```

[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]

 
           RECORDING INDUSTRY MARKETING PRACTICES: A CHECK-UP
=======================================================================

                                HEARING

                               before the

          SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET

                                 of the

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                            OCTOBER 9, 2002

                               __________

                           Serial No. 107-132

                               __________

       Printed for the use of the Committee on Energy and Commerce

 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house

                               __________

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                    COMMITTEE ON ENERGY AND COMMERCE

               W.J. ``BILLY'' TAUZIN, Louisiana, Chairman

MICHAEL BILIRAKIS, Florida           JOHN D. DINGELL, Michigan
JOE BARTON, Texas                    HENRY A. WAXMAN, California
FRED UPTON, Michigan                 EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida               RALPH M. HALL, Texas
PAUL E. GILLMOR, Ohio                RICK BOUCHER, Virginia
JAMES C. GREENWOOD, Pennsylvania     EDOLPHUS TOWNS, New York
CHRISTOPHER COX, California          FRANK PALLONE, Jr., New Jersey
NATHAN DEAL, Georgia                 SHERROD BROWN, Ohio
RICHARD BURR, North Carolina         BART GORDON, Tennessee
ED WHITFIELD, Kentucky               PETER DEUTSCH, Florida
GREG GANSKE, Iowa                    BOBBY L. RUSH, Illinois
CHARLIE NORWOOD, Georgia             ANNA G. ESHOO, California
BARBARA CUBIN, Wyoming               BART STUPAK, Michigan
JOHN SHIMKUS, Illinois               ELIOT L. ENGEL, New York
HEATHER WILSON, New Mexico           TOM SAWYER, Ohio
JOHN B. SHADEGG, Arizona             ALBERT R. WYNN, Maryland
CHARLES ``CHIP'' PICKERING,          GENE GREEN, Texas
Mississippi                          KAREN McCARTHY, Missouri
VITO FOSSELLA, New York              TED STRICKLAND, Ohio
ROY BLUNT, Missouri                  DIANA DeGETTE, Colorado
TOM DAVIS, Virginia                  THOMAS M. BARRETT, Wisconsin
ED BRYANT, Tennessee                 BILL LUTHER, Minnesota
ROBERT L. EHRLICH, Jr., Maryland     LOIS CAPPS, California
STEVE BUYER, Indiana                 MICHAEL F. DOYLE, Pennsylvania
GEORGE RADANOVICH, California        CHRISTOPHER JOHN, Louisiana
CHARLES F. BASS, New Hampshire       JANE HARMAN, California
JOSEPH R. PITTS, Pennsylvania
MARY BONO, California
GREG WALDEN, Oregon
LEE TERRY, Nebraska
ERNIE FLETCHER, Kentucky

                  David V. Marventano, Staff Director
                   James D. Barnette, General Counsel
      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

          Subcommittee on Telecommunications and the Internet

                     FRED UPTON, Michigan, Chairman

MICHAEL BILIRAKIS, Florida           EDWARD J. MARKEY, Massachusetts
JOE BARTON, Texas                    BART GORDON, Tennessee
CLIFF STEARNS, Florida               BOBBY L. RUSH, Illinois
  Vice Chairman                      ANNA G. ESHOO, California
PAUL E. GILLMOR, Ohio                ELIOT L. ENGEL, New York
CHRISTOPHER COX, California          GENE GREEN, Texas
NATHAN DEAL, Georgia                 KAREN McCARTHY, Missouri
BARBARA CUBIN, Wyoming               BILL LUTHER, Minnesota
JOHN SHIMKUS, Illinois               BART STUPAK, Michigan
HEATHER WILSON, New Mexico           DIANA DeGETTE, Colorado
CHARLES ``CHIP'' PICKERING,          JANE HARMAN, California
Mississippi                          RICK BOUCHER, Virginia
VITO FOSSELLA, New York              SHERROD BROWN, Ohio
ROY BLUNT, Missouri                  TOM SAWYER, Ohio
TOM DAVIS, Virginia                  JOHN D. DINGELL, Michigan,
CHARLES F. BASS, New Hampshire         (Ex Officio)
LEE TERRY, Nebraska
GREG WALDEN, Oregon
W.J. ``BILLY'' TAUZIN, Louisiana
  (Ex Officio)

                                  (ii)

                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Marmaduke, John, President and CEO, Hastings Entertainment, 
      Inc., on behalf of National Association of Recording 
      Merchandisers..............................................    24
    Peeler, C. Lee, Deputy Director, Bureau of Consumer 
      Protection, Federal Trade Commission.......................     8
    Rich, Michael, Children's Hospital Boston/Harvard Medical 
      School, on behalf of American Academy of Pediatrics........    13
    Rosen, Hilary, Chairman and CEO, Recording Industry 
      Association of America.....................................    17
    Severson, Gary, Senior Vice President and General Merchandise 
      Manager, Wal-Mart Stores, Inc..............................    29
    Simmons, Russell, Chairman, Hip Hop Summit Action Network....    22
Material submitted for the record by:
    EMI Recorded Music, letter dated October 29, 2002, to Hon. 
      W.J. ``Billy'' Tauzin......................................    54
    Evans, LaVerne, Senior Vice Presidend and General Counsel, 
      Legal and Business Affairs, BMG, prepared statement of.....    52
    Sony Music Entertainment Inc., letter dated October 31, 2002, 
      to Hon. W.J. ``Billy'' Tauzin..............................    53
    Universal Music Group, letter dated October 31, 2002, to Hon. 
      Billy Tauzin...............................................    56
    Warner Music Group, letter dated October 31, 2002, to Hon. 
      Billy Tauzin...............................................    55

                                 (iii)

           RECORDING INDUSTRY MARKETING PRACTICES: A CHECK-UP

                              ----------                              

                        TUESDAY, OCTOBER 1, 2002

              House of Representatives,    
              Committee on Energy and Commerce,    
                     Subcommittee on Telecommunications    
                                          and the Internet,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:14 a.m., in 
room 2123, Rayburn House Office Building, Hon. Fred Upton 
(chairman) presiding.
    Members present: Representatives Upton, Shimkus, Tauzin (ex 
officio), Gordon, and Harman.
    Also present: Representative Towns.
    Staff present: Linda Bloss-Baum, majority counsel; Will 
Nordwind, majority counsel; Hollyn Kidd, legislative clerk; Jon 
Tripp, deputy communications director; and Brendan Kelsay, 
minority professional staff member.
    Mr. Upton. Good morning, everyone.
    I am going to start off by asking unanimous consent that 
other members of the full committee may participate in this 
subcommittee hearing and would note that we are probably a 
little shorter on members than is certainly the norm. The 
reason, we were supposed to have votes yesterday, and they 
postponed those votes until today. So many members, as we all 
traveled home to our districts and States over the weekend--a 
number of folks now know they don't have to be back until 6:30 
tonight instead of 6:30 yesterday. But since we had already 
noticed the hearing and we had people, logistics that we needed 
to follow through, we decided to go ahead with the hearing this 
morning.
    Today's hearing is entitled Recording Industry Marketing 
Practices: A Check-Up. As I round the corner toward 50--my New 
Year's resolution was to move that to 40, I would note--I would 
recognize that, when it comes to your health, it pays to have 
annual checkups. And while such annual doctors' visits can be 
uncomfortable, they help chart your progress toward whatever 
health goals your doctor has set, whether it is to be losing 
weight, drinking less coffee, exercising more, whatever. It has 
been a little over a year since our last visit with the 
recording industry, so we thought it would be a good time to 
have an annual checkup.
    As the parent of two young kids, an 11-year-old and a 14-
year-old, I believe that there is no replacement for parental 
supervision when it comes from protecting kids from 
inappropriate content. However, parents do need the proper 
tools to make decisions about what might or might not be 
appropriate for their kids; and that is the very essence of 
what Mr. Markey, Mr. Shimkus, and I have been doing through our 
dot.kids bill, creating new domain for the Internet which would 
provide parents with a place where they can send their kids and 
know that they will be safe, much like the children's section 
of the library.
    I would note that that legislation passed in the House 
overwhelmingly earlier this year, and we are waiting for Senate 
action in the next, hopefully, couple days.
    But looking back at the medical charts from our last 
hearing, I recall closely examining the tools which the 
recording industry provides parents to help them protect their 
kids from inappropriate material; and one deficiency which I 
noted was the lack of any specific descriptive information on 
the parental advisory label, unlike the parental advisory 
labels of the motion picture and video games, which provide 
more specific information to parents on why something is rated 
the way that it is.
    At the last year's hearing I asked the RIAA whether it 
planned on improving its label by making similar information 
available to parents, and the answer that I think all of us 
received was no. Like a good doctor, I prescribed precisely 
that course of action that I thought ought to be appropriate to 
the RIAA.
    Since that time, one of the RIAA's biggest member 
companies, BMG, has begun including more specific information 
in its parental advisory label; and I look at this CD here with 
exactly that label. It talks about strong language, violent 
content, sexual content; and I applaud them for their corporate 
responsibility and leadership in that regard.
    Today, I, along with Chairman Tauzin and Congressman 
Shimkus and other members of this subcommittee, are calling on 
the RIAA and its other major member companies--Warner, 
Universal, EMI, Sony--to hopefully get on the same song sheet 
as BMG.
    So I look forward to talking about this issue today, and I 
thank the RIAA in advance for testifying and hopefully for 
assisting the subcommittee in its efforts to learn whether or 
not these other companies are going to get in tune with BMG, 
and if not, why not? In fact, we hopefully will have a letter 
that we will be sharing with you that you might want to send to 
the other members' CEOs to respond to the inquiry that we will 
put into the record.
    Finally, I want to thank the FTC for its continued 
diligence in providing this committee with its follow-up 
reports. They are very helpful diagnostic tools used in our 
checkups. The most recent report suggests that the recording 
industry practices reveal a mixed picture; and while that is a 
better diagnosis than the previous year, I would note that the 
recording industry is not yet out of the woods.
    As for myself, I believe that the First Amendment does make 
it inappropriate to legislate in these matters. However, just 
because you have the right to do something doesn't make it the 
right thing to do. Therefore, we expect and would hope that the 
recording industry continue working with Congress and this 
subcommittee to do the right thing for all of America's parents 
and their kids.
    Now, I would yield to my friend from Tennessee, Mr. Gordon, 
for an opening statement.
    Mr. Gordon. Thank you, Mr. Chairman. Just to note, I have 
recently passed that 50 corner that you had mentioned, and I 
survived; and I think you will live to tell about it. Also.
    Let me add my welcome to everyone here today. I think 
Chairman Upton has done a good job in outlining the scope of 
our hearing today. Unfortunately, our resident expert in 
lyrics, Ed Markey, couldn't be here, and so let me add just a 
quick bit of real-world thoughts to this issue.
    Let me first say that my grandfather used to tell me that 
the most important road in the county was the one in front of 
your house. I have an 18-year-old baby girl at home, so I am 
viewing the world a little differently than I used to. I guess 
her two favorite things, one is the walk we take every morning 
looking for dogs in the neighborhood and the other thing is 
dancing to her music video. She loves to dance to that video. 
Now, she is not talking yet, but I think she is--or she is 
starting to talk a little bit, and I think she understands a 
lot more. So in our walks every morning I have explained to her 
the evils of dating, and I think I am breaking through on that 
one, I hope.
    Mr. Upton. Now, did you say 18 months or 18 years?
    Mr. Gordon. She is 18 months.
    You have got to get started on that one. And repetition 
doesn't seem to bother her, but I am just about to gag on the 
hokey-pokey, and it is time for us to go get another video. And 
when we go get that video, I am really interested in knowing 
what tools am I going to have in trying to find out what would 
be a good video for her. I want to be sure that, you know, we 
get the bunny hop and not Bunny--or the best of Bunny's lap 
dances. So what tools am I going to have, and does the panel 
think those tools are going to be adequate? And, if not, what 
would you suggest would be adequate in helping me?
    So, thank you, Mr. Chairman.
    Mr. Upton. Thank you, Mr. Gordon.
    Mr. Shimkus.
    Mr. Shimkus. Thank you, Mr. Chairman, for calling this 
hearing and for your and Chairman Tauzin's work on following up 
on what is a very important area of our committee's 
jurisdiction. This is a very important hearing, and I would 
like to thank all the witnesses for coming this morning to 
share your expertise on this industry. We have an excellent, 
well-rounded panel.
    I would like to especially thank Hilary Rosen for being 
here. I understand you took the Red Eye. This can't be your 
favorite topic, but--even after a little night's rest, but I am 
grateful.
    The origins of this hearing go back to September, 2000, 
when the FTC issued a report which found that three 
entertainment industries--movies, music, and video games--were 
engaged in widespread marketing of explicit content to children 
that was inconsistent with the warning messages on their own 
label. So that is the start of why we are here today, is the 
inconsistency of the label with what was actually in the 
content. Further, the FTC found that advertisement for such 
products frequently failed to contain rating information.
    The following year, the movie and video game industry got 
better marks for cleaning up their act, but the recording 
industry earned another unsatisfactory grade. While the music 
industry has taken a few positive steps since last year's 
hearing, a lot more needs to be done.
    I also praise BMG for the implementation of a new rating 
system that is designed to give parents and consumers more 
information about the music they buy. I hope the rest of the 
record labels will do the same, because I believe more 
information for parents is essential.
    I would also like to take this opportunity to highlight the 
continued progress the video game industry has made. According 
to the FTC report, they have responded to our concerns 
proactively by adopting numerous voluntary standards that 
discourage the targeting of children for mature rated products 
and require the disclosure of rating information in most forms 
of advertising.
    In addition, the industry has in place an extensive system 
to enforce those standards and bring about continued 
improvement in industry practices, and I think most of us would 
like to see the industries do similar. Rather they do it than 
we do it through legislation.
    Although I sympathize that music is a much more complex 
entertainment product to deal with than video games, I think 
the video industry can be used as a role model for marketing 
practices.
    I would like to end by expressing a gentle reminder to the 
record labels today: Your representatives come to my office on 
a regular basis asking for assistance in fighting Internet 
piracy and on other matters important to your industry's bottom 
line. And don't get me wrong, I agree with your argument: 
Stealing is wrong. It is immoral. But so is marketing explicit 
content to our youth. Parents have a hard enough job in our 
environment today without being undermined by music labels 
pushing the sale of smut at the expense of our children's moral 
health.
    We are bringing you all up here again because we are 
looking for improvement in your corporate citizenship. I don't 
think I speak for only myself when I say if we don't see some 
genuine effort to improve labeling and marketing practices, we 
will start questioning the sincerity of other efforts.
    A lot of us will say as grandparents, or I am a father of 
three small boys--9, 7, and one will be 3 next week--this is a 
different environment. We no longer live in the Ozzie and 
Harriett days. So all we are asking for is help. And if we can 
get help, we will be very grateful. If we don't get help, then 
we will have to try to move on the legislative agenda.
    With that, I thank you, Mr. Chairman. I yield back my time.
    Mr. Upton. Thank you.
    I recognize the gentleman from New York, Mr. Towns. 
Welcome.
    Mr. Towns. Thank you very much, Mr. Chairman, for allowing 
me to participate in today's hearing on an issue that is 
increasingly important to me and to a large number of my 
constituents.
    In addition to the other witnesses in attendance today--I 
am pleased to welcome all of the witnesses, but I would 
especially like to welcome Russell Simmons from New York to the 
committee hearing.
    I appreciate the work that members of the committee and the 
FTC have done on the market of entertainment content and 
products. Entertainment plays a vital role in our society and 
providing consumers the information they need through labeling 
to make an informed decision before purchasing a product that 
contains explicit content is crucial. Parents today have a 
tougher job keeping up with their children in a world where 
kids seem to grow up more quickly than ever. I am heartened by 
the industry's efforts at self-regulation to assist parents by 
labeling content that could be considered offensive.
    Due to the downturn in CD sales over the past few years, I 
truly believe we should be questioning the illegal music 
swapping services where teenagers download the vast majority of 
music today. I am also deeply troubled at the attitude of some 
who are saying that self-regulation is not working. I believe 
it is up to the consumers and parents to decide what is 
appropriate and inappropriate for different age groups.
    The fact of the matter is that music reveals many truths 
about the social and political realities facing our Nation and 
our world today, particularly the African American community; 
and it is simply wrong for anyone to suggest that music and the 
messages contained are not suitable for America's teens 
because, in some cases, it contains explicit lyrics.
    Make no mistake about it, the debate is fueled largely by 
those who are uncomfortable with the way African Americans 
express their culture through music. When artists use explicit 
language, there is a label that clearly informs consumers of 
that fact. But, again, explicit language does not alone make a 
recording inappropriate for teens. I do believe it is important 
to consider the social value and messages contained within 
these recordings. Some of the most popular songs in the civil 
rights movement and the Vietnam war actually commented on our 
society. I mean, we have to think about that that is where 
those songs came from, out of those experiences.
    If people are upset about the content flowing from the 
artists' pen, then maybe what we really need to do is use our 
energies to change the society that the artists are living in 
and describing. Because they are describing their conditions, 
they are describing what they are going through, they are 
describing what they are experiencing and seeing every day of 
their life.
    I look forward to the testimony today from the witnesses. 
And on that note, Mr. Chairman, again I thank you for allowing 
me to participate, and I yield back the balance of my time.
    Mr. Upton. Thank you.
    I would recognize the gentlelady from California, Ms. 
Harman.
    Ms. Harman. Thank you, Mr. Chairman.
    Sitting here, I was thinking that it is deja vu all over 
again. I am looking at my notes of July 20, 2001, when we were 
all sitting here facing a similar panel. Jack Valenti is not 
there, but I trust he will receive my best wishes. But, 
otherwise, we are having the same conversation.
    I did want to say to you and Mr. Gordon that you may be 
getting older, but I am not. And, you know, I can't imagine 
being as old as 50. I just want you to know that.
    Looking at my notes from last year, I still feel the same 
way I did last year. A lot of the content out there is violent 
and degrading, and I don't want to listen to it, and I don't 
want my four children to listen to it. However, I continue to 
feel that it is parents who need to make judgments about their 
children's level of maturity, not us, and not any Federal 
agency.
    I want to commend BMG which has acted in the last year to 
set a very good example for the industry. That is useful, 
because that gives parents better tools to make judgments about 
our own children.
    One other thing that has changed since last year is that my 
youngest daughter, whom I described last year and I described 
our arguments about whether she should go to Eminem concerts, 
has been to another Eminem concert and survived it. She has 
also graduated high school, and she is now a--from my 
observation--quite a responsible freshman in a good college. 
So, kids do grow up and parents, even very busy and distracted 
parents like me, try our hardest to help them grow up and help 
to supervise what it is that they hear and do.
    I just think, as you said yourself, Mr. Chairman, that the 
First Amendment is a cornerstone of our democracy. It requires 
us to permit free speech, but it also requires us to be 
vigilant and responsible as we help our children understand 
what speech they should hear and what speech they should not 
hear.
    I would just close by observing that I am sure that most of 
our witnesses are parents. I know that Hilary Rosen is a parent 
of two children, and I am absolutely certain that when her 
children are old enough--I don't think they are yet--to listen 
to recorded music, that she will exercise her responsibilities 
as a parent, just as we do.
    Thank you, Mr. Chairman.
    Mr. Upton. Thank you very much.
    [Additional statement submitted for the record follows:]
 Prepared Statement of Hon. W.J. ``Billy'' Tauzin, Chairman, Committee 
                         on Energy and Commerce
    Mr. Chairman, thank you for holding this important hearing today. I 
want to commend you and the Subcommittee for its ongoing leadership on 
this important issue regarding how explicit content is labeled and 
marketed to our nation's youth.
    Fourteen months ago in this very room, we brought together 
representatives of the motion picture, video games and recording 
industry to discuss a recent FTC Report about the marketing of violent 
material to minors. At that memorable hearing, we discovered that two 
of the industries had made significant progress on rating and labeling 
systems to provide consumers with information about the content of the 
entertainment they bought. However, that hearing alerted us that the 
recording industry had a ways to go in order to catch up to their 
industry counterparts' rating systems. Members of the Committee asked 
serious poignant questions of the industry about how it labels and 
markets its material and some of us urged the industry to seek input 
from parents and third parties. Today--a little over a year later . . . 
it is time for a check up.
    At that hearing last July, I urged the recording industry to simply 
give parents a little more information about how violent or how 
explicit the content of the music is. I asked them to listen to the 
voices of American parents and give their rating and labeling system a 
second look. Some parents in America fear that some of this music is 
killing their values systems and their kids' innocence and they would 
like to know more about the content of their entertainment before they 
go out and buy it. As Members of Congress we have the privilege to help 
influence many policies that affect our constituents' lives. But one 
thing we can not do is directly control the music that America's kids 
listen to. But we can help, and want to help, parents be the best 
parents they can be . . . and we hope that is a goal that we share with 
the recording industry.
    The FTC has done an extraordinary job of reporting to Congress 
about the ongoing progress these industries have made. I want to thank 
you and I commend you, Mr. Peeler for the Commission's ongoing work in 
this area. Your report suggests that, while the recording industry has 
made some progress in disclosing its explicit warning labels in 
advertising, that advertising still appears on television shows and in 
print magazines that are popular with teens. If these marketing 
practices are to continue--and I understand the business reality to do 
so--then it becomes even more necessary to provide as much information, 
in the clearest possible fashion, for consumers who must make the 
choice about buying it. In my non-medical opinion--it appears as though 
the recording industry still has a ways to go to catch up to other 
industries on the objective growth charts.
    I remain concerned about one particular issue that was raised last 
year, and appears to be equally as prevalent today. The labeling system 
on CDs will not work if consumers are not able to see it. I have here 
two identical CDs purchased from the same bin, right next to one 
another, at the same music retail outlet. One has the explicit warning 
label completely blocked by the pricing sticker while the other has 
about \2/3\ of the label covered up. According to the FTC Report, the 
RIAA itself found no instances where price stickers obscured the label, 
but clearly this is a problem with the current system. I look forward 
to hearing more about the placement of price stickers and warning 
labels from Mr. Marmaduke, with the National Association of Recording 
Merchandisers and the other witnesses this morning.
    We have done our best to turn up the volume for the recording 
industry on this important issue. Some have heard us. BMG has announced 
its new detailed system of parental warnings that includes specific 
information about why the content is explicit. I am proud to join 
Chairman Upton, Mr. Shimkus and what I hope will be many other Members 
of the Subcommittee today in calling on the other major record labels 
to add their voice to the choir and provide similar information to 
consumers on their parental advisory systems.
    Once again, thank you, Mr. Chairman, for holding this important 
hearing, and I look forward to hearing from our witnesses and asking 
them some questions.

    Mr. Upton. Well, we are fortunate to have the panel that we 
have today. They are a led by Mr. C. Lee Peeler--happy 
birthday, sir, today, as we talk about birthdays--Deputy 
Director of the Bureau of Consumer Protection for the FTC. We 
have Dr. Michael Rich from Children's Hospital Boston/Harvard 
Medical School, on behalf of the American Academy of 
Pediatrics; Ms. Hilary Rosen, Chairman and CEO of the Recording 
Industry Association of America; Mr. Russell Simmons, Chairman 
of the Hip Hop Summit Action Network from New York; Mr. John 
Marmaduke, President and CEO, Hastings Entertainment, on behalf 
of the National Association of Recording Merchandisers; and Mr. 
Gary Severson, Senior VP and General Merchandise Manager for 
Wal-Mart here in Washington.
    We appreciated receiving most of your testimonies in 
advance. Last night, we were able to review those. We would 
like to limit your remarks initially to 5 minutes, if we can, 
and then we will do questions and answers.
    I know Chairman Tauzin is in a very important hearing 
upstairs, and he intends to be down at some point this morning 
as well.
    Mr. Peeler, we will begin with you. Thank you.

    STATEMENTS OF C. LEE PEELER, DEPUTY DIRECTOR, BUREAU OF 
 CONSUMER PROTECTION, FEDERAL TRADE COMMISSION; MICHAEL RICH, 
CHILDREN'S HOSPITAL BOSTON/HARVARD MEDICAL SCHOOL, ON BEHALF OF 
AMERICAN ACADEMY OF PEDIATRICS; HILARY ROSEN, CHAIRMAN AND CEO, 
  RECORDING INDUSTRY ASSOCIATION OF AMERICA; RUSSELL SIMMONS, 
   CHAIRMAN, HIP HOP SUMMIT ACTION NETWORK; JOHN MARMADUKE, 
 PRESIDENT AND CEO, HASTINGS ENTERTAINMENT, INC., ON BEHALF OF 
   NATIONAL ASSOCIATION OF RECORDING MERCHANDISERS; AND GARY 
    SEVERSON, SENIOR VICE PRESIDENT AND GENERAL MERCHANDISE 
                 MANAGER, WAL-MART STORES, INC.

    Mr. Peeler. Thank you, Mr. Chairman. Thank you for the 
opportunity to discuss the findings of the Commission's recent 
reports on the marketing of violent entertainment products to 
children by the motion picture, music recording, and electronic 
game industries. Each of these industries has put in place a 
self-regulatory system that rates or labels products and can 
help parents seeking to limit their children's exposure to 
violent entertainment materials.
    My written testimony today represents the views of the 
Commission, while my responses to questions represent my own 
views; and I would ask that my written testimony be included in 
full in the record.
    In September 2000, in response to requests by the President 
and the Congress, the Commission issued a report on the 
marketing practices of the entertainment industry for violent, 
R-rated movies, mature-rated games, and explicit-content 
labeled music recordings. That report found that the movie, 
video game, and music industry had engaged in widespread 
marketing of violent movies, video games, and music to 
children.
    Since September 2000, the Commission has issued three 
follow-up reports. The reports examine the degree of compliance 
with industry guidelines for the disclosures of rating 
information and advertising and the labeling of these products. 
The reports also review the placement of advertising for rated 
or explicit content-labeled products. The reports document 
instances where some industry members have engaged in marketing 
practices that the Commission believes may undermine existing 
self-regulatory systems as well as instances where individual 
members have done more than their industry self-regulatory 
codes require.
    To follow up on the Chairman's analogy, we view our job 
here very much as providing the Congress with factual 
information about what is taking place. I guess we would serve 
the roll of a radiologist: We will give you the information, 
and you can make your decisions on it.
    The Commission's most recent report was issued in June of 
this year. With respect to movies and games, the report found 
progress in a number of areas, including substantial compliance 
with voluntary self-regulatory standards requiring the 
disclosure of rating, the labeling information and advertising 
and on product packaging. The Commission also found encouraging 
the widespread compliance by the movie and game industries with 
existing self-regulatory guidelines, limiting advertising 
placements for violent R-rated and M-rated entertainment 
products in media with a large percentage of teens in the 
audience.
    With regard to music, the Commission did find some progress 
in placing the parental advisory label in advertising and on 
labeling and was told by industry representatives that steps 
were being taken to further improve compliance even as our 
report was being prepared.
    With respect to explicit content, music advertising 
placements, however, the report found no change in industry 
practices since the September, 2000, report. The report notes 
that the music industry views its parental advisory labeling 
system as not being an age-based system but rather as an 
indication to parents that there is explicit content on a 
certain album. Thus, the industry's self-regulatory code does 
not include restrictions on ad placement.
    In addition, the music industry's labeling program does not 
require advertisers to indicate why the recording contains a 
parental advisory. Nonetheless, as Chairman Upton just 
indicated, in June of this year one industry member, BMG 
Entertainment, announced that it would begin to specify on 
labels and in advertising whether violent content, sexual 
content, or strong language led to the decision to apply the 
parental advisory label, and that they would include that same 
information in advertising. It is not known whether other 
industry members will adopt that step.
    In sum, the Commission reports have documented progress by 
the entertainment industry in complying with and improving 
their own self-regulatory policies, more in the movie and games 
industries and less in the music industry. Because of First 
Amendment and other issues, the Commission continues to support 
private sector initiatives by industry and individual companies 
to address these issues. To encourage continued voluntary 
compliance and to document any changes in self-regulatory 
efforts, the Commission will continue to monitor the 
entertainment industries' marketing and practices throughout 
the next year and will issue a follow-up report to Congress.
    That concludes my prepared remarks, and I would be pleased 
to answer any questions you have.
    [The prepared statement of C. Lee Peeler follows:]
 Prepared Statement of Lee Peeler, Deputy Director, Bureau of Consumer 
                  Protection, Federal Trade Commission
                            i. introduction
    Mr. Chairman, I am Lee Peeler, Deputy Director of the Bureau of 
Consumer Protection at the Federal Trade Commission. I thank you for 
this opportunity to discuss the Commission's recent Reports on the 
marketing of violent entertainment products to children by the motion 
picture, music recording, and electronic game industries.1 
Each of these industries has in place a self-regulatory system that 
rates or labels products and that can help parents seeking to limit 
their children's exposure to violent materials.
    The Commission has issued four Reports on the marketing practices 
of these three industries. In particular, the Reports have examined 
voluntary guidelines and industry codes that govern the placement of 
advertising for violent Restricted (R)-rated movies, Mature (M)-rated 
games, and Explicit-Content Labeled recordings in media popular with 
teens and require the disclosure of rating and labeling information in 
advertising and on product packaging. The Reports document instances 
where some industry members have engaged in marketing practices that 
undermined the self-regulatory systems that the industries themselves 
put into place, as well as instances where other individual members did 
more than their industry required.
    The Commission's most recent Report, issued in June of this year, 
found progress in a number of areas. The Commission found substantial 
compliance by movies and games marketers, and, to a far lesser extent, 
by marketers of music, with voluntary, self-regulatory standards 
requiring the disclosure of rating and labeling information in 
advertising and product packaging. The Commission also found 
encouraging widespread compliance by the movie and game industries with 
existing guidelines limiting ad placements for violent R-and M-rated 
entertainment products in media with a large percentage of teens in the 
audience.
    Nonetheless, there are continued areas of concern. Existing 
voluntary guidelines for the movie and game industries still permit ad 
placements in media which are very popular with large numbers of teens. 
All three industries continue to place ads for rated or labeled 
products on television programs that are, according to Nielsen 
rankings, among the most popular shows watched by teens. And with 
respect to retail sales of violent entertainment products, although the 
motion picture industry has done the best job, all products remain 
easily available for purchase by young teens.
    Finally, despite a few initiatives during the period covered by the 
Commission's last Report, special issues remain in the music industry, 
particularly in its ad placement practices. Although the self-
regulatory codes of the movie and game industries place limits on the 
marketing of rated products to young people, the guidelines of the 
music industry do not. In the music industry's view, unlike the rating 
systems of movies and games, its ``Parental Advisory'' Labeling Program 
is not age-based and is not intended to indicate whether labeled music 
may be inappropriate for any specific consumer age.
                             ii. background
    The Federal Trade Commission is the federal government's principal 
consumer protection agency. Congress has directed the Commission, under 
the FTC Act, to take action against ``unfair or deceptive acts or 
practices'' in almost all sectors of the economy and to promote 
vigorous competition in the marketplace.2 With the exception 
of certain industries and activities, the FTC Act provides the 
Commission with broad investigative and enforcement authority over 
entities engaged in, or whose business affects, commerce.3 
The FTC Act also authorizes the Commission to conduct studies and 
collect information, and, in the public interest, to publish Reports on 
the information it obtains.4
    Revelations that the teen-aged shooters at the 1999 Columbine High 
School shooting had been infatuated with extremely violent movies, 
music and video games led to Congressional and Presidential requests 
that the Commission investigate and report back on the practices of the 
movie, electronic game, and recording industries with respect to the 
marketing of violent entertainment to children.
                     iii. the commission's studies
A. Scope of the Studies
    In response to these requests, the Commission has, to date, issued 
four Reports on the self-regulatory and marketing practices concerning 
violent entertainment by the movie, music and video game 
industries.5 In the course of preparing these Reports, the 
Commission staff requested information from the principal industry 
trade associations, as well as from major motion picture studios, music 
recording companies, and electronic game companies.6 In 
addition, the Commission staff contacted interested government 
agencies, medical associations, academics, and parent and consumer 
advocacy groups.7 The Commission collected information from 
consumers through surveys and polls and also designed and conducted its 
own surveys. In addition, the Commission conducted two mystery-shopper 
surveys of retail stores and movie theaters in an attempt to see if 
unaccompanied children could purchase or gain access to products 
labeled as inappropriate or warranting parental guidance. Lastly, the 
Commission staff reviewed Internet sites to study how they are used to 
market and provide direct access to rated or labeled products.
B. Findings of the Commission's First Report
    In September 2000, the Federal Trade Commission issued its first 
Report entitled, Marketing Violent Entertainment to Children: A Review 
of Self-Regulation and Industry Practices in the Motion Picture, Music 
Recording & Electronic Game Industries.8 That Report found 
that the three entertainment industries had engaged in widespread 
marketing of violent movies, music, and electronic games to children 
that was inconsistent with the cautionary messages of their own 
parental advisories and that undermined parents' attempts to make 
informed decisions about their children's exposure to violent content. 
In addition, the Commission found that advertisements for such products 
frequently failed to contain rating information. Finally, the 
Commission reported on the results of an undercover ``mystery'' shop by 
unaccompanied teens, aged 13-16, of retailers and movie theaters. The 
young shoppers were able to buy M-rated electronic games and parental 
advisory-labeled music recordings 85% of the time and purchase tickets 
for an R-rated movie almost half (46%) of the time.9
C. Findings of the Commission's Follow-Up Reports in 2001
    In response to Congressional requests, the FTC released two follow-
up Reports in 2001. Both Reports examined the entertainment industry's 
practices with regard to marketing violent entertainment products to 
children. The April 2001 Report 10 concentrated primarily on 
advertising practices by the three industries on television, in print 
media and on the Internet. For the December 2001 Report, 11 
the Commission staff contacted several companies within each of the 
three industries and requested marketing documents concerning violent 
movies, music and electronic games. In addition, the Commission 
conducted a second mystery shopper survey, like the one from the 
September 2000 Report. Finally, the Commission staff continued to 
monitor television, print and Internet advertising for placement and 
disclosure of rating and labeling information.
    These Reports noted progress by the movie and video game industries 
in providing clear and conspicuous disclosure of rating information in 
advertising as well as new efforts by both industries to limit 
advertising for R-rated movies and M-rated games in popular teen media 
venues. The music industry demonstrated mixed progress. On the plus 
side, members of the music industry had begun to comply with new 
industry guidelines encouraging the use of the Parental Advisory Label 
in advertising. But as for ad placement practices, the music industry 
continued to place advertisements for explicit-content recordings 
labeled with parental advisories in popular teen media.12
    The results of the Commission's second undercover shopper survey 
were included in the December 2001 Report. Although electronic game 
retailers showed modest improvement from the results in the 
Commission's earlier undercover survey, there was no change in sales 
practices in the movie theater and music retailer industries.
D. Findings of the Commission's June 2002 Report
    In June of this year,13 the Commission issued its latest 
Report which looked at industry advertising placements and disclosure 
of rating and labeling information in television and print media. In 
addition, the Commission reviewed product packaging to check whether 
rating information was being disclosed clearly and conspicuously. This 
Report documented further progress by the movie and games industries in 
ad placement practices for R-rated movies and M-rated games, and showed 
continued improvement by all three industries in disclosing rating and 
labeling information in advertising and product packaging.14
    Movies: In the case of movies, the most recent Report noted 
significant progress in complying with industry's commitment, issued in 
response to the Commission's first Report in September 2000, to not 
``inappropriately, specifically target children'' in films rated R for 
violence.15 The June 2002 Report found virtually no ads for 
violent R-rated movies in popular teen magazines. In addition, the 
movie studios widely complied with industry policies set by several 
studios not to advertise R-rated movies in venues with a thirty-five 
percent or more youth audience share. However, even while complying 
with these policies, studios frequently advertised R-rated movies in 
television shows that are very popular with teens.16 
Finally, the Report showed further progress by studios in disclosing a 
movie's rating and rating reasons in advertising, although some 
studios' rating disclosures were still difficult to read.
    Games: The Commission found widespread compliance with video game 
industry self-regulatory standards limiting the advertising of M-rated 
games in media where children constitute a certain percentage of the 
audience (35% for television and 45% for print media). Nonetheless, the 
Commission did find that some industry members did place advertisements 
for M-rated games on television shows popular with teens, and in youth-
oriented game-enthusiast magazines. As the Commission noted in its 
December 2001 Report, the industry's anti-targeting standards 
diminish--but do not eliminate--placements in programs mainly popular 
with teens. In addition, the electronic game industry continued to 
prominently place rating information in most forms of game advertising. 
Although some areas still could be improved (e.g., adding content 
descriptors in television advertising), there is much in the game 
industry's rating disclosure requirements that merits duplication by 
others.
    Music: With regard to music, the Commission did find some progress 
in placing the Parental Advisory Label in industry advertising. The 
Commission's review of explicit-content music ad placements, however, 
showed virtually no change in industry practices since the September 
2000 Report. Advertisements continued to be placed on television shows 
and in print magazines popular with teens. The industry views its 
Parental Advisory Labeling System as not being an age-based system, but 
rather an indication to parents that there is explicit content on a 
certain album. Thus, the industry's self-regulatory code does not 
include restrictions on ad placement.
    In addition, the music industry's labeling program does not require 
that advertisers indicate why the recording contains a parental 
advisory. Nonetheless, in June of this year, one industry member, BMG 
Entertainment, announced that it will begin to specify on the label 
whether violent content, sexual content or strong language led to the 
decision to apply the Parental Advisory Label, and include that same 
information in its advertising.17 It is not known whether 
other industry members will also adopt this positive step. In the 
Commission staff's ongoing monitoring of advertising, they have not yet 
seen ads by BMG artists that include this new label.
                             iv. conclusion
    The Commission's follow-up Reports have documented progress by the 
movie and electronic game industries in complying with and improving 
their own self-regulatory policies restricting ad placements and 
requiring rating information in advertising.
    Because of First Amendment and other issues, the Commission 
continues to support private sector initiatives by industry and 
individual companies to implement these suggestions. To encourage 
continued voluntary compliance and to document any changes in self-
regulatory efforts, the Commission will monitor the entertainment 
industry's marketing practices through the next year, and will then 
issue a follow-up report.
    This concludes my prepared remarks. I would be pleased to answer 
any questions you may have.

                                Endnotes

    1 The views expressed in this written statement 
represent the views of the Commission. My oral statement and responses 
to questions you may have are my own and are not necessarily those of 
the Commission or any individual Commissioner.
    2 15 U.S.C. Sec. 45(a).
    3 The Commission also has responsibility under 46 
additional statutes governing specific industries and practices. These 
include, for example, the Truth in Lending Act, 15 U.S.C. 
Sec. Sec. 1601 et seq., which mandates disclosures of credit terms, and 
the Fair Credit Billing Act, 15 U.S.C. Sec. Sec. 1666 et seq., which 
provides for the correction of billing errors on credit accounts. The 
Commission also enforces over 30 rules governing specific industries 
and practices, e.g., the Used Car Rule, 16 C.F.R. Part 455, which 
requires used car dealers to disclose warranty terms via a window 
sticker; the Franchise Rule, 16 C.F.R. Part 436, which requires the 
provision of information to prospective franchisees; the Telemarketing 
Sales Rule, 16 C.F.R. Part 310, which defines and prohibits deceptive 
telemarketing practices and other abusive telemarketing practices; and 
the Children's Online Privacy Protection Rule, 16 C.F.R. Part 312.
    The Commission does not, however, have criminal law enforcement 
authority. Further, under the FTCA, certain entities, such as banks, 
savings and loan associations, and common carriers, as well as the 
business of insurance, are wholly or partially exempt from Commission 
jurisdiction. See Section 5(a)(2) and (6)a of the FTC Act, 15 U.S.C. 
Sec. 45(a)(2) and 46(a). See also The McCarran-Ferguson Act, 15 U.S.C. 
Sec. 1012(b).
    4 15 U.S.C. Sec. Sec. 46(b) and (f). Section 46(f) of 
the FTC Act provides that ``the Commission shall also have the power . 
. . to make public from time to time such portions of the information 
obtained by it hereunder as are in the public interest; and to make 
annual and special reports to Congress . . .''
    5 The Department of Justice provided the FTC with 
substantial funding and technical assistance to enable the FTC to 
collect and analyze public and non-public information about the 
industries' advertising and marketing policies and procedures, and to 
prepare the Commission's written Reports. The analysis and conclusions 
contained in these Reports are those of the FTC.
    6 The Commission received information from numerous 
individual companies, as well as the Motion Picture Association of 
America (MPAA), the National Association of Theatre Owners (NATO), the 
Recording Industry Association of America (RIAA), the National 
Association of Recording Merchandisers (NARM), the Entertainment 
Software Rating Board (ESRB), the Video Software Dealers Association 
(VSDA), the Interactive Digital Software Association (IDSA), the 
Interactive Entertainment Merchants Association (IEMA), and the 
American Amusement Machine Association (AAMA).
    7 In addition to industry sources, the Commission 
received information from a wide range of consumer, medical, and 
advocacy organizations. The American Academy of Pediatrics, American 
Psychological Association, Center on Media Education, Center on Media 
and Public Affairs, Children Now, Commercial Alert, The Lion & Lamb 
Project, Mediascope, National Institute on Media and the Family, 
National PTA, and Parents' Music Resource Center were among the 
organizations that provided information to the Commission.
    8 The Commission's September 2000 Report is available 
online at: http://www.ftc.gov/opa/2000/ 09/youthviol.htm.
    9 See Appendix F (Mystery Shopper Survey and Parent-
Child Survey) of the Commission's September 2000 Report.
    10 The Commission's April 2001 Report is available 
online at: http://www.ftc.gov/opa/2001/04/ youthviol.htm.
    11 The Commission's December 2001 Report is available 
online at: http://www.ftc.gov/opa/2001/ 12/violence.htm.
    12 Music industry members continued to place ads on 
shows that are highly popular with teens, such as Total Request Live on 
MTV and 106th & Park on BET.
    13 The Commission's June 2002 Report is available online 
at: http://www.ftc.gov/opa/2002/06/ mvec0602rev.htm.
    14 Commissioner Swindle, in his concurring statement to 
the Commission's June 2002 Report, noted that ``the music industry 
continues to target young people explicitly in its advertising and, for 
the most part, refuses to provide content-based information that could 
help consumers. The motion picture and electronic game industries have 
acted far more responsibly in improving their self-regulatory programs, 
yet continue to allow advertising of R-rated movies and M-rated games 
in venues that attract large numbers of teens.''
    15 Motion Picture Association of America, Initiatives of 
MPAA Member Companies, Sept. 26, 2000.
    16 Movie industry members continue to place ads on shows 
that are highly popular with teens, such as Grounded For Life on Fox, 
Gilmore Girls on WB, WWF Smackdown on UPN, and MTV's The Real World.
    17 See BMG News Release, BMG Announces Steps to Build On 
Industry's Parental Advisory Program, June 3, 2002, available at http:/
/www.bmg.com/news/archive--general/general-- frameset.html (visited 
September 17, 2002).
    The revised sticker appears as follows:

    [GRAPHIC] [TIFF OMITTED] 81964.001
    

    Mr. Upton. Thank you, Mr. Peeler.
    Dr. Rich.

                    STATEMENT OF MICHAEL RICH

    Mr. Rich. Good morning, Mr. Chairman and members of the 
committee. Good morning again. Thank you for the opportunity to 
testify before you today.
    My name is Dr. Michael Rich, and I am testifying on behalf 
of the American Academy of Pediatrics and its 57,000 members 
across the U.S. .
    As a pediatrician who specializes in adolescent medicine, I 
am keenly aware of how crucial music is to a teen's identity 
and how it helps them to find important social and 
interpersonal behaviors. In fact, one study showed that 24 
percent of high school students ranked popular music as one of 
their top three sources for guidance on social interactions.
    We often use music to define our beliefs and convictions. 
We are attracted to music that will confirm and support these 
beliefs and convictions. Music can truly affirm and confirm 
struggles, joys, sorrows, fears, and fantasies.
    During the past four decades, rock music lyrics have become 
increasingly explicit, particularly with reference to drugs, 
sex, violence, and sexual violence. Heavy metal and rap lyrics 
have elicited the greatest concern for experts as they compound 
the environment in which some adolescents increasingly are 
confronted with risktaking, substance abuse, pregnancy, 
homicide, and suicide.
    To date, no scientific studies have proved a cause-and-
effect relaionship between violent or sexually explicit lyrics 
and adverse behavioral effects. Causality is exceedingly 
difficult to prove, as we have all witnessed in the debate 
about whether tobacco smoking causes lung cancer, heart 
disease, and stroke. However, all of us must pay attention to 
the strong associations that have been observed between music 
content and health outcomes. There is some music that 
communicates potentially harmful health messages, especially 
when it reaches a vulnerable and impressionable audience.
    The words and images evoked by popular music are powerful 
influences on how teachers--excuse me--are powerful influences 
on how teenagers are socialized. Youth who feel rejected and 
alienated are especially responsive to lyrics that glorify 
hostility and violence. Numerous studies indicate that a 
teenager's preference for heavy metal music may be a 
significant marker for alienation, substance abuse, psychiatric 
disorders, and suicide risk, among others.
    The world can be a threatening and scary place, especially 
for young people who feel powerless, disenfranchised, 
disrespected due to economics, race, or beliefs. Artists should 
have the right to reflect that reality and to address any issue 
in any way that they choose. However, we must recognize that 
the content that we choose to listen to inevitably affects us, 
and we must choose accordingly.
    Changes in young people's attitudes and behavior toward 
each other hurt all young people, regardless of their race, 
gender, religious, or ethnic backgrounds. It is in the child's 
best interest to listen to lyrics or to watch videos that are 
not violent, sexist, drug-oriented or antisocial.
    Music lyrics should be made easily available to parents so 
that they can read them before deciding whether to purchase the 
recording. To date, this has not occurred. Many recordings are 
broadcast in sanitized radio versions which are difficult if 
not impossible to buy retail. The current system of parental 
advisory labels provides inadequate information for parents to 
make appropriate choices for their children. To disclose the 
content of their product is not a violation of their rights but 
truth in advertising.
    From the perspective of a doctor who cares for and cares 
about children, this is simply about having the information 
necessary for parents to make a compassionate and safe choice 
for their children.
    The Academy has a number of recommendations to consider if 
we are to help families use the media in a positive way. Time 
limits me to the following:
    The music industry should develop and apply a system of 
specific content labeling of music regarding violence, sex, 
drugs, or offensive lyrics. We, too, applaud BMG for their 
leadership in this direction.
    Music lyrics should be made easily available to parents so 
that they can read them before deciding whether to purchase the 
recording.
    Research should be developed concerning the impact music 
lyrics have on the behavior of teenagers and children.
    Parents should take an active role in monitoring music that 
their children are exposed to and which they can purchase, as 
well as the videos they watch. In order to do so, they need the 
information to make that decision; and pediatricians should 
encourage parents to do this.
    Parents should also be reminded that if we as consumers do 
not buy or use entertainment media that are harmful to our 
children, these media would no longer be produced. Media are 
not the only cause of violence, sexism, racism, or health-risk 
behaviors, but they are a powerful influence on our young 
people over which we have some control. If we can make our 
lives and our future safer by paying attention to these issues 
and intervening where necessary, then we owe it to our 
children, ourselves, and our society to do so.
    Thank you.
    [The prepared statement of Michael Rich follows:]
  Prepared Statement of Michael Rich, American Academy of Pediatrics, 
                     Committee on Public Education
    Good morning, Mr. Chairman, members of the Committee. I want to 
thank you for the opportunity to testify before you today as a 
pediatrician, as a child health researcher, as a filmmaker, and as a 
parent. My name is Michael Rich, and I am testifying on behalf of the 
American Academy of Pediatrics (AAP) and its 57,000 pediatrician 
members. I am a member of the Academy's Committee on Public Education. 
I practice pediatrics and adolescent medicine at Children's Hospital 
Boston, and teach at Harvard Medical School and Harvard School of 
Public Health. In my research, I study the effects of various 
entertainment media on the physical and mental health of children and 
adolescents. I actually began my professional career as a filmmaker. I 
love audiovisual media and continue to work in video and radio 
production, developing pro-child and health-positive media as tools for 
child health research, education, and advocacy. Finally, and most 
importantly, I am the father of a 16-year-old daughter and a 14-year-
old son.
           impact of media on health and behavior of children
    Starting from when we are very young, we get the majority of our 
information from media, which includes television, movies, music, 
magazines, the Internet, video games, books, videos and all forms of 
advertising. While media offers us, including children, many 
opportunities to learn and to be entertained, how people interpret 
media images and media messages also can be a contributing factor to a 
variety of public health concerns. Among children and adolescents, 
research shows that key areas of concern are:

 Aggressive behavior and violence; desensitization to violence, 
        both public and personal
 Substance abuse and use
 Nutrition, obesity and dieting
 Sexuality, body image and self-concept
 Advertising, marketing and consumerism
    As a result of this research, the AAP and its members have been 
working on many fronts to help parents and children glean the best from 
unending media exposure. The AAP launched its Media Matters campaign 
(www.aap.org/advocacy/mediamatters.htm) five years ago to help 
pediatricians, other health professionals, parents and children become 
more knowledgeable about the impact that media messages can have on 
children's health behaviors. Public education brochures on the media 
have been developed and distributed, including one that explains how 
the various ratings systems work. In addition, the Academy established 
a Media Resource Team (www.aap.org/mrt) in 1994 to work with the 
entertainment industry in providing the latest and most accurate 
information relating to the health and well being of infants, children, 
adolescents and young adults.
    Parents alone cannot stem the tidal wave of images their children 
are exposed to throughout a given day. They need help, particularly 
from the entertainment industry and retailers.
Impact of Music Lyrics and Music Videos
    Pediatricians' concern about the impact of music lyrics and music 
videos on children and youth compelled the American Academy of 
Pediatrics to issue a policy statement on the subject 13 years ago, 
with revised, updated versions developed and published multiple times 
since then. Policy statements communicate the official position of the 
Academy concerning health care issues, and help guide pediatricians in 
their assessment and treatment of patients.
    As a pediatrician who specializes in adolescent medicine, I am 
keenly aware of how crucial music is to a teen's identity and how it 
helps them define important social and interpersonal behaviors. In 
fact, one study showed that 24% of high school students ranked popular 
music as one of their top 3 sources for guidance on social interaction. 
We often use music to define our beliefs and convictions. We are 
attracted to music that will confirm and support these beliefs and 
convictions. Music can truly affirm and confirm a teenager's struggles, 
joys, sorrows, fears, and fantasies.
    During the past four decades, rock music lyrics have become 
increasingly explicit--particularly with reference to drugs, sex, 
violence and sexual violence. Heavy metal and rap lyrics have elicited 
the greatest concern, as they compound the environment in which some 
adolescents increasingly are confronted with risk-taking, substance 
use, pregnancy, HIV/AIDS and other sexually transmitted diseases, 
homicide and suicide.
    Despite stories in the popular press relating suicides, ritualistic 
killings and school shootings to popular music influence, to date, no 
scientific studies have proved a cause-and-effect relationship between 
violent or sexually explicit lyrics and adverse behavioral effects. 
Causality is exceedingly difficult to prove, as we have all witnessed 
in the debate about whether tobacco smoking causes lung cancer, heart 
disease, and stroke. However all of us, pediatricians, parents, and 
responsible members of society, must pay attention to the associations 
that have been observed between music content and health outcomes. 
There is some music that communicates potentially harmful health 
messages, especially when it reaches a vulnerable and impressionable 
audience. Teenagers become absorbed in songs they believe help better 
define them during this rocky transition into adulthood. The words and 
images evoked by popular music are powerful influences on how they are 
socialized. Youth who feel rejected and alienated are especially 
responsive to lyrics that glorify hostility and violence. Numerous 
studies indicate that a preference for heavy metal music may be a 
significant marker for alienation, substance abuse, psychiatric 
disorders, suicide risk, sex-role stereotyping, or risk-taking 
behaviors during adolescence. With the advent of MTV and VH-1, not only 
do we have to listen to violent lyrics, but we also get to see violent 
narratives graphically portrayed. Research studies indicate that music 
videos may have a significant behavioral impact by increasing violent 
attitudes and behaviors in viewers, desensitizing male college students 
to violence against women, disproportionately reinforcing racial and 
gender stereotypes, and by making teenagers more likely to accept and 
engage in unsafe sex.
    The world can be a threatening and scary place, especially for 
young people who feel powerless, disenfranchised, or disrespected due 
to economics, race, or beliefs. Artists should have the right to 
reflect that reality and address any issue in any way that they choose. 
However, we must recognize that the content that we choose to listen to 
inevitably affects us and we must choose accordingly. Changes in young 
people's attitudes and behaviors toward each other hurt all young 
people, regardless of their race, gender, religious or ethnic 
backgrounds. Parents and pediatricians believe that it is important to 
know the contents of the food we feed our children's bodies. To protect 
their physical and mental health, we should be equally aware of what, 
to paraphrase Jefferson Airplane, we feed their heads.
AAP Recommendations
    Although there is no one solution, awareness of and sensitivity to 
the potential impact of music lyrics and videos by consumers, the 
entertainment and music industry is one important piece of the puzzle. 
It is in children's and teenagers' best interest to listen to lyrics or 
to watch videos that are not violent, sexist, drug-oriented, or 
antisocial. As a result, the Academy has, in our November 2001 policy 
statement on media violence, suggested that ``music lyrics should be 
made easily available to parents so that they can read before deciding 
whether to purchase the recording.'' To date, this has not occurred. 
Many recordings are broadcasted in sanitized radio versions, which are 
difficult, if not impossible, to buy retail. The current system of 
parental advisory labels applied by the producers themselves provides 
inadequate information for parents to make appropriate choices for 
their children. To disclose the content of their product is not a 
violation of rights, but truth in advertising.
    The Academy strongly opposes censorship. We advocate for more 
child-positive media. As a society, we have to acknowledge the 
responsibility that parents, the music industry and others have in 
helping to foster the nation's children. The entertainment industry 
should extend personal concern for the well being of children to their 
business of creating and selling music, movies, television programming 
and video games.
    Although the evidence is incomplete, based on our knowledge of 
child and adolescent development, the AAP believes that the public, 
including the recording industry and parents, should be aware of 
pediatricians' concerns about the possible negative impact of music 
lyrics and videos. The Academy recommends that:

 The music industry should develop and apply a system of 
        specific content labeling of music regarding violence, sex, 
        drugs, or offensive lyrics. We label the food we eat--why not 
        label the music? Let the consumer, including parents and youth, 
        know what the music contains and let the educated consumer make 
        the decision. For those concerned about the ``forbidden fruit'' 
        syndrome, one study has examined the impact of parental 
        advisory labels, and it found that teens were not more likely 
        to be attracted simply because of the labeling.
 Music lyrics should be made easily available to parents so 
        that they can read before deciding whether to purchase the 
        recording.
 Broadcasters and the music industry should be encouraged to 
        demonstrate sensitivity and self-restraint in decisions 
        regarding what is produced, marketed and broadcast.
 Performers should be encouraged to serve as positive role 
        models for children and teenagers.
 Research should be developed concerning the impact music 
        lyrics have on the behavior of adolescents and preadolescents.
 Parents should take an active role in monitoring music that 
        their children are exposed to and which they can purchase, as 
        well as the videos they watch. Ultimately, it is the parent's 
        responsibility to monitor what their children listen to and 
        view. Pediatricians should encourage parents to do so.
 Pediatricians should counsel parents to become educated about 
        the media. In order to help this process, the Academy has 
        launched Media Matters, a national media education campaign 
        targeted to physicians, parents and youth. The primary goal of 
        the Media Matters campaign is to help parents and children 
        understand and protect themselves against the sometimes 
        negative effects of images and messages in the media, including 
        music lyrics and videos.
    Media education includes developing critical thinking and viewing 
skills, and offering creative alternatives to media consumption. The 
Academy is particularly concerned about entertainment media images and 
messages, and the resulting impact on the health of vulnerable young 
people, in areas including violence, safety, sexuality, use of alcohol, 
tobacco, and illicit drugs, nutrition, and self-concept and identity.
    For example, if a music video shows violence against women to any 
degree, a viewer, including young girls, could be led to believe such 
action is acceptable. If they were educated about the media, the 
premise in the video would be questioned and hopefully rejected.
    Parents should also be reminded that if we, as consumers, do not 
buy or use entertainment media that are harmful to children, these 
media would no longer be produced. Media are not the only cause of 
violence, sexism, racism, or health risk behaviors, but they are a 
powerful influence on these behaviors over which we have some control.
    There must be a collective solution to this social problem. 
Parents, pediatricians, the music industry and others have critical 
roles in discussing and addressing the increasing amount of violence in 
society, particularly when it comes to children and adolescents. If we 
can make our lives and our future safer by paying attention to these 
issues and intervening where necessary, then we owe it to our children, 
ourselves, and our society to do so.
    Thank you for your time today, and I am willing to answer any 
questions you may have.

    Mr. Upton. Thank you very much.
    Ms. Rosen.

                    STATEMENT OF HILARY ROSEN

    Ms. Rosen. Thank you, Mr. Chairman, Congressman Gordon. 
Thank you for having me here today.
    And, Mr. Shimkus, while I actually didn't take the Red Eye 
last night, I am equally sleep deprived, having been up with a 
sick child all night. So if I am a little slow, I apologize.
    The RIAA is a trade association of record companies. 
Obviously, the recording industry's marketing practices have 
been the focus of a significant amount of attention from this 
Congress and from the FTC over the last several years, and 
there has been significant change in these practices over the 
last several years, although I think it is worth noting that in 
the very first FTC study a public opinion poll showed that 
there was over 75 percent approval for the existing program 
before we made all of these changes.
    My written testimony has a description of all of our 
successful implementation of our guidelines which have been 
revised and put in place over the last 18 months. I will 
highlight a couple of them in short.
    Since much of the reason that music marketing is different 
from other media is the existence of edited versions of the 
same product which is sold with explicit versions, we have 
significantly increased awareness of edited versions of these 
recordings. We have put a new sticker on the package and have 
added new information about edited versions in all advertising. 
In addition, our periodic reviews have shown excellent 
compliance with our advertising guidelines, print, and TV 
publications. And, finally, we have continued our efforts with 
organizations who focus on opportunities for young people as 
well as troubled youth.
    Today, I am pleased to report a new partnership we recently 
developed with the National Mental Health Association, a 
partnership whose goal is to find creative and supportive ways 
to encourage young people who need help to seek such 
assistance. The National Mental Health Association views what 
Dr. Rich said as an opportunity. If young people are attracted 
to alienating music, that is a signal for adults to go in and 
help them intervene; and our project with NMHA will help find 
ways to encourage young people to do that.
    So, as you can see by my testimony, I am proud of our 
record to date.
    Since Mr. Towns raised it, I would like to raise something 
but make it clear to this committee that I raise it not to 
avoid any responsibility on our part. We have responsibility. I 
think we take it, and we embrace it. But this committee should 
know about some significant statistics that have literally 
changed the environment for kids in their getting music.
    A significant percentage of 12- to 18-year-olds, almost 70 
percent in many cases, for those kids our marketing practices 
are largely inconsequential. That is because they don't go to 
stores or legitimate on-line music sites to get or learn about 
music. They are logging on to a peer-to-peer network and trade 
music with millions of others.
    Our most recent and, frankly, depressing poll shows that 
the 12- to 18-year-old kids are the most likely ones to go to 
these sites when they are looking for music and the least 
likely to go to a legitimate place to buy it by a margin of 67 
to 19 percent. The operation of these networks certainly fall 
into this committee's natural jurisdiction. I would like to 
share a couple of examples.
    When you go to a legitimate on-line site, because of our 
new guidelines you will see--and I think I gave this handout 
out, if people will just look at this handout--you will see 
that what we have here of a stickered record is shown stickered 
on the Amazon.com site. If you go to one of the on-line 
subscription services, the sticker on explicit lyrics is 
plainly obvious. The on-line subscription services often have 
parental controls that allow parents to exclude explicit 
content, all of these as the focus of our industry over the 
last couple years.
    Now go to Kazza, where 70 percent of 12- to 18-year-olds go 
for their music. Key in the same JZ, and you get page after 
page after page of tracks and albums available for download 
without a single advisory. And probably somewhat, as parents, 
most disturbing of all is for those artists who are 
particularly popular with young teens and artists like Britney 
Spears, you key in Britney Spears and you can see an 
overwhelming amount of porn focused in with all of the rest of 
the tracks that are available.
    The peer-to-peer networks are not per se illegal. It is 
their activity that is illegal; and, frankly, they are 
supported by advertising from many legitimate significant 
companies.
    You know, I encourage the FTC to spend time investigating 
this and encourage this committee to ask the FTC to do this and 
investigate these systems as much as they have the legitimate 
music industry. Because, in sum, while I am proud of our 
record, we have an obligation to do it. We care about parents 
and our consumers. The reality is, in today's marketplace our 
efforts are so diluted in this target-age group that--because 
of this rampant peer-to-peer use that it is just interrelated 
to the issues we are talking about today.
    Thank you, and I would be happy to answer any questions.
    [The prepared statement of Hilary Rosen follows:]
    Prepared Statement of Hilary Rosen, Chairman and CEO, Recording 
                    Industry Association of America
                              introduction
    Mr. Chairman, Mr. Markey, and members of the Subcommittee, thank 
you for the opportunity to appear before you today.
    I am Hilary Rosen, Chairman and CEO of the Recording Industry 
Association of America, an association that represents over 600 record 
companies.
    I welcome this opportunity to provide you with the details of our 
industry's efforts since this Subcommittee's review last July.
    There are two points that I would like to raise at the outset: (1) 
the unwavering commitment of our industry to the success of the 
Parental Advisory Program; and (2) my concern that the recording 
industry's ``marketing practices'' have not been evaluated by the FTC 
in a manner that fairly takes into account the specific nature of music 
and mass advertising that includes to more than one demographic group 
at the same time.
       the recording industry takes its responsibility seriously
    First, I would like to underscore that the recording industry takes 
it responsibility to parents and consumers very seriously. The Parental 
Advisory has been in existence for seventeen years. We created this 
program, have guided its development, and are proud of its impact. 
Moreover, we value the respect and trust that we have developed with 
parents over the years.
    I have met personally with each of the major record companies to 
review the implementation of our guidelines and we have been meeting 
with our retail partners as well. There is a commitment at every level 
in the recording industry to the continued success of the Parental 
Advisory Program.
            we produce and market a diverse range of sounds
    The recording industry releases over 36,000 albums each year. The 
vast majority of these titles contain no explicit content. In fact, I 
would like to note that despite the emphasis at these hearings on 
recordings with explicit content, they comprise a relatively small 
proportion of our industry's output. In an average retail store with 
110,000 titles, about 500 will carry the Parental Advisory logo. That's 
less than one-half of one percent of that store's total inventory. 
Moreover, the overwhelming majority--if not all--of the titles that are 
explicit are also available in an edited version. Unlike any other 
entertainment industry, music lovers have a choice. If a movie is rated 
``R'', a consumer does not have the choice to see a ``PG'' version in 
the theatre or to purchase it in the store. When considering 
advertising of an album, the availability of an edited version should 
be taken into account. The industry is not advertising an explicit 
album, it is advertising an album available in two versions.
    Let me now turn to the significant steps we have taken over the 
last year to ensure the continued success of the Parental Advisory 
Program.
          the industry continues to strengthen its guidelines
    An important aspect of our commitment to the Program is making sure 
that it evolves to meet the changing needs of retailers and parents 
without compromising the twin principles that guide it: (1) alerting 
parents to explicit content; and (2) protecting the First Amendment 
rights of artists to free expression.
    We recently implemented changes to the guidelines that accomplish 
this goal. The RIAA has published revised guidelines that became 
effective on April 1, 2002. The guidelines include three new 
provisions:

 The implementation of an ``Edited Version'' Label on 
        packaging: If an edited version of an album designated with the 
        Parental Advisory Label is released, it should include an 
        ``Edited Version'' Label plainly displayed either on the front 
        of the album (on the cellophane wrapper or on the album cover 
        itself), or on the top spine of the CD. The Edited Version 
        Label is a notice to consumers that an album has been modified 
        from the original, and does not include all of the same content 
        contained in the Labeled version.
 Adoption of an ``Edited Version Also Available'' Label in 
        advertising: If an ``edited'' version of a recording is 
        available for sale, consumer print advertising may contain 
        language indicating that fact. This will be accomplished with 
        the wording ``Edited Version Also Available'' placed near the 
        specific album or sound recording that has been designated with 
        the Label.
 The extension of the existing guidelines for print advertising 
        to radio and television promotions: In cases where the decision 
        has been made to place a Parental Advisory Label on a 
        recording, all consumer print, radio, and television 
        advertising (collectively ``consumer advertising'') for that 
        recording shall communicate the presence of explicit content.
          the recording industry is adhering to its guidelines
    In February 2001, the FTC issued a report on the industry's 
implementation of its guidelines and gave us a failing grade. I came 
before this Committee and indicated that we deserved that failing 
grade. I also stated that future reviews would demonstrate progress. We 
have kept our word and have made significant progress.

 All of the major record companies have issued internal policy 
        guidelines and have appointed a senior level employee to ensure 
        full compliance with the Parental Advisory Program, including 
        the new provisions.
 According to the Commission's February 2001 study: only 8% of 
        print ads in reviewed magazines displayed the PAL. According to 
        our review of the October and November issues of the same 
        magazines reviewed by the FTC that number is now nearly 100 
        percent. In fact, there was only one add that did not carry the 
        Logo, and the album in that add is available in an edited 
        version.
 100 percent of the PAL's were clearly legible.
 Additionally, parental controls have been included on many 
        online subscription services with an ``exclude explicit 
        content'' option check box: ``Check here if you would like to 
        exclude tracks from albums that contain a parental advisory 
        logo. A description of the parental advisory program can be 
        found at http://www.parentalguide.org''
           we have continued our educational outreach efforts
    Parents overwhelmingly recognize and support the Parental Advisory 
Program. All of the recent surveys on this issue have confirmed that 
fact. We have not, however, rested on our laurels. We continue our 
efforts to raise public awareness about the Parental Advisory Program.

 The RIAA designed and distributes an informational brochure in 
        English and Spanish for parents and caregivers describing:
     The evolution of the Parental Advisory label,
     How determinations for its application are made,
     And the meaning of the label with suggestions for links to 
            community-service based organizations.
 The RIAA and its members have worked to ensure ``Edited 
        Version Also Available'' has been quickly integrated into the 
        consumer lexicon.
 The RIAA have worked on creative methods of distributing the 
        PAL PSA, including in video magazines.
 The RIAA continues to partner with the National Association of 
        Recording Merchandisers (NARM) on many fronts, including 
        updating all parental advisory label displays in retail stores.
 Additionally, we have established a partnership with the 
        Association for Independent Music (AFIM) to further advance our 
        educational outreach efforts.
    I am proud of the significant strides we have made in the last 
year. We are committed to continuing to work hard to ensure the 
Parental Advisory Program remains successful and a priority for our 
industry.
    informational rating systems should reflect the nature of their 
                         respective industries
    Our labeling system is often compared to the ratings systems in 
place for the television, motion picture and videogame industries. 
While our industries work together to bring information about our 
systems to parents through the www.parentalguide.org website, our 
systems are very different. And for good reason. Each system is 
designed and has evolved to reflect the media to which it applies.
    We think that it would be unwise and improper to assume that a 
record label knows what kind of music and lyrical content is 
``suitable'' for whom. Like books or poetry, different listeners will 
take away different meaning from musical recordings and their lyrics, 
making a ``one-size-fits-all'' determination particularly unsuitable. 
Record labels should not be in the business of making assumptions about 
the values or maturity levels of their customers. The purpose of the 
advisory label is to provide a clear ``heads-up'' to all consumers that 
a sound recording contains explicit content. Books have no label or 
rating, even those that contain explicit content and are marketed 
directly to children. Why? Because words are particularly subject to 
interpretation and imagination, and most feel that labeling books is a 
bad idea. Lyrics likewise are susceptible to varying interpretations. 
Words can have different meanings depending on who is hearing them. We 
offer alternatives and trust that consumers will the choice that is 
best for them.
    Moreover, advertising an album in a publication where a significant 
percentage of those who see it are over 17 years of age should not be 
regarded as intentionally ``targeting children.'' Advertising an album 
available in two versions to a mixed audience is far different than 
targeting kids with explicit material. Yet it is described in such a 
manner for purposes of government review.
                 conclusion--no regulation is necessary
    In summary, the recording industry has in place a system that 
works--one that reflects the nature of the art form; is being 
strengthened and promoted; and is overwhelming supported by America's 
parents.
    To its credit the Federal Trade Commission has recognized that the 
First Amendment precludes government intervention in this area and that 
``vigilant self-regulation is the best approach to ensuring that 
parents are provided with adequate information to guide their 
children's exposure to entertainment media with violent content.''
    We have proven over the last year that self-regulation is the way 
to progress. In the last year, we have seen at the state level that 
efforts to regulate content are fraught with danger. Some states have 
even imposed criminal penalties for failing to adhere to voluntary 
standards. Rather than improving parent's access to information, such 
statutes create a disincentive to adopting voluntary standards. By 
essentially punishing those who adopt voluntary guidelines, the 
legislation would have the unintentional result of discouraging 
participation in the successful Parental Advisory Program. Fortunately, 
these statutes have been challenged in the Courts and ruled 
unconstitutional.
    Without regulation we have strengthened our guidelines and have 
seen tremendous improvement in the areas explored by the FTC. Without 
regulation, one of our members has expanded on our voluntary program 
and now provides content descriptors. This experiment by BMG will give 
us some insight into whether content descriptors will work with music 
and whether consumers will find it helpful or confusing.
    What is clear from the debate on the state and national level is 
that at bottom there are some people who simply don't like some types 
of music. That is fine. You have the option of listening to and 
purchasing what you do like. What we don't have the option of doing is 
silencing some voices based on personal prejudices. Taking away angry 
music will not take away angry feelings. Society and life is more 
complicated than that. We are willing to do our part by providing 
parents and consumers generally with information and choices in the 
music. They must also accept their role in the process.
    In the end, I am proud that the RIAA's Parental Advisory Program 
and the balance we have struck in respecting the free expression of 
artists while providing information and choice to consumers.
    Thank you.

    Mr. Upton. Thank you.
    Mr. Simmons, welcome.

                  STATEMENT OF RUSSELL SIMMONS

    Mr.  Simmons. Thank you, Mr. Chairman. Am I on?
    Mr. Upton. You should know more about microphones than 
anyone else here.
    Mr.  Simmons. No, sir. I am not an artist. I usually shy 
away from microphones, but for this occasion I am thrilled to 
use one. Thank you.
    The first thing, I am going to read my testimony, but I 
wanted to make a statement. I was--because I haven't been 
paying attention to some of the things that have been going on 
here in Washington. But I was surprised to hear that there was 
a connection between enforcing legislature against stealing and 
the willingness of this panel to work for--to protect our 
rights for our music and this panel's looking into our 
practices in regards to protecting youth from music that they 
found to be upsetting. So I think they should be separate, and 
I think that that is the kind of legislation that you have a 
right to explore, protecting us from stealing. But I think that 
we are here now discussing something we don't have any rights.
    But I want to read my testimony. I just wanted to make that 
statement, if you don't mind, and I want to read the testimony.
    I am here today to speak on behalf of the Hip Hop Summit 
Action Network. It is the largest national coalition of hip hop 
artists, recording industry executives, civil rights and 
business leaders. I am also joined by Network President Dr. 
Benjamin Chaves Muhammad, who is the former Executive Director 
and CEO of the NAACP.
    We represent the interests of the hip hop community, and we 
are very concerned and committed to protecting the First 
Amendment rights of hip hop artists and the rights of the 
freedom of cultural expression. The hearing today on Recording 
Industry Marketing Practices: A Check-Up is an opportunity for 
us to inform you that the theme of Hip Hop Summit Action 
Network is taking back responsibility. We work closely with the 
industry on issues related to marketing and promotions, and in 
fact we have strongly supported the extensive dissemination and 
display of Recording Industry Associations of America's 
parental advisory label. This has proven to be an effective 
tool that alerts parents to explicit content and helps parents 
to make decisions about music for their children.
    During the past 2 years, we have made tremendous progress, 
I think, in increasing public awareness on the positive value 
and cultural impact of the hip hop on our society. We have 
sponsored successful summits in New York, Los Angeles, Kansas 
City, Washington, Miami. Next week, we will be in Dallas. We 
continue to bring young people together for many good social 
causes; and the effects are obvious in many places, if you guys 
are paying attention.
    But hip hop has evolved into a global phenomenon, cultural 
phenomenon, has transcended race, ethnicity, class, and 
language. We believe in telling the truth. Hip hop music lyrics 
bear witness to truth of the social, economic, and political 
condition in our communities. I believe they must continue to 
tell the truth about the street, if that is what we know, and 
must continue to tell the truth about God, if that is what we 
found.
    Part of telling the truth is making sure that you know and 
talk more about and speak more about the truth than to appease 
those who are in power. Speaking truth to power is important, 
is essential.
    The Congress of the United States should not censor free 
speech nor cultural expression. It is unconstitutional for 
government intrusion or dictation concerning rating of music or 
limiting marketing that has the effect of denying free speech. 
What is offensive is any attempt by the government to deny the 
expression of words, lyrics, or music that emerge out of a 
culture that has become part of the soul of America. Congress 
should not attempt to legislate preferences in music, art, and 
culture.
    Last year, the FTC report on explicit content and marketing 
disproportionately focused on black hip hop artists. Once 
again, we are concerned that our culture is being targeted and 
profiled by people who don't understand our reality. We 
therefore appeal for more understanding and hope that the 
Congress would do the right thing and not censor hip hop.
    I am happy to answer any questions that you have regarding 
this culture and this music. Thank you for your time.
    [The prepared statement of Russell Simmons follows:]
Prepared Statement of Russell Simmons, on Behalf of The Hip Hop Summit 
                             Action Network
    My name is Russell Simmons and I am submitting this statement on 
behalf of the Hip Hop Summit Action Network and its Executive Director, 
Minister Benjamin Muhammad. I am Chairman of the Hip Hop Summit Action 
Network and I have worked in the music and entertainment industry for 
more than twenty-five years. Minister Benjamin is the former Executive 
Director and CEO of the NAACP and has over thirty-five years of 
experience in civil and human rights.
    The Hip Hop Summit Action Network is the broadest national 
coalition of Hip Hop artists, entertainment industry executives, civil 
rights and community leaders. Established this year, the mission of the 
Hip Hop Summit Action Network is to support Hip Hop and freedom, 
justice, equality and empowerment for all based on the principles of 
freedom of speech, music and art creativity, and the universality of 
humanity.
    The Hip Hop community has decided to take a leadership position 
toward the evolution of our artistic destiny and responsibility. We 
convened an historic summit last year in New York and we are planning 
others in Los Angeles and Miami in August to explore questions related 
to violence in our own communities, racial profiling, police brutality, 
representation of women, and the profanity of poverty, and how we can 
work from within our industry to expand and elevate the artistic 
presentation of our culture and experience.
    Although we know that the harsh underlying social realities that 
some of our music exposes have not changed much in our communities, we 
are committed to speaking the truth. We believe that we must continue 
to tell the truth about the street if that is what we know and we must 
continue to tell the truth about God if that is who we have found. Part 
of telling the truth is making sure that you know, and talk more about 
what you know than to speak or do music to appease those who are in 
power. Hip Hop represents truth telling, speaking the truth to 
ourselves and speaking the truth to power out of the context and 
condition of our community.
    The Congress of the United States should not censor free speech nor 
artistic expression. It is unconstitutional for government intrusion or 
dictation concerning ``labeling of music'' or ``rating of music'' that 
has the effect of denying free speech. What is offensive is any attempt 
by the government to deny the expression of words and lyrics that 
emerge out of a culture that has become the soul of America. In fact 
Hip Hop has now grown to become a global cultural and artistic 
phenomena. Congress should not attempt to legislate preferences in 
music, art and culture.
    My final point is that this is often largely about race. And it 
makes some of us very concerned that few will publicly admit that this 
effort to censure Hip Hop has deep seated racial overtones. Hip Hop 
emerged out of the African American experience. Eminem is a successful 
white Hip Hop artist who, power to him, has excelled and profited from 
the genre of black music. He stands on the shoulders of other 
originators of Hip Hop. The Federal Trade Commission's report on 
explicit content disproportionately focused on black Hip Hop artists. 
These reports are flawed scientifically as well as morally and 
culturally and should not, therefore, be used as a basis for 
constructing a system of ``ratings'' in regard to music and other forms 
of entertainment.
    Simply put, we conclude by appealing to this Committee to refrain 
from censoring, labeling, or rating our music and culture in the 
absence of understanding and appreciation of our artistic work which 
represents the genius of our culture and talent of our youth, in fact 
all youth of today--black, white, Latino, Asian and all others.
    Thank you.

    Mr. Upton. Thank you, Mr. Simmons.
    Mr. Marmaduke.

                   STATEMENT OF JOHN MARMADUKE

    Mr. Marmaduke. Good morning, Mr. Chairman. My name is John 
Marmaduke. I am the President and CEO of Hastings 
Entertainment, and I am a past Chairman of the Board of 
Directors of the National Association of Recording 
Merchandisers, and I currently serve on NARMS' Retailer's 
Advisory Council as well as the Board of Directors of the Video 
Software Dealers Association. I appreciate this invitation to 
update you on our retail marketing practices.
    Hastings is a publicly held company headquartered in 
Amarillo, Texas. We have 144 stores; and we sell not only 
music, but video, computer software, books, magazines, 
newspapers, and video games. We have over 30 years of retail 
experience in a variety of markets, from towns as small as 
15,000 people to large urban centers in the 21 Western States. 
For 3 years we have also had our Web site, GoHastings.com.
    Hastings' corporate mission is to satisfy our guests' 
desires for personal entertainment and information; and that 
mission is reflected in every store we open, regardless of the 
size of the community. We hear directly from our customers. In 
fact, the first thing I do every morning is scroll e-mails from 
our store associates, and also I get about 100 ``Postcards to 
the President'' every morning that customers fill out that are 
at every cash and exit vestibule in our stores. So we are 
pretty well connected; and, like a lot of retailers, that is 
the way we want to be. That is who we serve.
    In terms of music selection, our company's policy is today, 
and always has been, is to stock titles that carry parental 
advisory because they do meet a demand from our customers. 
However, we do require them to be 18 years old to purchase it. 
I think we were probably the first retail chain to do that, and 
we had quite a bit of publicity at the time. But we also have 
the same policy with video games and movies that we sell.
    We stand behind these programs. We know they work well, 
because in those hundred postcards that I read every morning I 
don't think I have had a complaint on the ``18 to purchase'' in 
over 3 or 4 years, and I can assure you that I hear complaints 
on about everything that customers don't like with some 
frequency.
    Not every retailer's policy is just exactly like ours. Some 
don't stock these titles at all, like Wal-Mart. Some may 
restrict the sales; some may not. Each retailer's decision 
about what to stock, how to merchandise, how to advertise, and 
what to sell is driven by their desire to meet their target 
customers needs. It is just that simple.
    Even though each retailer may take a different tack when it 
comes to marketing music to customers, our common goal is to 
keep improving the program as a whole. Over the years, through 
NARM, we have provided the record companies with feedback from 
our customers; and we have offered suggestions on a variety of 
things like, for example, standardizing the placement of the 
logo, adding merchandising materials or instituting guidelines 
to applying the labels so it doesn't cover that logo.
    In turn, we welcome information and dialog provided by the 
FTC and you elected officials. This ongoing review has resulted 
in many improvements, and Hastings has also improved the way we 
have handled the parental advisory information in our 
advertising and also on our Web site. Last fall, we made 
brochures printed courtesy of the RIAA that describe this 
program and made it available to our customers.
    Since the subcommittee's hearings on this subject a little 
more than 1 year ago, NARM has been working with the Federal 
Trade Commission and other entertainment retailing 
organizations on a more comprehensive consumer education 
campaign about the various ratings programs. We think the more 
information the parents have about these programs, the better 
they will work.
    I want to assure you, Mr. Chairman and the members of the 
subcommittee, we music retailers take these challenges 
seriously. I know I speak for fellow retailers when I say that 
our stores are a part of the communities they are located in; 
and our stores, especially being in smaller communities, we are 
very sensitive to those communities' desires and needs. We know 
we must be responsible to their concerns and--because we want 
to stay in business.
    Can we do more? I am certain we can, and we are happy to 
keep meeting with you and with the RIAA to keep improving this 
program.
    Thank you again for giving me this opportunity to testify 
today.
    [The prepared statement of John Marmaduke follows:]
   Prepared Statement of John Marmaduke, President and CEO, Hastings 
                             Entertainment
    Good morning Mr. Chairman and Members of the Subcommittee. My name 
is John Marmaduke and I am President and CEO of Hastings Entertainment. 
I am a past Chairman of the Board of Directors of the National 
Association of Recording Merchandisers, and I currently serve on NARM's 
Retailer's Advisory Council as well as on the Board of Directors of the 
Video Software Dealers Association. I appreciate the invitation to 
appear before you today to update you on retail marketing practices for 
music that carries the Parental Advisory.
    Hastings is a publicly held company headquartered in Amarillo, 
Texas. Our 144 stores carry music, video, computer software, books, 
magazines and videogames representing nearly 3 million square feet of 
retail space. Between our warehouse, offices, and stores, we have 7000 
employees. We have over 30 years of retail experience in a variety of 
markets, ranging from small towns to large urban areas throughout 21 
states of the Western U.S. For three years we have also operated 
GoHastings.com, our e-commerce initiative.
    Hastings' corporate mission is to satisfy our guest's desire for 
personal entertainment and information. That mission is reflected in 
every store we open, regardless of the size of the community. We hear 
directly from our customers whenever they think we're not doing 
something right. So our success, like that of every retailer, depends 
on our ability to meet the needs of our customers every day.
    In terms of the music selection, my company's policy is to stock 
titles that carry the Parental Advisory because they do meet a demand 
from our customers. However, we require purchasers to be at least 18 
years old. Hastings was one of the very first retailers to have such a 
policy and we were considered quite brave when we launched it. We now 
have similar programs in place for movies and for video games. I get 
approximately 100 ``Postcards to the President'' every day. I have not 
received a complaint from a customer or a parent on inappropriate music 
in the hands of their under-18 year old children in years. We stand 
behind these programs; we think they work well; and we know our 
customers appreciate them.
    Not every retailer's policy or program is exactly like ours. Some 
don't stock titles with the Parental Advisory; some offer edited 
versions, while others may not restrict the sale of these titles to 
minors. Each retailer's decision about what to stock, how to 
merchandise, how to advertise, and who to sell to is driven by the 
desire to meet the needs of their target customer. These different 
approaches in the marketplace offer parents a choice when it comes to 
deciding what's best for their family.
    Even though each retailer may take a different tack when it comes 
to marketing music to its customers, our common goal is to keep 
improving the program as a whole. Over the years, through NARM, we've 
provided the record companies with feedback from our customers. We've 
offered suggestions on a variety of things like, for example, 
standardizing the placement of the logo, or adding merchandising 
materials, or instituting guidelines for applying the label. In turn, 
we have welcomed the information and dialogue provided by the FTC and 
by elected officials. This ongoing review has resulted in many 
improvements. Hastings has improved the way we handle Parental Advisory 
information in our advertising and on our website. All of our ads 
contain the Parental Advisory logo, and our website contains a link to 
ParentalGuide.org, the industry site that contains information on all 
the media rating programs. When NARM made point-of-purchase materials 
that describe the Parental Advisory available a few years back, we 
began ordering those and replenish them as necessary. Last year, when 
brochures on the program were made available through NARM, we offered 
those to Hastings' guests.
    Since the Subcommittee's hearing on this subject a little more than 
one year ago, NARM's retailers have undertaken a fairly comprehensive 
review of the Parental Advisory program that covered such aspects as 
the guidelines for applying the label, the quality of information 
conveyed by the label, promotional support of the program, and edited 
versions.
    There were a number of recommendations that were communicated to 
RIAA, including the need for more information about why titles carry 
the PAL, adding guidelines for radio, adding a label for edited 
versions and perhaps guidelines for editing PAL titles. RIAA did adopt 
many of the recommendations, including the addition of labeling edited 
versions of PAL titles, and both organizations worked together to 
encourage greater support for the PAL program from independent labels. 
(A detailed report on the review, the conclusions, and NARM's 
activities in response to the review is attached.)
    NARM has continued to provide retailers with copies of the FTC 
reports, with updates to the RIAA guidelines, and with samples of copy 
that we can use to help educate our customers about the program both in 
the store and online. NARM has recently begun working with the Federal 
Trade Commission (FTC) and other entertainment retailing organizations 
on a more comprehensive consumer education campaign about the various 
ratings programs. We welcome that initiative and think the more 
information parents have about these programs the better they will 
work.
    I want to assure you, Mr. Chairman, and the members of the 
Subcommittee that music retailers take these challenges very seriously. 
I know I speak for my fellow retailers when I say that our stores are 
part of the communities where they are located. We know we must be 
responsive to community concerns if we want to stay in business. Can we 
do more? I'm sure we can, and we're happy to keep meeting with you and 
with the RIAA to keep improving this program.
    Thank you again for giving me the opportunity to testify today. I 
look forward to answering any questions that you may have.
                                 ______
                                 
            National Association of Recording Merchandisers
                                                     April 19, 2002
Mr. Dick Kelly
Ms. Mary Engel
Federal Trade Commission
600 Pennsylvania Ave NW
Washington, DC 20580
    Dear Mr. Kelly and Ms. Engel, Thank you for the opportunity to 
update you regarding the efforts of NARM and our member companies to 
support the Parental Advisory program for music. Since our last update 
there have been a number of activities and communications about which 
we would like to make you aware. Our activities have reflected two 
primary goals: 1) a review of the guidelines for the Parental Advisory 
for the purpose of identifying areas which could be improved; 2) 
enhancing the educational efforts of both NARM and our members so that 
the public has a better understanding of the Parental Advisory program 
and how it works. We believe that the activities as outlined in this 
report reflect real progress in both areas as well as the ongoing 
commitment of NARM and its member retailers to the success of the 
Parental Advisory program.
                      parental advisory guidelines
    A joint NARM/RIAA Task Force was formed in 2001 for the purpose of 
evaluating the Parental Advisory program and making recommendations for 
improving the program. NARM began this process by soliciting feedback 
from our member retailers and wholesalers regarding various aspects of 
the program, including the guidelines for applying the Parental 
Advisory Label, the consistency with which the label is applied, the 
quality of the information conveyed by the label; the placement of the 
label, promotional support for the label, and edited versions of 
labeled releases. NARM concluded that there were a number of ways in 
which the program could and should be improved:

1. More information needed to be communicated to consumers about titles 
        which carry the Parental Advisory Label.
2. More independent labels needed to be encouraged to support the 
        program.
3. Advertising guidelines needed to be revised to include radio as well 
        as TV ads.
4. Better labeling of music videos with music from CD's carrying the 
        Parental Advisory Label.
5. Edited versions of titles that carry the Parental Advisory Label 
        needed to be clearly marked with a standardized label. Artwork 
        built on the existing Parental Advisory was the preference. 
        Guidelines for editing PAL titles would be helpful.
6. A coordinated set of guidelines for placement of the PAL logo and 
        placement of retail price stickers might be necessary to insure 
        that price stickers never obstruct the visibility of the PAL 
        logo.
    These recommendations were communicated to RIAA through a series of 
communications and meetings over the fall and winter. RIAA responded by 
revising their guidelines in February, 2002. The revised guidelines 
call for 1) an expansion of the advertising guidelines to include all 
media: print, radio, TV, and internet; 2) the adoption of standardized 
labeling for edited versions of PAL titles along with recommendations 
for advertising the availability of edited versions. Retailers would 
still like more information about why titles receive the PAL 
designation or a link to song lyrics . Many would prefer a more 
consistent approach to editing PAL titles. (Currently some edited CD's 
may delete whole songs, or bleep certain words, or include a revised 
version with new lyrics.) Because the labeling of edited versions is 
new, there will be an ongoing evaluation of the placement of the 
``edited version'' label to ensure that the current recommended 
placement (top spine) works. Retailers concurred with labels that the 
top spine placement was the most logical place to start the 
identification process, but have some concerns about the lack of 
permanence of the label once the sticker is removed.
    In addition, both organizations promised to encourage greater 
support for the PAL program from independent labels. NARM used the 
opportunity of a joint convention with the Association for Independent 
Music (AFIM) in March to reinforce the message. Retailers were invited 
to notify RIAA regarding music videos that should be carrying the 
Parental Advisory Logo.
    Discussions regarding the coordination of PAL placement guidelines 
and guidelines for retail price stickers are ongoing. The current 
guidelines for PAL placement from RIAA instruct labels to place the 
logo in the lower left corner of the front face whenever possible. NARM 
guidelines ask retailers to avoid placing price or other stickers over 
the Parental Advisory Label. Despite the two guidelines, the consensus 
of both groups was that keeping the labels separate while not covering 
up the title of the work or imposing rules on artists that could not be 
followed 100% of the time posed a challenge. NARM was asked to review 
the placement of advisory information on movies and games to determine 
how the placement issue is handled for those products. We've learned 
that the MPAA rating for both VHS and DVD is on the back face of the 
product. While the icon for video game ratings appears on both the 
front and back face, the important content descriptor information 
appears on the back face. With that information as background, it would 
appear to make sense to move the placement of the PAL logo to the back 
face of music products so that the consumer can begin looking for 
rating logos in a consistent place. If retailers kept their pricing 
labels on the front face, any possibility of accidental covering of the 
PAL would be eliminated. This possibility is actively being discussed.
                          educational efforts
Retail Education
    A number of activities have been initiated with the goal of 
educating consumers about the Parental Advisory program. NARM's efforts 
have also included a component which focuses on educating retailers 
about the importance of the Parental Advisory Label program, how it 
works, and how to support it. As was promised last year, NARM created a 
section on our website devoted to the Parental Advisory Label program. 
Posted on the site are a philosophical statement from NARM about the 
value of the program and its importance to the public along with the 
current guidelines for the PAL program. We also include a sample 
descriptive statement about PAL for retailers to use in their stores or 
on their websites, links to the RIAA page on the Parental Advisory, 
links to parentalguide.org, (the site hosted by the entertainment 
companies covering music, games, and movies), and a copy of the reports 
from the FTC on Marketing Violent Entertainment to Children. These 
published materials are supplemented by updates in our electronic 
newsletter, and verbal presentations at meetings of the NARM Board of 
Directors and the Retailers Advisory Council.
Consumer Education
    Educational efforts to consumers this past year included the 
ongoing NARM/RIAA merchandising program of posters and counter cards 
depicting the PAL logo with an explanatory paragraph. This year the 
pieces were revised to include the URL to the parentalguide.org site. 
Nearly 8000 pieces of material were shipped to retail and wholesale 
locations prior to the important holiday selling season. These 
materials were supplemented with the addition of a new brochure 
describing the PAL program in more detail. Nearly 100,000 of these 
brochures were made available to the public through 4, 447 stores 
beginning last September. We are in currently in discussions with RIAA 
about the possibility of a reprint and ongoing distribution of the 
brochure. In addition to the specific programs run by NARM, we know 
that a number of our member companies created their own in-store 
materials regarding PAL and other rating/advisory programs. Several 
companies either conducted in house training programs for store 
personnel or reissued policy statements on the program in the fall to 
help insure consistent dissemination of information and execution of 
policies.
Advertising
    Another important component to many retailers efforts regarding the 
PAL program was a review of existing advertising programs and policies. 
The very helpful feedback that NARM received last summer regarding 
specific approaches to the incorporation of the PAL logo in print, 
radio, TV, and internet advertising was passed on to retailers and 
wholesalers in September, 2001. Many retailers have reported that they 
have revised their internal guidelines in response to this feedback and 
these changes should be readily apparent in these media. One area in 
which many retailers continue to disagree with both the FTC and the 
RIAA relates to the need for the PAL to appear on every screen 
throughout a sales transaction online. While some retailers have 
adopted this approach, others believe that showing the PAL logo at the 
initial depiction of the album graphic, and again at the point of sale 
provide sufficient warning to consumers about the lyric content of the 
title.
Sales Policies
    No retailers have reported a change of policy regarding the sale of 
music carrying the Parental Advisory Label to individuals under age 17. 
Those companies that decline to stock titles with the PAL continue to 
believe that approach best serves their clientele. Those that had 
restrictive sales policies prior to the FTC report continue them, and 
those that do not believe such policies work for their customers have 
not adopted them. Most retailers continue to express concern about the 
appropriateness of the FTC recommendation for restricting sales of PAL 
titles to those under 17 when the RIAA guidelines do not provide for an 
age based program. The only significant change in this area is that 
more companies are stocking edited versions of titles with the Parental 
Advisory Label now that such titles are identified with their own 
label.
    The Parental Advisory Label program is now 17 years old. Like any 
teenager, it's learned a lot, but has room for improvement. We continue 
to believe that most parents appreciate the industry's efforts to 
inform them that certain titles may not be appropriate for some of the 
children in their families. We also believe that they appreciate having 
a choice in the marketplace regarding how different retailers stock, 
merchandise, and sell Parental Advisory Label products.
    Thank you again for the opportunity to recap our efforts in this 
area for the FTC. We welcome any comments or information that you'd 
like to share with us.
            Sincerely,
                                                    Pamela Horovitz
cc: Alan Malasky
   John Mitchell
   David Schlang

    Mr. Upton. Thank you very much.
    Mr. Severson.

                   STATEMENT OF GARY SEVERSON

    Mr. Severson. Mr. Chairman, members of the subcommittee, I 
am Gary Severson, Senior Vice President and General Merchandise 
Manager for Wal-Mart stores. I have a written statement that I 
would like to have introduced into the record.
    My predecessor, Doug McMillon, testified before your 
subcommittee last July on the--last year on the issue of the 
entertainment industry's efforts to curb children's exposure to 
violent content. I understand the hearing today is a follow-up 
to the July hearing and the purpose is to review the recordings 
industry's marketing practices.
    Before addressing the marketing issue, I will briefly 
describe Wal-Mart's approach to our customers and entertainment 
ratings.
    At Wal-Mart, we have worked hard to create and protect our 
relationship with our customers. They are and always have been 
the guiding force behind our decisions. We have created stores 
that offer every day low prices, quality merchandise, and fast 
and friendly service. Our associates have also been involved 
with the individuals and families in our communities. Last year 
alone, we supported our communities with $190 million in 
charitable giving. Ninety-seven percent of that money was 
donated at the local level through our stores. We aspire to be 
an important part of our customers' communities and to provide 
products and services that raise the standard of living for 
American families.
    Consistent with that aspiration, Wal-Mart attempts to sell 
entertainment product in a way that allows our customers to 
make informed decisions and to exclude from our shelves 
merchandise that a majority of our customers would find 
objectionable due to its sexually explicit or extremely violent 
nature. The challenge we face is in our ability to, one, help 
the customers understand what they are buying and, two, to 
determine which products they find objectionable either before 
and in some cases after we have made it available for purchase. 
At times, this is harder than it sounds due to the subjective 
nature of some of these decisions.
    Any success we achieve in these efforts is accomplished, in 
large part, by following rating systems established by the 
entertainment industries. We have rating systems that we follow 
in the sale of movies, video games, and computer software.
    As I indicated in my written testimony, we use rating 
systems to enforce our policy on selling age-restricted 
products to customers under age of 17. Our customers must be 17 
or older to purchase R-rated movies and M-rated video games and 
computer software. We use register prompts to verify the age of 
a customer.
    Unfortunately, in the case of music, the recording industry 
has not provided us a ratings system to follow. The music label 
has determined on a title-by-title basis whether to attach a 
parental advisory sticker or not. We refer to this as stickered 
music; and, today, we do not carry parental advisory stickered 
music in our stores.
    The music labels make edited versions of some stickered 
music available to us. We do carry most edited versions of 
music on selected product. This product is labeled ``edited 
version.'' Our buyers for music determine which music to carry 
based on their best judgment. As we testified last year, from 
our perspective, an unbiased, standardized rating system would 
help our customers determine whether specific music is 
appropriate for their needs and taste.
    If the recording industry adopted a rating system, we would 
educate our customers about the rating system, train our 
associates about our company policy on the sale of rated music, 
and would most likely restrict the sale based on the rating. We 
would enforce the restriction through a register prompt as we 
do with R-rated movies and M-rated games.
    The marketing of music is generally a partnership between 
the recording industry and the retailer. The recording industry 
will fund the marketing and provide the content in coordination 
with us. As for Wal-Mart, our marketing of music is much more 
limited than that of other retailers. Our main approach is to 
market the music in the store and drive customer traffic to the 
entertainment area where we do display the music. Occasionally, 
we will do television and print advertising of title-specific 
music. We control the content of the advertising and try to 
ensure the ad is appropriate and appealing to our customers.
    While we use our best judgment at Wal-Mart on which items 
we carry and while we work hard to restrict the sale of certain 
products to those under the age of 17, it is simply not 
possible to eliminate every image, word, or topic that an 
individual might find objectionable. In addition, we are the 
first to admit our systems and our associates, good as they 
are, are not infallible. However, it is our sincere hope that 
our policies make it possible for our customers to make 
informed decisions and for them to feel we are handling 
entertainment product in an appropriate matter.
    At this time, I am pleased to answer any of your questions. 
Thank you.
    [The prepared statement of Gary Severson follows:]
Prepared Statement of Gary Severson, Senior Vice President and General 
               Merchandise Manager, Wal-Mart Stores, Inc.
                              introduction
    Mr. Chairman, members of the Subcommittee, I am Gary Severson 
Senior Vice President and General Merchandise Manager, for Wal-Mart 
Stores.
    My predecessor, Doug McMillon, testified before your subcommittee 
in July last year on the issue of the entertainment industry's efforts 
to curb children's exposure to violent content. I understand the 
hearing today is a follow-up to the July hearing and the purpose is to 
review the recording industry's marketing practices.
    Before addressing the marketing issue, I'll briefly describe Wal-
Mart's approach to our customers and entertainment ratings.
    At Wal-Mart, we have worked hard to create and protect our 
relationship with our customers. They are and always have been the 
guiding force behind our decisions. We have created stores that offer 
every day low prices, quality merchandise, and fast and friendly 
service. Our associates have also been involved with the individuals 
and families in our communities. Last year alone, we supported our 
communities with $190 million in charitable giving. Ninety-seven 
percent of that money was donated at the local level through our 
stores. We aspire to be an important part of our customers' communities 
and to provide products and services that raise the standard of living 
for the working families of America.
    Consistent with that aspiration, Wal-Mart attempts to sell 
entertainment product in a way that allows our customers to make 
informed decisions and to exclude from our shelves merchandise that a 
majority of our customers would find objectionable due to its sexually 
explicit or extremely violent nature. The challenge we face is in our 
ability to 1) help the customers understand what they are buying and 2) 
determine which products they find objectionable either before, and in 
some cases after, we have made it available for purchase. At times, 
this is harder than it sounds due to the subjective nature of some of 
these decisions.
    Any success we achieve in these efforts is accomplished, in large 
part, by following rating systems established by the entertainment 
industries.
                                 movies
    In the case of movies, we use the MPAA, Motion Picture Association 
of America, voluntary ratings (G, PG, PG-13, R, and NC-17) as we make 
decisions about which movies to carry. For example, we do not carry NC-
17 rated content. We do carry G, PG, PG-13 and most R rated content. 
Our buyers for movies determine which movies to carry based on their 
best judgment. They use their knowledge of our customers and the 
customer response to the movie in theaters to make a decision on a 
specific title. We then utilize a register prompt at our cash registers 
to verify the age of the customer buying the R rated movie. In 
accordance with our policy only those customers who are age 17 and 
above are permitted to purchase R rated movies.
    We believe that because MPAA ratings have been in consistent use 
since 1968, there now exists a widespread customer understanding of the 
ratings. As a result, we have few customer questions about the ratings 
themselves. Our customers seem to clearly understand what they are 
purchasing.
                   video games and computer software
    In the case of video games (for example, Sony Playstation or 
Nintendo games) and computer software, we use the ESRB, Entertainment 
Software Rating Board, ratings (EC, E, T, M, and AO) as we make 
decisions about which products to carry. We do not carry software rated 
adults only (as rated by the ESRB). As a rule, we do not carry Parental 
Advisory stickered product. We do carry EC, E, T, and select M titles. 
Our buyers for video games and computer software determine which M 
rated products to carry based on his or her best judgment. They use 
their knowledge of our customers to make decisions on specific titles. 
We then utilize a register prompt at our cash registers to verify the 
age of the customer buying the M rated product. In accordance with our 
policy only customers who are age 17 and above are permitted to 
purchase M rated titles.
    Since the ESRB has only been in existence since 1994, we have taken 
several steps to educate our customers on how to interpret the ratings 
including in store signing; print advertising; and associate training. 
As a specific example, Wal-Mart stores display in store signing which 
explains the ESRB ratings. For video games and software, in store 
signing is placed in either the glass case or section where the item is 
stocked and explains the ESRB ratings to customers.
                                 music
    In the case of music, the recording industry has not provided us a 
rating system to follow. The music labels determine on a title-by-title 
basis whether to attach a parental advisory sticker or not. We refer to 
this as stickered music. Today, we do not carry parental advisory 
stickered music.
    The music labels make edited versions of some stickered music 
available. We do carry most edited versions of music on selected 
product. This product is labeled ``edited version.'' Our buyers for 
music determine which music to carry based on their best judgment. As 
we testified last year, from our perspective, an unbiased, standardized 
ratings system would help our customers determine whether specific 
music is appropriate for their needs and tastes.
    If the recording industry adopted a rating system, we would educate 
our customers about the rating system; train our associates about our 
company policy on the sale of rated music, and would most likely age 
restrict the sale based on the rating. We would enforce the restriction 
through a register prompt as we do with R rated movies and M rated 
video games.
                           marketing of music
    Marketing of music is generally a partnership between the recording 
industry and the retailer. The recording industry will fund the 
marketing and provide the content in coordination with the retailer. As 
for Wal-Mart, our marketing of music is much more limited than that of 
other retailers. Our main approach is to market music in a store and 
drive customer traffic to the entertainment area where we display the 
music. We display the music to encourage sales. Occasionally we will do 
television and print advertising of title specific music. We control 
the content of the advertising and try to insure the ad is appropriate 
and appealing to our customers.
                               conclusion
    While we use our best judgment at Wal-Mart on which items we carry, 
and while we work hard to restrict the sale of certain products to 
those under the age of 17, it is simply not possible to eliminate every 
image, word or topic that an individual might find objectionable. In 
addition, we're the first to admit our systems and our associates, good 
as they are, are not infallible.
    However, it is our sincere hope that our policies make it possible 
for our customers to make informed decisions and for them to feel we 
are handling entertainment product in an appropriate manner.
    At this time I am pleased to answer any of your questions.
                                appendix
    MPAA (Motion Picture Association) Ratings.
    G (General Audience)--All ages admitted.
    PG (Parental Guidance Suggested)--Some material may not be suitable 
for children.
    PG-13 (Parents Strongly Cautioned)--Some material may be 
inappropriate for children under 13.
    R (Restricted)--Under 17 requires accompanying parent or adult 
guardian.
    NC-17--No One 17 and Under Admitted.
    ESRB (Entertainment Standards Ratings Board) Ratings.
    EC (Early Childhood) content suitable for persons ages 3 and older.
    E (Everyone)--Content suitable for persons ages 6 and older.
    T (Teen)--Content suitable for persons ages 13 and older.
    M (Mature)--Content suitable for persons ages 17 and older.
    AO (Adults Only)--Content suitable only for adults.

    Mr. Upton. Well, thank you all.
    At this point, we will go to the questions from the 
members; and we will limit the time for us to 5 minutes. We may 
have a second round, depending on where things stand.
    Again, I know that Chairman Tauzin is intending to come 
downstairs.
    I go back to my statement, as a dad of an 11-year-old and 
an almost a 15-year-old, I know that when I go to purchase 
music at any store, I would say that very few parents actually 
take the time to read the lyrics before they buy the CD packet.
    First of all, the lyrics are inside the wrapper, which 
takes a little while to get off, I would note. And sometimes 
they are in the long box so they make sure you don't put it in 
your coat jacket. For those that try to shoplift those things 
out, it is obviously more difficult. But it is also nearly 
impossible then to read the lyrics.
    As a dad, I think it is much better to simply look to see 
if in fact there is a warning sticker on the outside, 
particularly if your kids are going to be with you or that is 
the music that they would like to hear.
    Now, Mr. Peeler, you said in your opening statement that 
movies and games have made substantial improvement from--over 
the last couple of years, but the music industry has made some 
progress but not a lot. Now, I don't know if you were aware of 
BMG's new announced policy, and I would be interested to know 
what you think about their--if all studios have or recording 
industries have followed their lead, if that would 
substantially change your report card. My guess is that it 
would. Is that correct?
    Mr. Peeler. Well, in our report, we are looking at what the 
industry self-regulatory program is and whether members have 
complied with it. We cited the BMG initiative in our report as 
a positive development. We look forward to seeing it rolled out 
in the marketplace.
    From talking to parents, we think that a lot of parents are 
like you; that they would like more information about the basis 
for the parental advisory on the album.
    Mr. Upton. As a dad, I would say that what BMG has done is 
perfect. I don't think they need to go beyond that, and I think 
that it works well.
    Mr. Simmons, I don't know if you have seen precisely what 
BMG has done. But what are your thoughts? It is actually on the 
screen behind you.
    Mr.  Simmons. Okay. You know, I have seen it, and I think 
it is good if----
    Mr. Upton. I mean, we are not talking censorship.
    Mr. Simmons. No, I got it. I think that it is good and is 
acceptable to me. I don't believe it should be standardized. 
And let me say that, you know, it is very difficult to measure 
words. If I were to say--for instance, if I were to say God, 
everyone in this room would have a different image. Some might 
even be offended. So it is very--you know, in words and in 
books and in poetry, which is what rap music and even song is 
written in that kind of form, it is poetry. And it conjures 
up--you know, it is about the imagination. And, you know, what 
you hear--and the whole rating system for me--for instance, 
what most people on this panel might refer to as a gangsta 
rapper, artists like DMX, I find him quite inspirational, and I 
think the artists and the people who understand his music feel 
that way about him.
    I believe that there is such a cultural divide that the 
people whose job it has been to make these decisions and the 
people--even the industry--and the people who are listening on 
this panel don't speak the language of the young people. People 
are so offended sometimes by profanity, what they refer to as 
profanity, the language, that content and real--the meaning of 
these songs is left un--I mean, completely not understood. 
Misunderstood.
    So I think if BMG wants to do that, since they have a small 
amount of relevant hip hop music, I mean, that is fine. I don't 
think at Vivindi where we have--Def Jam records, where we have 
most of the hip hop music, it is a good idea.
    I think that we--parents--it says parental advisory, we 
have gone a long way to change since the last time we spoke. I 
mean, we have made sure that every radio commercial, television 
commercial, or any kind of a promotion is very clear or--
sticker music, what the stickered music is. And I think that 
that is a good stand. We have all agreed to do that. And I 
think that is a lot, really. Because still there is, you know, 
such a--there is such different meanings depending on who is 
listening to most of this poetry. And the audience is getting a 
diverse group of ideas and they are important ideas. They are 
voices for people who would be voiceless.
    The last time I was here, Senator Thompson made a point 
because he had a cultural--he had a certain opinion. He said, 
Saving Private Ryan was a strong movie. It taught young people 
about war. And he thought that every young person--that was his 
opinion, and he made it clear that that was only his opinion--
that every young person should see that movie so they would 
understand war.
    Well, I think it is important that every young person hear 
Snoop Dog, because I think it is a war that is going on down 
the block in some cases. I think it is important that kids in 
Beverly Hills hear--since mostly rappers' voice is for 
voiceless people, not only in the ghettos now, the urban 
environment, it is the trailer parks that have become very 
popular and a group of people who haven't had a voice in a long 
time.
    And now you have the trailer parks and the projects 
collaborating and having a dialog, and you have the kids in 
Beverly Hills riding around listening to them. And they are 
getting to understand the plight of those people who are in the 
poor--or I mean in these conditions. And that is the profanity, 
is the condition that they are living in, not in some of the 
words that people find offensive. And that is my opinion. So I 
know that that is not something you share, but language is a 
lot less important, again, than the content.
    And I think that when young girls who are listening to the 
songs--I know that there are some very sexist songs out there. 
I know one thing in the projects, no one wants to be the daddy 
of the baby's momma. Madonna had a song, ``Papa Don't Preach,'' 
before Hip-Hop, ``I'm having my baby.'' Nobody in Hip-Hop or in 
the project is bragging about having a baby today, because what 
is being said in the back rooms now is clear to them, and there 
is an opinion about it.
    About drugs, they talk about drugs, and I know people think 
that they influence people, but mostly it is against drugs, and 
mostly it is the effect of drugs that they talk about. But you 
may not hear the same thing that most of the Hip-Hop audience 
hears. I think it is important that there is truth, have an 
opportunity to come out, and I think that we shouldn't worry 
about the reflections that come, because the music is like a 
reflection of our realities. Breaking the mirror is not going 
to help the problems. When they said ``F'' the police, 
everybody got in an uproar. It called attention to what was in 
Compton at that time, a terrible situation.
    I think it is very, very important that these kids have a 
chance to express themselves, and I think that we have a very 
strong rating system. And I think that--I commend BMG on taking 
the initiative. I don't think it should be something that 
everybody has to accept.
    Mr. Upton. My time has expired, but we will come back.
    Mr. Gordon.
    Mr. Gordon. Mr. Peeler, you stated that in this checklist 
or this criterion that you are using for a report card, that 
the three groups--the motion picture industry and the video 
games and the recording industry--it all made progress, but 
that the recording industry has made less progress.
    What are some of the areas that would be applicable that 
these other groups are doing in terms of reducing the marketing 
to minors that, in your opinion, that the recording industry 
could do?
    And, Ms. Rosen, if you would listen to that, and I would 
like your opinion as to whether you think those are valid, and 
if so, what are you doing to meet that?
    So, Mr. Peeler, we will start with you.
    Mr. Peeler. Again, our tracking of the appearance of the 
advisory label and advertising has shown considerable progress 
over the last 2 years, but our most recent numbers show only 
about half of the ads contained--accurately reflected the 
parental advisory label. I think that the industry's current 
efforts to monitor that and increase that are a very good sign. 
We would like to see those numbers higher.
    I think the two big areas where the Commission has 
expressed concern are, first, the area that the Chairman was 
just raising, that we think it would be a better system if 
there was information about the reason for putting the parental 
advisory label on the recordings. The second big area has been 
that the current system does not include any restrictions on 
marketing of the product directly to children. We believe that 
the movie and game industry systems, which do include 
restrictions on direct marketing of rated products to children, 
is a better model.
    Mr. Gordon. Okay. So what are they doing? More 
specifically, how are they, the motion picture industry, how 
are they limiting this marketing to minors?
    Mr. Peeler. Well, they have come up with voluntary industry 
self-regulatory guidelines which limit where they will place 
their ads in an attempt to reduce advertising, or programming 
or in publications that are very popular with teens. We have in 
our report suggested that they could do a couple of things 
better in that area, but they certainly have a program, and our 
review indicated that their members are complying with it.
    Mr. Gordon. Ms. Rosen, is this an adequate analogy? You 
know, is there--the motion picture industry, are they smarter, 
or are they more socially conscious than the recording 
industry, or is it just different?
    Ms. Rosen. It is not analogous at all, and I think there 
are two issues. Let us deal with the age-based marketing 
restrictions that Mr. Peeler referred to.
    We are the only industry that has edited versions of music. 
So we have a choice. When you have edited versions of music on 
the radio and edited versions of videos on MTV--and the only 
place this ever comes up is on MTV and BTV. Frankly, the record 
companies don't advertise as significantly as other industries 
do. We do more marketing, street marketing, things like that, 
than we do advertising.
    But if you market--if you are advertising an edited 
version, you are recognizing inherently that there is a 
differentiation between music and other content products, 
because the edited versions will still have the same music, 
same artist, similar sentiments, but the explicitness will be 
edited out.
    And so what's better? We have this constant discussion with 
the FTC. Not advertising the edited version means that people 
don't know that there is an edited version available. We came 
to the conclusion that advertising the edited version was more 
informative and more productive for both parents and young 
people than not advertising at all, and the only thing that 
people would understand is that there is an explicit version.
    So it is a very different industry. It is not analogous to 
the situation in----
    Mr. Gordon. Well, you have edited versions of movies.
    Ms. Rosen. No, they don't.
    Mr. Gordon. When you go into----
    Ms. Rosen. In airports, in airplanes, but----
    Mr. Gordon. I mean, when you--if you go in to rent one, you 
will see sometimes that they say, this is an edited version.
    Ms. Rosen. I actually have never seen that.
    Mr. Gordon. Haven't you?
    Ms. Rosen. I have actually seen director's cuts, which is 
the opposite, where they put in all the stuff they have taken 
out. Television, they edit out the same way they do with music 
broadcast, of course. So, you know, is the notion that there is 
an edited version--but they are not selling them commercially. 
I think that is what we are talking about. Broadcast is fine. 
That is not an issue. MTV edits their videos. Radio edits their 
songs, so there is no sort of, you know, innocent exposure in 
music.
    If you want the explicit version, you have to actually 
secure it.
    Mr. Simmons. This may not be helpful but it is a point I 
made earlier, if you don't mind if I interject here. I want to 
add, you know, when you edit a song or a movie, you don't take 
out the content. You just take out a word, you know, a 
language. I mean, we are all--the whole discussion, when--what 
is--you know, in all--every book that you can think of, any 
good book, the Sutras, Yoga Sutras, or the Bible, or the Koran 
or the Tora, nobody ever talks about language. It is what you 
intend to do. It is--you know, first rule--nonviolence. You 
know, that is one of the first rules, spiritual rules, I mean, 
for any--you know, wherever it is that you practice, you know, 
your higher self.
    Why do we think when we take a word out and the whole idea 
is still communicated, the whole thing is--I mean, we don't 
have a--the judgment that we are making----
    Mr. Gordon. Well, the response might be this, my response 
might be this: There is a different responsibility in terms 
of----
    Mr. Simmons. This is cultural. The whole discussion is 
cultural.
    Mr. Gordon. I think there is a different--throughout 
cultures, there is a different responsibility to minors versus 
adults, and I think--I mean, Spike Lee, you know, has been 
successful in conveying a message, and somehow he lives within 
the motion picture industry's effort not to censor. But to rate 
in an effort to give parents tools, I don't think anybody is 
talking about taking out words. The question is: Are you going 
to give notice of the words beforehand? So we should not think 
this is editing anywhere.
    Ms. Rosen. Let me respond, if you would, Congressman, to 
the content distributor, because Mr. Peeler raised two issues. 
One is that we don't prevent advertising in vehicles where 
young people go. I have already said we made the decision that 
it is better to advertise that there is an edited version 
available, because that is what puts pressure on retailers and 
others to go out and pursue the edited version.
    On the content descriptors, we are in a very different 
world than motion pictures. The motion picture guidelines 
basically say, if you have these words and it is showing these 
naked body parts or this level of blood and violence connected 
with these words, then it gets this rating. Words don't provide 
that. Words are simply interpretative. They are subjective. 
That is why content descriptors are not appropriate for music.
    BMG is undergoing an experiment. Everybody is looking at 
BMG's experiment, but it is worth noting that as fantastic as 
BMG's announcement is, people should know that the only album 
that has actually come out from BMG so far has all of the 
content descriptors that our logo already has. There is one 
record. It is clips, I think. You know, it says it is strong 
language, sexual and violent content. Guess what? That is what 
every single retail store, that is what every single 
advertisement, that is what every single Web site already says 
the logo means. The parental advisory is a notice to consumers 
that recordings identified by this logo will contain strong 
language or depictions of violence, sex or substance abuse. 
There is no mystery--I find this a bit of a red herring--there 
is no mystery about what this means. We constantly advertise 
it.
    Mr. Gordon. You might--my time is up, but just for your 
information, Albertson's now is selling edited versions of 
movies.
    Mr. Upton. Mr. Towns.
    Mr. Towns. Thank you very much, Mr. Chairman.
    Let me begin by just asking you, Mr. Severson and also Mr. 
Marmaduke, you are saying to the committee that the age-based 
system is in the best interest of consumers. Who would enforce 
such a system? Because it seems that those large companies and 
those who own a number of stores having, you know, greater 
resources to enforce such a system, while small music stores 
like ones that are around in my district who are struggling to 
stay relevant due to the illegal downloads, might not have the 
luxury nor the resources to enforce such a system.
    Mr. Severson. I think that we are calling for more age-
based to help the parents to be better educated to determine 
for their minor children what a better system would be. The 
enforcement of that can be systematic, but also it requires on 
human beings at the cashier level to be able to understand 
policies and then enforce those policies. So we are calling on 
a human element to make sure that while you can have a system 
to help support that, that even in small companies where you 
might not have those systems, you still have to rely on the 
cashier to enforce policies that an individual retailer might 
set to determine age appropriateness.
    Mr. Marmaduke. Well, Congressman, I would say that the 
contrary would be the case in my experience. And that is that 
the small retailer generally is the proprietor who is in charge 
of his store, and he knows his customer base better than any 
chain will ever know their customer, and so enforcement would 
be actually easier for a small and local retailer if they 
elected to do so.
    Mr. Towns. I was sort of looking at it a different way. I 
was thinking that a store like Wal-Mart that sells everything 
else, you know, that they could have a different attitude about 
it. You know, I was thinking--you know, because you sell all 
kinds of goods, so therefore, you know, you could take a hard 
line and whatever on anything, because that is not really, you 
know--it just happens to be a minor product that you are 
involved in.
    Mr. Severson. I am not sure I understand the question.
    Mr. Towns. I am saying to you that Wal-Mart could take a 
position that a small store could not take, you know, in many 
instances, because the fact that this is basically what they 
are selling. You are selling a lot of different products. So, 
therefore, you could draw the line and say, no, we are not 
going to do this, we are not going to sell this or whatever, 
because of the fact that that is just a minor item with you in 
terms of what you are selling.
    Mr. Severson. Well, we are not suggesting that every 
retailer has to do a certain thing; that every retailer sets 
their own policies in accordance with what they believe their 
customers want and need. And we would be setting the policy 
that we believe our customers would expect us to do, while the 
individual company could set their own policy and enforce it as 
they wish.
    Mr. Towns. The age-based system, what would--let me put it 
this way. What type of content would Wal-Mart not sell?
    Mr. Severson. That is a very subjective question to ask, 
and there is no simple answer where I can give that, but we try 
and represent the interests of the majority of our customers. 
Okay? And if we believe that the majority of our customers 
would expect to find this product on our shelves, then that is 
what we want to represent.
    Now, if there are certain products that might have an 
explicit nature to it that our customer might expect, we would 
also hope to be able to restrict that sale to minors, so that 
parents can make that choice and determine whether it is 
appropriate for their children or not.
    As far as what we--I mean, we have stated policies that we 
will not carry X-rated movies, we will not carry explicit 
magazines, we will not carry adult-only video games. Those are 
ratings that exist that we have determined that we are not 
going to be involved in. Everything after that becomes 
subjective to a point where you determine and you try and make 
the best choice you can, based on what you believe your 
customer wants and expects.
    Mr. Towns. Mr. Simmons.
    Mr. Simmons. I was going to ask what kind of music wouldn't 
you sell. You mentioned four different kinds of visual 
products, but you didn't mention what kind of music. And that 
is an important question, since we are here addressing the 
music issue today. What kind of poetry would you limit? So that 
is really the question I think he was asking.
    Mr. Severson. Well, our current policy states that we will 
not carry parental-advisory-sticker music, and that is our 
current policy on that. That could certainly change if there 
were to be a change in the rating system that would become age-
appropriate. That would be consistent with the other 
entertainment products that we do carry that we do have a very 
consistent policy on.
    Mr. Simmons. Would you, for instance, not carry music that 
describes nudity, or do you already carry tons of product that 
describes nudity and describes--you probably do, I guess?
    Mr. Severson. Yeah. I don't pretend to understand every 
single lyric that is on every single album in every single one 
of our stores, but we rely on the industry's policy currently 
of parental-advisory-stickered music as our policy to determine 
what we carry. Thank you.
    Mr. Towns. You know, I think that what we are really saying 
here is that, you know, different words have different meanings 
based on your life experience, and I think that, you know, that 
is something you just can't lose sight of. And, of course, 
these young people, in many instances this is what they are 
doing; they are expressing themselves out of their own little 
life experience. And, of course, we cannot lose sight of that, 
and that is something that I think that has to be discussed 
even more, because what is offensive in one sense might not be 
offensive in another. And that is also a key issue that I think 
we need to spend some time talking about, because the 
background, here again, makes a difference in terms of the 
person's definition of, you know--and it could be different 
from yours, it could be different from mine.
    But the point is this: I think that this is something that 
we should not ignore and cannot ignore. And of course a lot of 
times, you know, once you stop and you listen to it, then you 
find out that maybe it is not really that, it is something 
else.
    So, you know, Mr. Chairman, I think it is good that you are 
having this hearing. I think that this is something that we 
need to have a tremendous amount of dialog around, because this 
is a very serious issue. And I think that the interpretation, 
you know, many times is just so different, you know, based on 
the person's background.
    I yield back.
    Mr. Upton. Ms. Harman.
    Ms. Harman. Thank you, Mr. Chairman.
    I first want to say that the participation of Mr. Simmons 
on this panel is very helpful to me. I think his testimony was 
important. His comment about speaking truth to power is 
extremely important. We should never forget that we don't have 
all the answers up here, and we do need to hear from artists 
and others about how they view all sorts of situations.
    And I want to say to our colleague, Mr. Towns, that many of 
the points he has made this morning I feel are valid, and while 
I may make choices for my kids that he might disagree with, I 
think that is also protected under our Constitution. And I 
think that it is very important that we do have a First 
Amendment and that we can hear different voices and that one 
person's definition of truth may not be another person's 
definition of truth, and I think that is healthy in a 
democracy.
    At any rate, I wanted to follow up on a comment that Ms. 
Rosen made at the end of her testimony. She didn't expand on 
it, but I think her point was that a number of these peer-to-
peer networks don't have any guidance for consumers. They also 
pose other problems, but I don't think this is a hearing on 
digital rights management. I have strong views on that, but I 
will save them for another forum. But I am interested in these 
peer-to-peer networks as they affect the subject we are talking 
about today, which is advice to parents.
    And so I thought I would ask Mr. Peeler for his views on 
this and whether he has looked at this and what he thinks ought 
to be done about this. And then I would like Ms. Rosen to 
comment on whatever he might say.
    Mr. Peeler. Well, we certainly think that it is an 
important music distribution channel, and we certainly intend 
to include it in this ongoing review that we are doing right 
now. It is an issue that is different from the issue that we 
have looked at in the past, that focuses on what types of 
active marketing is done for the music. Kids have to learn 
about the music from some source, and what we have been looking 
at is what advertising and what marketing leads kids there.
    Ms. Harman. And just let me follow up for 1 second. Her 
claim was that a lot of legitimate companies are involved in 
some of this advertising on these P-to-P networks. Have you 
found that to be the case?
    Mr. Peeler. I don't believe we have looked at it yet. As I 
said, that is one of the issues that we are looking at in this 
current review.
    Ms. Harman. Okay. Thank you.
    Ms. Rosen.
    Ms. Rosen. The United States Air Force, Orbitz, Comcast, 
significant companies are advertising on these networks. I 
think it is--you know, it is not just another distribution 
network. I think we are finding that in targeted audiences, it 
is a primary axis. And the issue is if a kid hears a song on a 
radio, which is still where the majority of people hear new 
music, and then says, oh, I like an artist, what our statistics 
are showing us is they don't go anywhere else.
    So they are getting it from the radio, and they are going 
to a peer-to-peer network, and they are getting that song or 
other songs by similar artists. There are share files where you 
go into the drive of the person who you have pulled down the 
song that you like and say, ``Show me what else you have.'' So 
it is not that they are learning about it from reading the New 
York Times on Sunday, which I noticed was a big criticism in 
the FTC report. It is that they are learning about it through 
these networks and through the sales point, is normally where 
you would have that sticker go all the way through. That is 
where we have been careful that sticker goes all the way 
through.
    If I could just beg your indulgence, Congresswoman, on one 
point. I think that the committee would really benefit from 
thinking about the testimony of these two really thoughtful, 
successful retailers, because both of them are good retailers 
and successful companies and have been in the business a long 
time.
    Hastings Records, run by Mr. Marmaduke, uses a sticker as a 
sales restriction tool. They have other information in the 
sticker for their constituents to say, you know what, if you 
are under 18, you cannot buy it. Wal-Mart is saying, oh, no, 
no, no; we need more information to use this as a sales 
restriction tool. But Hastings is being pretty successful doing 
it.
    And so I think it is important to recognize when people are 
so--are cynical and accuse us of just ignoring what would be 
the right thing to do for profit, Wal-Mart, which is 25--and 
Kmart, which is 25 to 30 percent of all music physical sales, 
is telling us you would sell more music if you gave us a rating 
system.
    The fact that the industry isn't doing it, you know--and 
this gets to Mr. Shimkus's point. The fact that we are not 
doing what everybody says they want us to do maybe actually is 
based on some level of principle and rationale, on the 
substantive artist's view, as Mr. Simmons has said.
    Retailers are telling us we would sell more, although other 
retailers are telling us they think the tool is just fine. This 
is not a black-and-white issue.
    Ms. Harman. My time is up, Mr. Chairman, but I would just 
comment that I don't think it is black and white either. I 
think that most of the issues we address in this committee 
involve shades of gray, and making a better decision is a hard 
thing to figure out often. And often regulation is not the 
answer, as I think it is not the answer here. But I--if I were 
cynical, I wouldn't be in this line of work. I am not cynical, 
and I think that we are looking at some very smart people who 
are testifying before us and who are searching for answers, not 
just for our kids and not just for other people's kids, but for 
their own kids.
    So I see a bunch of responsible parents out there, and I 
think that as we search for answers together, we need to be 
very, very careful that we don't define truth in our own way 
and ignore truth as others define it. Thank you.
    Mr. Upton. Mr. Simmons, did you want to just respond to 
that?
    Mr. Simmons. The one thing I want to make a point--and I 
heard the gentleman say about, you know, the will of Congress 
to act on legislation that will protect this industry and that 
there was some connection. And the point--I took offense to it, 
but the thing to realize is that in a few years if we don't 
start to protect ourselves, if the Congress doesn't move to 
protect us, we won't have an industry. It will be out of 
business, I mean, in a few years.
    The dramatic drop in record sales is--if we don't address 
it now, there will be no way for any of us to be in business, 
and I think that, you know, that is--we know that it is illegal 
to steal people's copyrights and take advantage of people's 
music or trade it, and we really need to address it. It is a 
separate issue, but it is certainly one I would like to bring 
up, because it really is the end of our industry as we know it.
    I think my company is one of the last really profitable 
ones. Everybody has taken a tremendous downturn, more than the 
economy, much, much, more than the economy, and we have what 
has traditionally been a recession-proof business; not only 
music, but it is small--this kind of entertainment. But we are 
almost out of business, and we really need to move to protect 
this industry, and I hope it is not tied to whether or not we 
can censor the music.
    So I just want to make that comment. Thank you.
    Mr. Upton. Again, I just want to reiterate that I don't 
think any member wants to censor music. That is the furthest 
thing from any of our minds, and I just want to give you that--
--
    Mr. Simmons. I am sorry. I didn't mean to--but we do have 
to address that issue. That has got to be one of the most 
important things if we are going to have a record industry. If 
Time Warner Music and Vivendi Music and these companies are 
going to be in business at all, we have to address this issue 
immediately.
    Mr. Upton. Ms. Rosen, you said that there was no mystery 
surrounding the numerous reasons why it wouldn't go to the more 
expansive label which we are looking at, which is behind you. 
If that is the case, why not just go ahead with that type of 
label? I have to admit I really not have seen your brochures in 
different places where I shop for music in terms of what the 
``parental advisory, explicit content'' means in terms of the 
full description. And if there is no mystery behind it, why not 
go along with what BMG has done?
    Ms. Rosen. Actually, that--BMG has four different versions 
of their sticker, and this is only one of them that says--that 
has everything in there. And one just says language, and one 
just says sexual content, and one just says violence. I don't 
think it is very hard to figure out that maybe you would put 
this sticker on every one, regardless of my personal view of 
whether or not it is pejorative. I think the issue is how you 
parse those particular content descriptors. And we have made a 
significant progress in public awareness. Our surveys, and the 
FTC's also, show well over 90 percent awareness of the parental 
advisory logo and its meaning. So I don't believe that there is 
this lack of understanding about explicit content.
    Mr. Upton. Do you know if any of the member companies are 
looking to follow what BMG has done? Do they see that as an 
experiment, short term, long term? What is the reaction from 
the other----
    Ms. Rosen. I don't know of any other companies that are 
looking to adopt it. I think people are just watching to see 
what happens in the marketplace.
    Mr. Upton. Mr. Marmaduke, Mr. Severson, do you want to 
comment on what BMG has done specifically? Do you think that 
has been positive? Dr. Rich?
    Mr. Marmaduke. Well, since I don't have to sit there and 
parse them out, I would say that it is probably viewed as 
positive by us. But I would say that the current system seems 
to work very well for us. We see no customer irritation at all. 
Our customers seem to be very satisfied with the parental 
advisory. If we come up with more information, certainly we 
would not see that as a negative but, you know, it doesn't 
seem--the system right now to us, from our customer's 
viewpoint, doesn't seem to be broken. So we would just as soon 
stay where we are.
    Mr. Severson. And from our point of view, obviously it has 
had no effect for us, because we do not carry the parental-
advisory-stickered music, but we do see it as a step in the 
right direction and would encourage it to continue.
    Mr. Upton. Dr. Rich.
    Mr. Rich. I think that as Mr. Simmons said, this is all 
about truth, and I think truth needs to go both directions. I 
think that the artist should have the right and, in fact, the 
obligation to speak the truth to all of us, so we know what is 
going on in the streets. You know, I take care of the kids in 
that street, and I am always learning more of the language as 
it evolves, because it is a dynamic entity. And so I want to 
emphasize it from our perspective. This is not about what is 
offensive or hard to relate to or from another person's world. 
It is about simply what is understood by the research in hand 
to be potentially dangerous to their health and their long-term 
health.
    And I think that while there is information out there, that 
there are edited versions--go into a store and try to buy one--
with the exception of Wal-Mart, it is exceedingly difficult. 
And I have been laughed out of a number of stores, like don't 
be ridiculous, we would never carry such a thing. So I think 
that that is key.
    I agree with the sentiment that if it is no big deal to the 
BMG information, that it would be good to have it there. I 
think that as much as people understand something to have a 
simple binary system of on or off, parental advisory is less 
informative to parents than one that tells them exactly what 
they are buying here. And I think, to add to that, one of the 
key features that is problematic for me as a parent and as a 
pediatrician is that this is not an objective or unbiased 
placement of the sticker. This is decided by the producer of 
the music who stands to make or lose money, depending on 
whether Wal-Mart puts it on their shelves or not.
    Mr. Upton. Mr. Marmaduke, would you agree with the comment 
with regard to the availability of edited----
    Mr. Marmaduke. Well, he doesn't shop at our stores because 
we have always had edited and unedited.
    Mr. Upton. Remember, he is in the East. You are in the 
West.
    Mr. Marmaduke. So I think every retailer has their own 
unique way of dealing with this issue, but we have customers 
that desire both, and we have both for them.
    Mr. Upton. Mr. Gordon, do you have other questions?
    Mr. Gordon. I am sort of in Mr. Upton's situation, Ms. 
Rosen. I am really not as familiar with the current system that 
you have in terms of the advisory label. Could you tell me what 
you do and how you arrive at those decisions?
    Ms. Rosen. There is a broad series of guidelines that 
accompany the logo that are available to sound recording 
producers and actually are available on our Web site for the 
public to see and critique, which they never do. And it 
essentially gives guidance to a record company about what they 
ought to look at to make a determination on whether or not to 
put the sticker on it. So it is along the lines of if there are 
explicit violent lyrics that could be associated mentally with 
violent images, if there is language or profanity, things like 
that.
    Mr. Gordon. And does the record company or the artist make 
that decision?
    Ms. Rosen. Usually it is a joint decision, but the record 
company has responsibility for the decision.
    Mr. Gordon. So then I guess we are over this thing about 
censoring, then, Mr. Simmons, because apparently you are 
already making those decisions, and that is--but it is not 
considered censoring, so I don't think that is really an issue 
before us today.
    Mr. Simmons. I am sorry. My point is that if we put strong 
language, sexual and violent content, parental advisory, 
explicit content on that sticker, it would not affect our sales 
at all. Maybe we would sell more. And the reason we would sell 
more, as this gentleman said, it would be easier for him to 
determine.
    So it is not--it is difficult to answer the questions in 
the way that you guys are asking us. Again, these are words.
    Mr. Gordon. Right. But apparently the word----
    Mr. Simmons. Describing on NBC at 6 o'clock news with the 
language that you guys are comfortable with is okay. Describing 
a violent act, describing in words a violent act at 8 o'clock 
prime time on Fox is okay. It is acceptable to you. But the 
point I am making is----
    Mr. Gordon. So are you opposed to what the industry is 
doing now?
    Mr. Simmons. I am not opposed to it. I am telling you that 
it is not--once you put ``parental advisory, explicit content'' 
on there, again, it is not going to affect my business. I am 
just recommending to you that we don't go any further. You 
know, the FTC--or FCC has made choices about a women's lib 
poem, and they sued the radio or threatened to close the radio 
down if they played it anymore. I am just afraid of any more 
involvement. I am concerned about the level of involvement in 
pushing from this panel and other--you know, because I 
believe----
    Mr. Gordon. If I could--if I could just reclaim my time. I 
have a limited amount of time.
    So, Ms. Rosen, as I understand it, then, the industry is 
already, if you want to--I won't say editing, but someone other 
than the artist is already making some decisions now about an 
advisory opinion, not changing the words or anything, but about 
advisory opinion.
    Ms. Rosen. Right. And I think your question was why can't 
we go farther than that.
    Mr. Gordon. Not necessarily.
    Ms. Rosen. And parse out.
    Mr. Gordon. I am not saying why can't you go further. I am 
just trying to establish that there is already something being 
done along that line.
    Ms. Rosen. Yes. And I think what you have heard Mr. Simmons 
say is really the--you know, welcome to my life. This is the 
balance that the industry tries to achieve between our 
responsibility to the community and to parents and extremely 
strong feelings in the creative community about this issue. And 
so the sticker itself and what it implies is specific enough to 
be useful to retailers and useful to parents. After all, more 
than 75 percent of them already approve of it. But it is 
general enough to not be specifically pejorative and 
interpretive about the lyrics.
    And when you get to the level that BMG--of the BMG 
proposal, some people are concerned it is too specific to say 
that a song about rape is--is that sex, is that violence, is 
that strong language? What is that? And ought the artist not be 
able to say, you know, that it is explicit, it is mature 
content, you make your own decision.
    And so that is I think the raging analysis that constantly 
goes on, and it comes, as has been said, from a place of 
principle. What Dr. Rich just said is exactly wrong. Everybody 
tells us we would make more money if we acceded to this. You 
guys would like us better. It would be politically the right 
thing to do. It would be financially the right thing to do. And 
yet we can't go there, because it comes from a place of----
    Mr. Gordon. The question before us then is not whether or 
not there should be some arbitrary decision made as to whether 
or not a label should be on a product. So apparently we are 
all--at least we are not arguing that. The question is just 
what level of specificity, and so that we have established 
apparently that artists and the industry can accept some type 
of a labeling process. Is that correct?
    Ms. Rosen. Absolutely. And I think we have not just 
accepted it, I think we have embraced it and promoted it very 
effectively.
    Mr. Simmons. I think if that--if you don't mind my 
interjecting. We have made dramatic changes in the way that we 
promote our labels and in the way that we market and include 
the labels in the way we market our product. And we have gone 
to such lengths to let people know that there is, you know, 
some content that you may find offensive.
    To go further is part of--is going down a path that I feel 
is--that it is already a bit disturbing, because how do we then 
define what is offensive? That is already a subjective issue 
that we agree that anything is--because we can put a parental 
advisory sticker on anything and sell more. Anything we smack a 
parental advisory on sells more. Every time you attack rap 
music or young people's music, whether it is jazz, blues, rock 
and roll, or any new art form, Shakespeare and plays, whatever 
you attack, whatever the censors are, people are uncomfortable 
with the young culture attack, it sells more.
    I remember I was so thankful when my brother ``Run'' from 
Run DMC, all he ever sang about was God, school, and surviving 
in the ghetto. He is now Reverend Run. The whole world attacked 
him. His album sales went up. He was on the cover of every 
newspaper as he came into town. And now people, of course, love 
Reverend Run and Run DMC and they love the old songs. The old 
songs are now American classics, and he listens to them 
closely. And the album is about God, again, school, and higher 
aspirations, higher American aspirations. That is what Run DMC 
sang about, and they were gangster rappers in 1983.
    Matter of fact, when I met Ben Chavis, who is now the head 
of the Hip-Hop Summit Network, he used Reverend Run and Run DMC 
to register voters. The board of directors almost fired him. 
That was their rigid attitude about young people and their 
voice.
    Mr. Gordon. So are you following the RIAA's system of 
putting the rating----
    Mr. Simmons. Yes, sir. In fact, we at our summit----
    Mr. Gordon. That doesn't stifle you?
    Mr. Simmons. [continuing] we added to the way--we gave a 
long list of additional ways to promote that system, and we 
have been the ones who are promoting it to the rest of the 
industry through our vehicles to accept this new, even greater 
promotion of these labels. So we absolutely want to support 
them. We just don't want to go down the wrong path.
    Mr. Gordon. Sure. So I guess what we have established then 
is that it is not censorship, and we ought not be crying 
censorship to talk about----
    Mr. Simmons. Well, there have been some instances where 
industries have attacked artists in----
    Mr. Gordon. But you are using a system of rating----
    Mr. Simmons. That's correct.
    Mr. Gordon. Okay. Thank you.
    Mr. Upton. Mr. Towns, do you have additional questions?
    Mr. Towns. Just one quick question, Mr. Chairman. To Mr. 
Peeler, this billboard, how did you develop this?
    Mr. Peeler. I am sorry; the billboard?
    Mr. Towns. Yes. How did you develop it?
    Mr. Peeler. This billboard here?
    Mr. Towns. Yeah, yeah. Right. What I have----
    Mr. Peeler. That is----
    Mr. Towns. Actually I am talking about the July 15th, 
2000--the billboard where you have the archives chart? Do you 
see this?
    Basically, you know--pass it to him.
    I got that from someplace.
    Mr. Peeler. This is, I believe, a private publication of 
the Billboard 200. It is a listing of top-selling albums.
    We used that information and other information in 
connection with our December 2001 report to determine which 
corporations to send requests to ask about specific marketing 
practices.
    Mr. Towns. Let me make sure I understand that.
    Mr. Peeler. This is a published list of top-selling albums 
that is published by the industry by Billboard.com.
    Mr. Towns. Published by----
    Mr. Peeler. It is published by an industry source, 
Billboard.com.
    Mr. Towns. You had nothing to do with what?
    Mr. Peeler. We had nothing to do with that particular list. 
We used this list, which is published by an industry trade 
source, to develop the list of music recordings that we were 
going to ask about the marketing practices of.
    Mr. Towns. And----
    Mr. Peeler. This is a list of top-selling albums that we 
got off the Internet the same way anybody else would.
    Mr. Towns. And the 25--you know, the reason I am asking 
this question is that, you know, looking at that list, the top 
25, you know, 22 of them were urban, you know, and that just 
sort of hit me--struck me funny, you know, that out of the top 
25, 22 of them were. And that didn't strike you funny?
    Mr. Peeler. Well, again, this is a list of what consumers 
are buying in the marketplace.
    Mr. Towns. In a random kind of way, you are saying?
    Mr. Peeler. It is not in a random way. It is the industry's 
tracking of what consumers are purchasing in the marketplace. 
These are the music recordings that consumers are buying the 
most of. These are the most popular music recordings, and it 
shows what their rank is this week and what their rank was last 
week. This is very much like what is published every--Monday 
morning, about which movies everybody goes to over the weekend.
    Mr. Towns. I am trying to figure out how you get to this, 
because 22 of those 25 are black, and that is the reason why I 
am asking that question. So how do you arrive at--that doesn't 
seem to be a----
    Mr. Peeler. The industry tracks sales, and the industry 
reports the sales.
    Mr. Towns. That is the way you do it? That is the way you 
have----
    Mr. Peeler. That is the way the industry does it.
    Mr. Simmons. But you also have some poor white rappers in 
there. So that would be about it. It is a cultural issue, and I 
believe that--it is very--we have to be very careful. Again, 
these are voices of people who are not so visible, you know, 
and the reason that I am so adamant about protecting them is 
because they are talking about conditions in our society that 
are swept--you know, people are very offended by the Jerry 
Springer show, and Maury Povich and these shows; and, of 
course, sometimes you realize there is some ignorance and some 
poverty in this, and you see it.
    You see white people. God, you only see rappers mostly, 
poor people who have voices. So when you see the white people 
who have voices, it is amazing, because it has not been in 
style until now. So you say 22 of those 25 people are black, 
but then they are also those white rappers, you add to the 24, 
the 25 or something like that. So it is just--the fact is that 
these are reflections of the conditions of--in our society, and 
these reflections are not always pretty. They are honest, and 
it is all reality, and breaking the mirror will not change 
that.
    And that is the point I want to make, and I want to protect 
these artists. I think it is important that America hears them. 
We have made a lot of change. I think that some of the good 
that you see when you watch those shows now, that couldn't 
happen a few years ago before rap. I remember when my brother 
got on MTV, there was no one black on MTV except Michael 
Jackson, and he had his hair straightened and nose broken. But 
Run DMC, their first record, they said they made a connection 
and the beginning of a connection between the projects and the 
trailers. They speak the same language now, you know, and I am 
hopeful that will have great ramifications, political 
ramifications in this country. There is a commonality in this 
poverty that they share amongst each other. And, again, the 
kids in Beverly Hills understand it, and I want to protect it 
because of its socially redeeming qualities.
    And, again, when you watch Maury Povich and they want to 
know who is the baby's daddy, and there is the white guy and 
the black girl or vice versa, they never mention race, ever. 
There is so much that rap has done to bring people together. So 
that is what I am protecting, and that is why I am here, not 
for the number of records I sell. If I slap one more sticker on 
the record, I will just sell more records.
    Mr. Towns. Mr. Peeler, though, in closing, you picked 25--
FTC picked 25, and of course of those 22, you know, you don't 
know anything about this? I am trying to figure out how do you 
do that. Of course, out of the 200, you did pick the 25. Right?
    Mr. Peeler. There are two separate issues, as I understand 
it.
    Mr. Towns. Help me, then, because my understanding is that 
you selected the 25.
    Mr. Peeler. Again, as I understand it, there are two 
separate issues. One of the issues that you have raised with us 
before was the ads that we monitored and reported on.
    Mr. Towns. Right.
    Mr. Peeler. And those are ads that we monitored in our own 
review of the advertising. Seventy-five percent of the ads that 
we monitored--in other words, when we looked at publications, 
we picked ads out of the publications for explicit-rated music 
and made a decision whether or not about the parental advisory 
was properly displayed. Seventy-five percent of those ads were 
by urban artists.
    The other issue I think you are raising is how do we 
select, when we prepare our reports, what music marketing we 
look at? And we have used industry publications like this 
billboard chart to ask about the marketing practices for the 
top-selling most popular parental-labeled albums for the 
purpose of preparing reports back to Congress to say, here is 
how this is going.
    Now, obviously the issue that you have raised about what 
the mix is, is one that we need to be sensitive to, and we have 
been. You have raised it with us before, and we appreciate 
that. It is an issue that we want to be sensitive to. This 
should not be about Hip-Hop music. This should be about the 
industry's advisory program and whether consumers are getting 
the information they need. And we agree with you on that.
    Mr. Towns. Yield back.
    Mr. Upton. Thank you. Recognize the Chairman of the full 
committee, Mr. Tauzin.
    Chairman Tauzin.  Thank you, Mr. Chairman, and I to welcome 
you all. Thank you for coming. Let me make a point. Ms. Rosen, 
I was absent. We were upstairs with the corporate 
responsibility hearings on Quest and Global Crossing, and I 
apologize for being a little late. And I missed your opening 
statement. But I understand you mentioned the problems of peer-
to-peer and of content protection for musicians and those of 
you who are in the context business, either in creative works 
or in retail/wholesale.
    Let me make a couple points, and then I want to ask you 
some questions. One, this committee, of all the committees of 
Congress, is as solid I think in joining you in attempting to 
find solutions to those problems, not simply because we want to 
direct kids to the stores where they see these labels and where 
they are going to get the benefit of whatever labels are put on 
this music, but simply because we want to protect content. We 
understand that those of you in the creative world who make a 
career of this deserve to have your creativity protected, and 
those of you who are valuing these products deserve to have the 
value protected.
    And so I want to associate myself with those comments you 
made. I think we all have a joint interest in that. That is on 
the one hand.
    On the other hand, we also have a joint interest in not 
substituting ourselves for parents and asking you to become the 
parents of all the kids of America--that is not our job, or 
yours either--but simply helping parents in the business of 
raising their children in regard to some of these questions 
about exposure to violence and other things that may hurt them 
in their young age.
    In that regard, you wrote a letter to the FTC which 
basically said that we have found that parents who are aware of 
the parental advisory program are not only satisfied but find 
the program effective.
    First question. I am sending you a letter, by the way, with 
some very specific questions I would like you to respond to, 
but let me just take you through some of it right now. What was 
the methodology used for you to make that statement? Did you 
have focus groups? Did you go around the country inviting 
parents to look at these warning labels and comment on them? 
Did you show them alternatives? BMG has--one of your members 
has now, as you know, indicated that they are willing and are 
now putting a little more information up there so parents can 
know why explicit content advisory is on a label, a little bit 
more about what may be in the package.
    In your methodology, did you show parents this alternative? 
Did they have a chance to say, I would rather that; I would 
really appreciate it if the music industry would all adopt a 
warning label that included just a little more information for 
me to know what may be in it. I may, for example, not have any 
problem with my children hearing some sexual-related music, but 
I may have a problem with violence. Vice versa. I may have a 
problem with music that may tend to, you know, subject them to 
too much violent content, and I may be okay--parents have 
different ways of--views about raising their children. This 
kind of stuff looks like it might help them. Did you give them 
that choice--is what I am asking--in your methodology? What was 
your methodology? Could you describe it to us?
    Ms. Rosen. Actually, it was the FTC study, not ours, that 
found that parents approved of the system.
    Chairman Tauzin. So you have not done any kind of focus 
groups or----
    Ms. Rosen. Well, we used to do it pretty regularly, but I 
think because they are always received with an appropriate 
level of cynicism by members, why bother? That is what I 
figured. But since the FTC study showed such good results for 
us, I figured that would probably be as credible as we need it 
to be.
    Chairman Tauzin. The FTC, we know, didn't give them this 
kind of a choice or this kind of a look.
    Do you think if parents had a choice between a program that 
had the parental advisory explicit content only and one that 
had a little more information about what may be in the package, 
that they would choose the first instead of the latter?
    Ms. Rosen. Well, I don't know the answer to that. Mr. 
Marmaduke from Hastings Records, he was here saying that they 
used the existing parental advisory to restrict sales, and that 
they get support from parents and consumers who are not 
clamoring for more information. We do a lot of promotion on our 
logo and what it means, and it already says all of those 
things. So I don't think that is an issue.
    Chairman Tauzin. But you are a parent, Ms. Rosen. I mean, 
we know a little bit about parents. If you had a choice between 
these two systems, wouldn't you as parent love to have a little 
more information about why explicit content is on this package, 
because parents have different views about what they want to 
subject their children to?
    Ms. Rosen. Well, I am not sure if you are focusing on this 
particular sticker, because that is what our sticker already 
says and means when it has language and sexual and violent 
content. If you are asking me as a parent if somebody could 
tell me it is sex versus violence, would I like that? Yeah, I 
would probably like that, but I don't think that is the easy 
answer. It is too----
    Chairman Tauzin. It may not be the easiest answer, but it 
is something parents want. I want to go to Mr. Marmaduke. What 
good is a label if you put the price sticker on top of it?
    Mr. Marmaduke. Well, we don't, but----
    Chairman Tauzin.  Somebody does. Who does that? I am 
looking at--I have got a couple of them----
    Mr. Upton. Best Buy, I think.
    Chairman Tauzin.  Yeah. Best Buy. The Best Buy price is 
right on top of the warning.
    Mr. Marmaduke. We put all our stickers on the top right-
hand corner, and I believe Wal-Mart does the same, Congressman. 
So there is no conflict there.
    Chairman Tauzin.  So this is just a problem with some 
marketers?
    Mr. Marmaduke. Yes.
    Chairman Tauzin.  And----
    Ms. Rosen. And that would be a violation of the policy.
    Chairman Tauzin.  That would be a violation of your policy, 
right? Best Buy ought to be advised of violating your policy. 
Who does that? Do you do that, or does the FTC do that?
    Ms. Rosen. We leave retailer issues to the Retailer 
Association. I am sure Best Buy is going to get a letter 
tomorrow.
    Mr. Marmaduke. They have been sent a letter.
    Mr. Upton. Yield just a second. We did send Best Buy a 
letter. They never responded back.
    Chairman Tauzin.  Well, somebody needs to send somebody a 
letter. There are a lot of letters here.
    Ms. Rosen. We do sort of reprimand, if you will, record 
companies when we see them violating the policy.
    Chairman Tauzin.  Let me sum up, Mr. Chairman, again. You 
guys have got a lot of friends here. This panel and Members of 
Congress love music and arts as much as anybody in the country 
does. Our kids love it, and we love to listen to new forms and 
varieties of music just as much as anybody. That is not the 
issue. The issue is not whether or not we are all, you know, 
struggling in a crazy age to raise kids. That is true. We all 
are. The only question is, can you help a little bit? Can you 
help a little bit with more information on these labels? Can 
you help to make sure retailers don't obscure?
    You are going to find big defenders over here for your 
creativity rights and for your rights to make a profit and to 
fight those who are trying to steal your music.
    One of my dear friends, Trace Adkins, was in town the other 
day, and he told me he was out in Los Angeles to do a little 
video for one of his songs, and one of the ladies who was 
singing and dancing in his video came up to him and said, you 
know, Trace, I never heard your music, but I got on the 
Internet the other day and streamed some of it down, and let me 
tell you, you are pretty good. He said he wanted--he didn't, 
obviously, but he is a country western boy--he wanted to do a 
little number on her for that.
    The bottom line is we object to that as much as you do. And 
when you come to us, asking for us to give you help to make 
sure that your creativity rights and your value rights are 
protected, we are here; but we are also asking you to stretch 
it if you can. It is not our business to censor.
    It is not our business to write labeling laws. I don't 
think that some people want to do that around here. I certainly 
don't, but I sure want to encourage you to give parents as much 
of a helping hand as you can in some tough times.
    Thank you, Mr. Chairman.
    Mr. Upton. Mr. Shimkus.
    Mr. Shimkus. Thank you. I will be brief. And I apologize 
for missing some of the question-and-answer period because of 
another commitment. But--and I think enough has probably been 
said, and I did listen to all of your opening statement.
    Ms. Rosen, let me just ask a question. You are familiar 
with my Dot Kids Dot U.S. bill, and if you are--and I think the 
Chairman mentioned it--we would like to see you-all's more 
vocal support in that, in that it does try to address and help 
parents with another tool to protect their kids on the 
Internet. It also could address some of the piracy issues, 
training kids properly. And we know you haven't taken a 
position on the legislation yet, and I was just wondering what 
comments you might have on it.
    Do you know what I am----
    Ms. Rosen. I am embarrassingly unprepared. Is this the one 
where you set up a separate domain name?
    Mr. Shimkus. What it does, instead of attempt to establish 
a sort of a red-light approach, which is constitutionally 
debatable, it establishes a green-light approach, a positive 
approach, voluntarily, for people to go and for marketers to 
go----
    Ms. Rosen. Right.
    Mr. Shimkus. [continuing] and we are very optimistic, 
moving aggressively through this committee and through the 
floor, and had a good hearing on the Senate side.
    Again, it may not address the whole parental involvement 
and content debate, but it could also address, you know, a 
firewall on some of this downloading of music.
    So I would just ask if you would and your organization 
would take a look at that and be helpful in that venue, if you 
may.
    Ms. Rosen. Okay. It is a good idea.
    Mr. Shimkus. And I will yield back my time.
    Mr. Upton. Well, thank you.
    This is the conclusion of the hearing. We appreciate your 
testimony. We look--all of us look forward to continuing to 
watch the progress and appreciate your attendance here today.
    I might just note that we may submit some questions in 
writing from either side. We will get those out as promptly as 
we can.
    Ms. Rosen. Mr. Chairman, I am so sorry to do this, but my 
friends in the motion picture industry have asked me to make it 
clear to Mr. Gordon and other members of the committee who may 
be interested that the use of edited videos has been objected 
to by the Directors Guild and the studios, and they are in 
litigation right now.
    Mr. Upton. Thank you. Have a good day.
    [Whereupon, at 12:12 p.m., the subcommittee was adjourned.]
    [Additional material submitted for the record follows:]
Prepared Statement of LaVerne Evans, Senior Vice President and General 
                Counsel, Legal and Business Affairs, BMG
    Chairman Upton, Ranking Member Markey, and Members of the 
Subcommittee: my name is LaVerne Evans, Senior Vice President and 
General Counsel, Legal and Business Affairs for BMG. Thank you for this 
opportunity to submit brief testimony for the record. I had hoped to 
appear in person before the Subcommittee, but regrettably, a prior 
commitment requires me to be out of the country on the day of the 
hearing.
    BMG, which employs approximately 1,700 persons in the U.S., is the 
global music division of Bertelsmann AG, one of the world's leading 
media companies. BMG is a home for creativity to artists across the 
musical spectrum, including Alan Jackson, Christina Aguilera, Alabama, 
Toni Braxton, Dave Matthews Band, Foo Fighters, Five, Whitney Houston, 
Kenny G, Andy Lau, Alicia Keys, Sarah McLachlan, Misia, Wolfgang Petry, 
Eros Ramazzotti, Santana, TLC, and George Winston. These and other 
artists work with BMG and its 200 record labels based in 42 countries, 
including well known labels such as Arista Records, RCA Records, RCA 
Label Group-Nashville, and Ariola. In addition, BMG owns one of the 
world's largest music publishing companies.
    On June 3, 2002, BMG announced that it was expanding upon the 
Recording Industry Association of America's (RIAA's) Parental Advisory 
Program with its own additional descriptive labeling categories aimed 
at providing more information to parents and consumers. At that time, 
we also announced a new policy that will enforce labeling compliance 
and consistency company-wide, as well as the extension of the new 
advisories to advertising. BMG's Arista Records, BMG U.S. Latin, RCA 
Records, RCA Label Group--Nashville, and J Records will use the 
expanded parental advisory labels (PALs) (a sample of which is appended 
to my testimony).
    Since announcing the expanded advisory, BMG has released a number 
of CDs and twelve-inch singles with our expanded PAL. For example, the 
following releases carry an expanded PAL:

 Clipse, ``Lord Willin'' (full-length CD released 8/20/02, with 
        ``Strong Language, Sexual + Violent Content'' advisory);
 Midwikid, ``Something Wikid This Way Comes'' (full-length CD 
        released 10/1/02, with ``Strong Language, Sexual + Violent 
        Content'' advisory);
 Clipse, ``Grindin'' (twelve-inch single released 7/30/02, with 
        ``Strong Language'' advisory);
 Clipse, ``When The Last Time'' (twelve-inch single released 8/
        20/02, with ``Strong Language, Sexual Content'' advisory);
 Rob Jackson, ``Breakin'' Sketti'' (twelve-inch single released 
        7/16/02, with ``Strong Language'' advisory);
 Youngbloodz, ``Wathcu Lookin At'' (twelve-inch single released 
        7/16/02, with ``Strong Language'' advisory); and
 Youngbloodz, ``Cadillac Pimpin'' (twelve-inch single released 
        9/3/02, with ``Strong Language'' advisory).
    The process that culminated with the announcement last June of our 
new PAL began almost a year ago. We at BMG recognize that parents and 
consumers are in search of more information to guide their purchasing 
decisions. At the same time, we sought to ensure that artists continue 
to maximize their creative expression. This is a delicate balance, but 
one we are committed to achieving, and refining if need be.
    We concluded in the final analysis that an expanded version of the 
existing industry-wide PAL that we have adopted achieves the critical 
balance we are seeking. As our Chairman and CEO, Rolf Schmidt-Holtz, 
said when announcing the new advisories: ``BMG recognizes our dual 
responsibility to help parents make informed decisions about the 
entertainment their children consume and to protect the right of our 
artists to express themselves freely,'' said Schmidt-Holtz. ``Our 
labeling initiative will offer parents additional tools to help them 
decide what is appropriate for them and their families, keeping in mind 
the rich diversity in our communities.''
    According to the new BMG policy, any BMG record release in the 
United States that warrants a PAL will receive an additional label (or 
labels, as the case may be) describing the nature of the explicit 
content according to three classifications: Strong Language, Violent 
Content and Sexual Content. Depending on its content, a release may 
fall into more than one classification and therefore receive multiple 
labels, which will be placed on the bottom right corner of the album 
itself directly under the PAL. While all labeling decisions will 
continue to reside with the record labels, BMG has appointed me to 
oversee compliance. The BMG policy will be in accordance with and 
expand upon the RIAA's Parental Advisory Program guidelines, which 
establish basic principles on which labeling decisions are based.
    At this early stage of implementation, we are still gathering 
feedback from all affected parties, including consumers, artists, 
advertisers, retailers, and our record labels. But based on the initial 
positive response, we are hopeful and optimistic that our expanded 
advisories are serving the interests of all involved. I would 
particularly like to thank you, Chairman Upton, as well as the Chairman 
of the Full Committee, Mr. Tauzin, for your kind words of support for 
our new advisories. We look forward to your continued support, and 
working with you on this important matter. Thank you.
                                 ______
                                 
                              Sony Music Entertainment Inc.
                                                   October 31, 2002
Honorable W.J. ``Billy'' Tauzin
United States House of Representatives
Washington, DC 20515
    Dear Chairman Tauzin: Thank you for contacting us with your 
questions about Sony Music Entertainment Inc.'s views about BMG's 
decision to change its policy concerning the labeling of recorded 
music. As we understand its new policy, BMG has decided to qualify the 
parental advisory label by separately categorizing the content of each 
labeled recording as containing strong sexual language or strong 
violent language, or a combination thereof.
    Sony Music has worked for some time to develop a system of labeling 
and informing parents that works as best as possible. We have been 
deeply interested in and respectful of the views of you, your 
committee, and parents throughout this nation who care deeply as do we 
about informed choices with respect to consumer purchases. In addition, 
we have found ourselves working ever more closely with retailers and 
distributors on these issues, to make sure we understand as best as we 
possibly can how people actually want to receive information with 
respect to their choices, so that we can be as responsive as possible.
    Sony Music has adopted and supported the RIAA's enhanced guidelines 
for the parental advisory labeling program. Our goal is to provide 
adults and parents with notice of explicit content so they can act as 
they deem appropriate with respect to their children's record buying 
and listening choices, including on the internet. To that end, we have 
extended use of the parental advisory label to all advertising in all 
media and have widely publicized the existence and meaning of the 
parental advisory label through, among other things, a web site, 
brochures, an industry task force, and in-school educational programs.
    Unlike songs, movies and videogames which are longer, multimedia 
works, have visual and narrative context; content labeling of movies 
and videogames may therefore be possible. However, the only way to 
attempt to categorize a song is by labeling its unadorned language. The 
many problems with this include the fact that words and the various 
contexts they are placed in have different meanings to different 
people. Indeed, some words may have special ethnic or cultural meanings 
significant to the writer or a particular audience. Songwriters and 
recording artists might well object to having record company employees 
delegated with the power to review and impose value judgments on songs 
by imputing inferences and meanings where none may have been intended. 
An attempt to subjectively categorize the words and meanings in a song 
will all too often result in arbitrary and misleading labels and, 
possibly, threaten artistic integrity and freedom of expression. We 
believe that our successful implementation of the current parental 
advisory labeling policy, with its attendant publicity, continues to be 
the best way to achieve the goal of providing clear and reliable 
information to parents.
    Please be assured that we fully share your concerns and that we are 
committed to empowering parents with reliable information that helps 
them guide their children's purchases. We have been responsive to 
concerns that our own practices needed improvement. We are proud of the 
commitments that we have made and continue to make to give consumers 
choices. We are respectful of the fact that there are different ways to 
approach this same goal, and we will as always be responsive to 
concerns and views about informed consumer choice, artistic integrity 
and freedom of expression.
            Respectfully,
                                           Thomas C. Tyrell
          Executive Vice President, External and Government Affairs
                                 ______
                                 
                                         EMI Recorded Music
                                                   October 29, 2002
The Honorable W.J. ``Billy'' Tauzin
Chairman
Committee on Energy and Commerce
U.S. House of Representatives
Washington, DC 20515-6115
    Dear Chairman Tauzin: I write in response to your letter of October 
1, 2002 to Hilary Rosen of the Recording Industry Association of 
America (RIAA), signed by eight members of the House Committee on 
Energy and Commerce. As the Chairman and CEO of EMI Recorded Music, 
North America, I can assure you that EMI is committed to effectively 
addressing the concerns of parents and consumers. Because we take this 
responsibility very seriously, it is important to carefully consider 
the adoption of any new policy or practice. Specifically, regarding the 
inclusion of content descriptors in Parental Advisory Labels, EMI has 
not yet determined that such an expansion to the RIAA Parental Advisory 
Program is effective in achieving the intended goal, nor capable of 
doing so without unintended negative consequences. For that reason, 
although we remain open to the future adoption of such a policy, until 
we are able to evaluate the effects of an expanded Parental Advisory 
Program on an informed basis, EMI believes that the existing RIAA 
Parental Advisory Program best addresses the needs of parents and 
consumers while balancing the attendant concerns of our recording 
artists and our record labels.
    The overriding purpose of the Parental Advisory Program is to 
inform parents and consumers that a recording carrying the Parental 
Advisory Label contains explicit content and, accordingly, that 
parental discretion is advised when that recording is purchased for 
children or listened to in the home by children. The Program does not 
attempt to make the decision as to whether or not a particular 
recording is appropriate for individual listeners. As a record label 
executive, I want to ensure that parents and consumers are advised that 
a decision is warranted, but I also want to protect our artists' First 
Amendment rights of free expression. As a parent, I would want to be 
the Person making the decision as to whether or why a particular 
recording is appropriate for my children, and not have it made for me 
by a third party. EMI is not yet convinced that the use of general 
content descriptors adequately assists a parent in making a decision 
and, therefore, believes that it is not necessarily an appropriate 
approach.
    Music, unlike film and video, is a non-visual mode of expression, 
and is often difficult to accurately characterize. Even the task of 
determining whether or not a particular recording warrants the 
application of a Parental Advisory Label is not a simple, objective 
undertaking. At EMI, each of our label presidents is ultimately 
responsible for making the decision whether or not to apply the 
Parental Advisory Label on recordings released by that label. The 
decision is necessarily subjective, and a variety of factors are 
considered in addition to straight lyrical content, including context, 
frequency, emphasis and interpretation. An attempt to capture all of 
this subtlety through the use of a limited number of general 
descriptors may be inaccurate and misleading.
    EMI releases thousands of album-length sound recordings in the 
United States each year. While we applaud BMG for attempting to provide 
parents with additional information, we remain cautious about whether 
the new policy will be effective--and we remain wary about any 
potential unintended negative consequences, including legal concerns 
over claims, however, unwarranted, that product is in fact mis-labeled. 
In sum, therefore, before we take the significant step of making a far-
reaching change to our current Parental Advisory Policy--one that we 
believe works quite well to achieve its goals--we want to better assess 
the effects of the new BMG policy.
    I hope that this letter is helpful in providing you with an 
understanding of EMI's views on this important issue. I am happy to 
continue this dialogue and to update the Committee on any changes to 
EMI's policy in the future.
            Sincerely,
                             David Munns, Chairman and CEO,
                                  EMI Recorded Music, North America
cc: Alain Levy, Chairman and CEO, EMI Recorded Music
   Mike Dungan, President and CEO, Capitol Nashville
   Bill Hearn, President and CEO, EMI Christian Music Group
   Bruce Lundvall, CEO, Blue Note, Angel and Manhattan Records
   Matt Marshall, President, Higher Octave Music
   Jorge Pino, President and CEO, EMI Recorded Music Latin
   Phil Quartararo, Executive Vice President, EMI Recorded Music, North 
America
   Matt Serletic, Chairman and CEO, Virgin Records America
   Andy Slater, President and CEO, Capitol Records
   Wesley Van Linda, President and CEO, Narada Productions
                                 ______
                                 
                                         Warner Music Group
                                                   October 31, 2002
The Honorable Billy Tauzin
Chairman, Committee on Energy and Commerce
U.S. House of Representatives
2125 Rayburn House Office Building
Washington, DC 20515
    Dear Mr. Chairman, I am writing in response to your October 1st 
letter to Hilary Rosen in which you asked her to solicit from RIAA 
member companies their position on adding content descriptors to 
parental advisory labels. Warner Music Group understands your concerns 
in this area and your interest in providing parents with information 
that will be helpful in guiding their decisions about music choices.
    We are seriously considering your suggestions. Warner Music Group 
has been engaged in a process to evaluate the merits of including 
additional information on our parental advisory labels describing the 
nature of the recorded musical content. As part of this process, we are 
speaking with our record labels, our artists' representatives, parents 
and music retailers. In order to reach a decision, we need to learn 
whether the addition of content descriptions (of the BMG sort or 
otherwise) would be helpful to music retailers and will assist parents 
in making purchasing decisions for and with their children.
    We expect to have all feedback by the end of this year so that a 
final decision can be reached at that time. We will keep you apprised 
of the process as we move forward.
            Very truly yours,
                                          David H. Johnson,
                         Executive Vice President & General Counsel
cc: Hilary Rosen
                                 ______
                                 
                                      Universal Music Group
                                                   October 31, 2002
The Honorable Billy Tauzin
Chairman
Committee on Energy and Commerce
U.S. House of Representatives
Washington, DC 20515
    Dear Mr. Chairman: Hilary Rosen forwarded to me your letter 
regarding the programs we use to advise parents and other consumers 
about sound recordings that contain explicit content. My colleagues and 
I followed the Commerce Committee's recent hearing and appreciate your 
views as well as those of others on the Committee. The Universal Music 
Group has a comprehensive review process in place to monitor the 
content of releases from all of its record labels, and over the years 
UMG has chosen not to release certain music. We take this subjective 
and difficult undertaking quite seriously, knowing that not everyone 
will always agree with the decisions that are made.
    The company is also committed to following the voluntary stickering 
program devised in cooperation with the record industry and the 
Recording Industry Association of America to alert consumers to 
potentially offensive material. A recent study by the Federal Trade 
Commission from September 2000 found that more than 70% of parents 
surveyed were satisfied with the current Parental Advisory label. UMG 
supports the Parental Advisory labeling system as an effective and 
recognizable tool for parents to help them determine if the content is 
appropriate for their children. UMG believes that the Parental Advisory 
label can be an effective tool for parents in the online world as well. 
It is noteworthy that pressplay, an online music venture with which UMG 
is associated, enables parents to block from their homes songs that 
have been stickered with the RIAA Parental Advisory label. Pressplay is 
virtually the only online music site to take such steps to educate and 
empower parents. In fact, the limited availability of parental advisory 
information or controls on peer-to-peer networks was one of the 
concerns cited by Senator Rick Santorum and Representative Joe Pitts in 
their request that the FTC conduct a study on the problems of peer-to-
peer networks.
    Importantly, as part of our ongoing relationships with our retail 
partners and with consumers, we continue to review and assess the 
viability of the current labeling system. In June of 2001, the 
Universal Music Group initiated changes to our Parental Advisory 
labeling procedures with respect to the marketing of albums carrying 
the Parental Advisory label, in order to more clearly identify such 
labeled product for parents.
    UMG required that all radio and television advertisements for 
``stickered'' UMG releases carry the Parental Advisory label. 
Furthermore, it is our policy that such advertisements carry a notice 
indicating ``Edited Version Available,'' if applicable. UMG also 
adopted an internal compliance process to ensure that the appropriate 
steps are being taken by each label within the Universal Music Group.
    More recently, as you have noted, one record company--BMG--has 
opted to adopt a different labeling system. We have been meeting with 
retailers around the country to obtain their views on whether they and 
their customers find the RIAA system satisfactory, whether or not the 
BMG-adopted system is being well-received, or whether a different 
approach should be explored. At this stage, there has been very little 
practical experience with the BMG-adopted system, although it has 
certainly stimulated further analysis and internal debate.
    Universal Music Group takes this issue seriously and is dedicated 
to maintaining a viable balance among its artists, the preferences and 
demands of audiences in the marketplace and our effort to inform 
parents.
            Respectfully submitted,
                                            Michael Ostroff
                 Executive Vice President, Business & Legal Affairs
cc: The Honorable Joe Barton
   The Honorable Eliot Engel
   The Honorable Paul Gillmor
   The Honorable Chip Pickering
   The Honorable John Shimkus
   The Honorable Lee Terry
   The Honorable Fred Upton
   Hilary Rosen

                              

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