technical knowledge was needed to supply the Schedule A information, and he was unavailable.
Following the August 19, 1947, dinner at the New York City hotel, Massler frequently informed Kahn about the problems and progress concerning negotiations for a contract with Simon and Schuster, Inc. In September, 1947, Brown met Arthur Shimkin who was in charge of the Golden Record Division of Simon and Schuster; they talked about a contract for the sale of 6-inch records; Brown told him that Wilson was the expert engineer who had developed the molds for the injection molding process; Brown delivered samples produced by defendants. On October 4, 1947, Shimkin wrote to Gimmicks, Inc. (Brown) that Simon and Schuster had decided to go ahead with the Little Golden Record project. The proposed terms of a contract were set forth in the letter. Then on October 21, 1947, the contract was executed for the sale of 600,000 six-inch 'Little Golden Records' at .065 cents a record, to be delivered on or before February 1, 1948. Gimmicks agrees to pay for the 'complete manufacture of the records including the making of the masters, molds, mothers, labels and all other materials necessary to complete manufacture. * * * (Also) the talent, recording, scripts, music and arrangements. * * * It is further understood that you will not produce 6 inch records for the juvenile market for any other party than Simon and Schuster for as long as our orders to you in any one year total 3,000,000 records or more. This intention is based on your assurance that the maximum price of the records will not exceed .065 cents per record, in accordance with the specifications and terms herein stated.' Simon and Schuster agrees to pay Gimmicks $ 8,750 on February 10, 1948, if Gimmicks delivers the records. 'It is understood that this sum will be applied in reduction of the cost of the first 5,000,000 records ordered by us subsequent to the initial order of 600,000 records. * * * In the event that Simon and Schuster does not reorder beyond the first 600,000 records, Gimmicks, Inc. shall be entitled to retain this sum.' Brown signed the contract on behalf of Gimmicks.
Prior to the October 21, 1947, contract, Shimkin had asked Brown to show him the manufacturing facilities. It was not until in the middle of January, 1948, however, that Shimkin visited the Bestway factory where he met defendants. Shimkin visited the factory at that time because Brown told him that soon the first record would be manufactured and Shimkin previously had expressed his desire to be present for the occasion. At the Bestway factory, there had been great difficulty in manufacturing the first records; the production delay and problems were caused by the failure to have a mold that was designed to produce 6-inch records. The large size of the mold that had been used necessitated reducing the size of the records to six inches. When Shimkin arrived at Bestway's factory, he saw a newly acquired production mold which the parties anticipated would produce about 10,000 records each day, perhaps 50,000 each week. In the ensuing two weeks, the Bestway factory produced sample records.
On January 30, 1948, Simon and Schuster paid $ 10,000 to Brown. The group
had not yet solved all of the mechanical problems relating to the successful commercial production of injection molded records.
On March 15, 1948, Shimkin wrote a memorandum to his boss at Simon and Schuster. The attempts of the members of the group to produce records finally had reached the point where they were able to test consumer demand by placing the records for sale in small stores in several communities. 'However, the problems far outweigh this slight good news', wrote Shimkin; there was not a uniform satisfactory quality to the records; another problem was that they needed more than one mold to produce the records. Two days later Shimkin wrote an addition to his memorandum. During the intervening two days, Brown inadvertently had seen the first page of the memorandum on which Shimkin referred to the problems. As a result, Brown offered to 'wash his hands of the whole situation and when I (Shimkin) -- and Bob * * * all to readily accepted this he immediately grew quite contrite and explained all the differences in costs by merely attributing them to additional expenses.' Brown insisted that Simon and Schuster pay for a second mold. As a result of the difficulties with Brown, Simon and Schuster's executives met with him. It was suggested that Simon and Schuster reexamine the possibility of dealing directly with the manufacturers, paying Brown a royalty to act as a director. 'This is agreeable to Mendi (Brown) under such fantastic terms as to obviate any immediate decision. He wants one-half cent royalty on any and all Golden Records produced and sold for the next Five years * * * and offers his services as director in return. He will not allow us to deal directly with the manufacturer * * * and LS (Leon Shimkin, officer and director of Simon and Schuster) thinks it advisable to wait a few days before doing it anyway. As you know, I've been approached by the manufacturer several times -- for he would like to do business directly with us.'
Shimkin further noted in his memorandum that production was proceeding erratically; between 35,000 and 40,000 records had been produced.
On March 29, 1948, Shimkin wrote a ten-page memorandum to his boss setting forth the latest developments:
'After several alternate proposals and a come-down from a demand of .005 per record for a five year period, Mendi Brown is agreeable to taking .0025 per record sold for three years, and giving us the option at the end of the three year term to
'1. Buy him out with the difference between his collected royalties and $ 250,000.
'2. Continue paying him .0025 per record made in the 3 year period.
'In return for this he turns over his contracts and all interest in the manufacture of the records, and gives us his services as director for any and all services connected with our recordings exclusively. This makes it a pretty good deal for Mendi Brown -- and considering our costs working without him as gobetween, a pretty good deal for us.
'I suggest we offer him a lesser settlement after three years in lieu of a guarentee sum each year for the three year period. He would certainly not be getting as good a contract that way -- but might very well take -- let us say $ 10,000 a year for three years minimum guarentee against .0025 royalty -- and settle for less at our option.
'To make clear the object of this reversal of action -- its necessary to go over the whole cost picture as compared with the previous cost setup (buying the records from him. For that reason I've outlined the picture as best I can over the next few pages. These figures are based on direct talks with the parties concerned.
'How it started:
'I found by ordinary investigation -- that Mendi's prices to us were rather generous -- based on actual costs. This came about when we were asked to put up money for additional molds * * * and I wrote you about that. It all began to pile up. Mendi wanted us to cover any payments to Petrillo, Mendi wanted us to pay for additional molds. Mendi wanted us to pay for any and all re-recording work and extra studio time, Mendi wanted us to pay for anything over .002 that labels cost * * * etc.
'So it came about that upon reexamining our costs -- it added up to a heck of a lot more than .065 per record. IE:
'Record -- .065
'Union -- .0025
'Mold -- amortize $ 20,000 for three molds -- over this years production.
'Studio extras -- $ 2,000 for extra sides, Several hundred for re-record.
'TOTAL -- appeared to be very near -- .08 for the record at least for the next few years. Any savings after that Mendi insisted would have to go to him for some time to recompense him for lack of profit at the beginning. This profit I found had to consist of at least $ 500 per week or Mendi would be unhappy.
'I also found that Mendi, paying as he was for stampers -- was most anxious to get as many records as he could from them * * * to the damage of quality. This was something we couldn't control any other way than by rejecting them after delivery * * * and this would soon put him in the red * * * and consequently ourselves in the position of having to pay more per record.
'To top it all off -- came the mold differential in his asking figures and the actual costs. Bestway (the plant) suggested we deal directly with us. Bart Laboratories, (the stamper people) asked us to back Mendi's credit * * * etc.
'In conclusion -- it seems wiser all around to be able to control our production directly -- and have assurances of better quality and accurate estimates of delivery.
'At first Mendi refused to admit * * * that he didn't own the process, the machinery etc. for making the records. Then, faced with the obvious facts -- based on my meeting the people out at the plant and learning that the plant was owned by the Watson Stillman Company, Mendi refused to allow us to do business directly in terms of stampers, molds etc. By Leon's suggestion that we would cease doing business with him at all -- and by that alone, I think he came around to agreeing that it was probably better this way. * * *
'I've outlined briefly the various items that come into the picture if we deal directly. All these figures -- the minimums as well as the maximums are generous to a fault * * * however -- even if we work on the premise of the maximum figures -- we still come out ahead by paying Mendi .0025 per record --
* * * * *
'Production -- to date and for 1948
Title Opening Inventory March 27
3. . . . .hundred plus
7. . . . . .hundred plus
8. . . . . .hundred plus
10. . . . . .
12. . . . . .
Total 41,000. . . .checked and ready
© 1992-2004 VersusLaw Inc.