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1.

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

The income provided to the music publishing industry by recordings --
measured in the dollar aggregate, and per recorded tue -- 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 foreig 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.

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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 tmerican music publishing industry fare in compari.
son, as between those years? Let us examine what happened to each of
the several kinds of income that copyright owners derive from record-
ings. The following facts are set forth in Exhibits 2 and 3. **

* See !974 Statistical Abstract of the United States.
** The year 1973 was used in this connection, being che !atest year for

nich certain important iaca vere ivai.able. See \CTS to Exh:31: 3.

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• Derivation oi figures is explained in Exhibit 3, Notes a and 5.

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NOTE: The year 973 is used in this Exhibit, Seing the latest year for which date of performance fees and royalties froa foreign

record companies were available. The two figures given for 1973 Copyrighe royaldies paid by U.S. record cocpanies are based on two different CRI surveys of record coepenies. The lover figure (577 llion), which is estieated from statistics supplied by thirteen record companies with about 57 of the industry's salos, will be found in Exhibit 5-c. lin. 9, page 17. The higher figure (583 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 5-0 pag. 18. The lower ostinato is clearly too low, for the financial records of the 34 cocpanies in the larger survey show that these Companies alone paid $80.4 million in mechanical feos in 1973. Nevertheless, we shall use the lover figure whenever we are coa pariag it to other data !roa The 15-coapuny survey or when we are making trend analyses. We shall use the higher figure only when We make single point estimate of the level of sechanical royalty payments.

The explanation for the two different figures riven for 1974 is the same as fiven in footnote "q" above.

1973 and 1963 pertanance Peas were estimated. See Technical Appendix.

Suursos:

The 1963 fiqures are fron the 1965 Glover report before the subcomittee on Patents, trademarks, ant Convrights of the Comittee in the udiciary, U.S. House of Representatives, 39th Congress, First Session The 1975 ? gure on foreign aechanical rovalties as stinates from 9illboard reports about sales abroad of recordings of ".. quic. The two 1973 ?igures » sechanicai rayalties paid by I.$. :ecording plans are fron Exhibit 5 und votes thereto. See footnote "q" above. 7e :974 e gure for sechanical oyalties paid zy 'J.S. recording fires is from Exhibit S and is based on statistics supplied by 34 -ecord akers.

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2. Mechanical Royalties from U.S. Record Makers

Between 1963 and 1973, nechanical 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 nade 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 I.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%. Total Mechanical Royalties

Total nechanical 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 "background" music. These are known as perfornance royalties. In 1963, publishing coapanies and ochers 300 iron broadcasters and others, some thing like $15.: nillion for the use of recorded music. In :973, they obtained at least $44.4 million from those sources. This represents an increase of 233%. in addition, this bill provides that pubiishers and composers will, for the first time, receive performance income from jukebox operators who play sound recordings. This is estimated to provide an addiciona! St aillion income each year.

6.

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

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 túne, a separate license for each release will result in further royalties for the same, original tune.

7.

Accordingly, a reasonably popular tune can be the subject of dozens and dozens of separately licensed "releases in a single year. This zumber of "releases" of a single performance has been tending to increase as the numbers and popularity of different recording nedia have been increasing, and with reissues, often cn ''budget" !abels, of former favorites.

One way of estimating the stond in royalties recsived per tune i: 20t the literai dolla: Imounts -- is simply to diviie che uoca: dollar

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