady's time has expired. >> thank you for your indulgence and i'm ready for all of us to come together and craft a portion of what mr. williams said. i would appreciate it if i could hear some of the comments in writing back to the committee so we could work on it in the way mr. williams has laid out.

>> i thank the gentleman and i yield back. >> i would like to thank the panelists those who have been here for three hours, by the way, the room must be cleared by 2:00 because of a scheduled hearing, but today's hearing has been concluded. thanks to all for attending. without objection, all members will have five legislative days to submit additional written questions for the witnesses or additional materials for the record. the hearing stands adjourned. coming up on the next washington journal senator ron johnson of

siskon inn on the u.s. strategy in iraq and other news. then the congressman of new york talks about his proposed vulnerable voice act. legislation to provide services to unaccompanied minors crossing the border. live every morning on 7:00 eastern here on cspan. >> now you can keep in touch with current events from the nation's capitol using any phone any time on cspan radio to hear public affairs programs and the program. 5:00 p.m. eastern on washington today. you can also hear audio of the five sunday public affair programs beginning at sunday. call 202-626-8888. long distance or phone charges may apply.

this week in the british house of commons, prime minister david cameron faced questioning about his decision to hire former news of the world editor and couldon. on tuesday he was found guilty of a conspiracy to hack into cell phones and is awaiting sentencing. this is 35 minutes. >> order before i call mr. collins at the start of questions to the prime minister, i wish to inform the house how i will be applying the house's rules to any exchanges on mr. couldon's case. i asked the case for some forbearance as it is important for members outside the house that the position is clear. the house will known that mr. couldon has now been convicted of a charge of conspiracy to

intersucept communications. the court has not yet sentences mr. couldon for offense. there hasn't been any verdict with two charges against him on conspiracy to commit appliant to criminal cases which are active. they cease to be active when and i quote they are concluded about by verdict and sentence. so they apply in this case at the same time, the house's resolution gives the chair discretion in applying the rules. i have taken appropriate advice as the house would expect and indeed been in receipt of unsolicited advice for which i

am, of course, grateful. in the light of all of the circumstances, i have decided, one, to allow reference to mr. couldon's conviction, two, not to allow reference to his sentencing by the court such as speculation on the nature of that sentencence and three, not to allow reference to those charges on which the verdict is awaited. i rely upon honorable members to exercise strength, if that proves helpful to the house. >> questions to the prime minister? mr. damian couldon. >> thank you mr. speaker. this morning, i had meetings with colleagues and others. in addition to this house, i will have such further meetings

today. >> speaker andy couldon's conviction shows that the parliamentary inquiry was consistently misled by him and others with phone hacking and others. does the prime minister agree with me that the first concern what does he do to address the victims of phone hacking also uphold the democratic press. >> i think my honorable friend is absolutely right. the first thing is that we should remember the victims. we should ensure that that cannot happen again. as we do so, we must as he says cherish a free and vibrant price in our country. i take full responsibility for employing. i did sell the basis of assurances that i received. i also said that if those assurances turned out to be wrong, i with apologize to the

house of commons and am doing so today. i am sorry. this was the right decision but i think it is right that we have a public inquiry and have public investigation. yesterday, it showed that that one is above the law in this country. >> mr. speaker, today we know that for four years, the prime minister has hand picked closest advisor was a criminal and brought disgrace to downingstreet. we now also know that the prime minister willfully ignored multiple warnings about him. on the 8th of july, 2009, the guardian published evident of phone hacking on an industrial scale when couldon was editor of the news of the world. at that time couldon was