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I.

THE HIGH INCOME ENJOYED BY COPYRIGHT OWNERS (Cont'd.)

B. THE INCOME PROVIDED TO THE MUSIC PUBLISHING INDUSTRY FROM RECORDINGS
HAS GROWN MUCH FASTER THAN INFLATION

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The income provided to the music publishing industry by recordings
measured in the dollar aggregate, and per recorded tune
has grown
very rapidly. It has grown faster than inflation. It has even grown
faster than "Median Family Income." Music copyright owners' income from
recordings comes not only from mechanical royalties paid by U.S. record
makers. They also get incomes from payments of mechanical royalties by
foreign record makers, including foreign companies that make, and sell,
records abroad from American-made master recordings. Copyright owners
also receive large and growing incomes from records used in radio and
television broadcasting, and in providing "background" music that is a
widely sold service.

Not only is the share of revenues from the sale of recordings that goes to publishing companies and other copyright owners much greater than originally visualized by Congress, but their dollar incomes from recordings have, in fact, increased very much faster than inflation.

1.

Inflation in the Decade 1963 and 1973

Between 1963 and 1973, the average annual Consumer Price Index, based on the year 1967, rose from 91.7 to 133.1, an increase of 45%.* In those years, Median Family Income, that level of income where 50% of American Families have more and 50% have less, and which takes into account both dollar inflation and increases in real income besides, rose from $6,265 in 1963 to $12,051 in 1973, an increase of 92%.

How did the American music publishing industry fare in comparison, as between those years? Let us examine what happened to each of the several kinds of income that copyright owners derive from recordings. The following facts are set forth in Exhibits 2 and 3. **

* See 1974 Statistical Abstract of the United States.

**The year 1973 was used in this connection, being the latest year for which certain important iata were available. See NOTE to Exhibit 3.

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* Derivation of figures is explained in Exhibit 3, Notes a and b.

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NOTE: The year 1973 is used in this Exhibit, being the latest year for which data of performance fees and royalties from foreign record companies were available.

The two figures given for 1973 copyright royalties paid by U.S. record companies are based on two different CRI surveys of record companies. The lower figure (377 million), which is estimated from statistics supplied by thirteen record companies with about 571 of the industry's sales, will be found in Exhibit 5-C, line 9, page 17. The higher figure (582 million), which is estimated from statistics supplied by 34 record companies with about 98% of the industry's sales, is explained in the last section of Exhibit 3-0, page 18. The lower estimate is clearly too low, for the financial records of the 34 companies in the larger survey show that these companies alone paid $80.4 million in mechanical fees in 1973. Nevertheless, we shall use the lower Figure whenever we are com paring it to other data from the 13-company survey or when we are making trend analyses. We shall use the higher figure only when we make a single point estimate of the level of mechanical royalty payments.

"The explanation for the two different figures given for 1974 is the same as given in footnote "a" above.

1973 and 1963 performance fees were estimated. See Technical Appendix.

Sources:

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The 1963 figures are from the 1965 Glover report before the Subcommittee on Patents, Trademarks, and Convrights of the Committee on the Judiciary, U.3. House of Representatives, 19th Congress, First Session."

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The 1973 figure on foreign sechanical rovalties was estimated from Billboard reports about sales abroad of recordings of J.3. music.

The two 1973 figures on mechanical royalties paid by J.S. recording firms are from Exhibit 5 and lotes thereto. footnote "a" above.

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The 1974 figure for mechanical royalties paid by J.S. recording firms is from Exhibit 5 and is based on statistics supplied by 34 record makers.

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2. Mechanical Royalties from U.S. Record Makers

Between 1963 and 1973, mechanical royalties paid by U.S. record companies more than doubled from $37.6 million to $77.1 million. That is an increase of something of the order of 113%. This is to be compared to the increase of 45% in the Cost of Living Index and the increase of 93% in Median Family Income.

3. Mechanical Royalties from Foreign Record Companies

In addition to those domestic mechanical royalties, copyright owners also receive royalties from foreign record makers. A substantial fraction of those foreign royalties come from the use of master recordings made by U.S. recording companies in the United States and that are licensed for manufacture and distribution abroad by non-U.S. companies. Foreign royalties have grown even faster than U.S. royalties. Mechanical royalties received by U.S. copyright owners from record companies abroad rose from $6.9 million in 1963 to $35 million in 1974. That is an increase of 407%.

4. Total Mechanical Royalties

Total mechanical royalties paid to publishing companies rose, therefore, from $44.5 million to somewhere around $115 million, say by something like 158%.

5. Incomes to the Publishing Industry from Commercial Use of Recordings
In addition to mechanical royalties from record makers, copyright
owners get large and growing incomes from the use of recordings in
radio and television broadcasting and in commercially supplied "back-
ground" music. These are known as performance royalties. In 1963,
publishing companies and others got from broadcasters and others, some-
thing like $15.7 million for the use of recorded music. In 1973, they
obtained at least $44.4 million from those sources. This represents an
increase of 283%. In addition, this bill provides that publishers and
composers will, for the first time, receive performance income from juke-
box operators who play sound recordings. This is estimated to provide an

additional $4 million income each year.

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6.

7.

It should be noted in passing that, unlike the music publishing industry, recording companies receive not one penny in the form of performance royalties from commercial uses of their products, as in broadcasting and "background" music.

Copyright Owners' Total Income from Records

Taking these several incomes together, publishing companies and others, in 1963, derived from records and their commercial use a total income amounting to $60.2 million. These kinds of incomes, in 1973, came to something like $159 million. The 1973 figure represented an increase of over 260%, as compared to the increase of 45% in the Cost of Living Index and of 92% in Median Family Income.

These are the facts as to how music publishing companies and other copyright owners fared from recorded music in comparison to inflation. Increase in Royalties Per Tune

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Not only have royaities to copyright owners increased faster than inflation in the aggregate, royalties per tune have also increased faster. This has occurred because of two reasons: first, because of the expansion in recording media, a new tune is often released in numerous mechanical forms on a 45 RPM single, as a band on an LP, on an 8-channel tape or a tape-cassette. Royalties are paid on each unit of each of these forms, many times under several different licenses. Additional paying licenses will occur if the tune is later released through a record club, or if re-recorded on a budget album. Second, if a second or third or fourth artist also performs the tune, a separate license for each release will result in further royalties for the same, original tune. Accordingly, a reasonably popular tune can be the subject of dozens and dozens of separately licensed "releases" in a single year. This number of "releases" of a single performance has been tending to increase as the numbers and popularity of different recording media have been increasing, and with reissues, often on "budget" labels, of former favorites.

One way of estimating the trend in royalties received per tune -if not the literal dollar amounts is simply to divide the total dollar

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