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Because of the differences in rate patterns among the three types of records, which was noted above, we prepared a separate tabulation for each type of record. Exhibit 17 covers the Singles; 18-A & B, the Regular Price LP albums; and Exhibit 19 covers the Budget label albums.

Royalty Rates on Singles

As regards "Singles", a cursory glance at Exhibit 17 is all that is needed to show that the statutory rate is the standard rate for such records, and that discounted rates are very rare. Of the 162 records covered, there were discounted rates on only 7 records, and as indicated above, the discounted rates applied to only 13 licenses, only 4.3% of the total of 315 licensed tunes. In each of these 13 instances, the performing artist either owned or had an ownership interest in the copyright of the tune . being performed, aná granted a flat mechanical rate for the entire record. Of these rates discounted because of artist interest, 11 or 85% were at 1.50¢, and 2 or 15% were at 1.75€. The one record with two rates at 1.75¢ suggests the possibility that real negotiation as to royalty may occasionally take place with singles. However, it is more likely that the rate arrived at reflects other provisions in the contractual arrangement between artist and recording company in addition to the "relative bargaining strengths" of the parties. Most of the "bargaining" in these instances seems to relate more to payments for the artist's performance, or to the price of the master tape which may be produced by the artist himself, rather than to the royalty rate paid on the copyright, as such.

In summary, 24 is the prevailing rate for singles. Departures from that rate represent standard, common recognizéd variations from that 2¢ standard.

Royalty Rates on List Priced LP's

We now turn to royalty rates paid on licenses for tunes on List Priced LP albums.

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As shown in Exhibit 16, the sample included 168 such albums
carrying a total of 1,219 tunes. Of these, 173 tunes carried
no royalty rate, leaving 1,046 licensed tunes on which a royalty
rate was payable. Of these licensed tunes, the statutory royalty
rate of 2¢ was paid in 848 instances or in 81.1% of the cases.

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On 74 tunes or 7.1% of the instances, rates of more than 2¢ were
paid for tunes of longer than average duration in accordance with
standard practice.

That leaves 124 licensed tunes, or 11.8% of the cases on which less
than a 24 royalty rate was paid. These occurred on only 17 of the

168 albums covered by the sample.
A detailed look at these 124 exceptions reveals a great deal about how
the music publishing industry and the recording industry interface with each
other.

Exhibit 18-A on p. 74 details all rates for all Regular Price LP's in the sample. The pattern of discounted rates by level of rate and by reason for the discount appears on the next page in Exhibit 18-B. Of the 124 rates payable at less than 24, 56 were for tunes in which the performing artist had an ownership interest. Of these rates, 50 were paid at 1.50$. These rates are scarcely results of "bargaining". This rate of 1.50¢ represents 3/4 of the statutory rate and is customary. in the industry. There remain 6 other rates of less than 2¢ in which the artist had an interest. On one album, a group of performing artists was also the composer and publisher of a block of 5 tunes and . this group granted only a 1/4¢ discount on the license covering these 5 tunes. On another album, arrangements were made with a single artist-composer covering the entire record of 10 tunes for an overall royalty rate of 22€ for the album. Two of the tunes were of longer than average duration and had rates above 24, 7 were at the statutory rate of 2¢, and the 1 which was shorter than average duration was allocated the residual amount of the album rate, namely 1/24.

There were 40 rates of less than 2¢ which represented "block discounts" which are customarily paid when a record contains several tunes in which the copyright is held by a single owner or group of owners. It is a form of quantity discount, generally recognized in the industry. Records containing such

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"blocks" of tunes are often recordings of works of a single well-known composer. These. 40 block discount royalty rates were all for tunes on 4 reg

ular LP albums :

In one album a publishing company granted a 1/4¢ discount on
a block of 10 tunes which it owned and which made up the entire
record. (#312.)

Another publishing company granted a 1/24 discount per tune
for a 12-tune record on which it owned the entire block of 12
tunes. (#349.)
Another record involved a contract with a film producer and several
publishing companies for the film score involving a record of 14
tunes. One of these publishing companies granted a rate of 64
for a block of 5 tunes -- 1 tune at 24 and 4 at 1¢. Another granted
a rate of 8¢ for a block of 5 tunes -- 3 at 24 and 2 at 14. The
rates for the other 4 tunes of other owners were at the statutory
level. (#301.)

Finally, one publishing company arranged a set of rates for a 16- ·
tune album, all tunes owned by it, on a volume basis. The album
rate for the first 50,000 records sold was 234, for the next 50,000
was 254, and for all sales above 100,000 was about 33€ per album.
Four of the tunes were no longer than average and had royalty rates
greater than 2¢. All other tunes were of shorter than average dura-
tion and the block rates arranged were 2 at 14, and 10 at 3/4¢ for

the first .50,000 records sold. (#369.) . .
There were also 28 licensed tunes on 5 albums with royalty rates of less
than 2¢ on the basis of their being designated as "medley discounts". Such
medley discount rates occurred as follows:

On one album (*367) of 20 tunes there was a 6-selection medley
and a 2-selection medley. The first medley ran for 3-1/2 minutes
with 5 tunes, each from a different publishing company at a 1/24
discount and the sixth involving a split between two publishing

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companies at a 1/4¢ discount (one publishing company granted 1/24
but the other refused to grant any discount). The second medley
ran for two minutes and 50 seconds with one publisher granting a
1¢ discount and the other insisting on the statutory rate.

A second album (+373) of 16 tunes had discounted rates of 1/24
for three transitional tunes of 5 seconds, 9 seconds, and 19 seconds
duration

A third album (1418) of 11 tunes with one longer than average had
a discount of 1¢ on a transitional tune of very short duration.

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The fourth album (#431) of 15 tunes had a 5-tune medley with all
tunes owned by the same publisher on which a medley rate of 3/44
per tune was granted.
The fifth album (+354) of 21 tunes contained 2 medleys each of 7
tunes. All 7 tunes of the first medley which ran 4 minutes and
50 seconds were owned by the same publishing company which granted
a discount of 1¢ on each tune. No two of the tunes of the second
7-tune medley, which ran just over 5 minutes, were owned by a single
publisher. No discounts were granted on 3 of these tunes, a 1¢ dis-
count was granted on another 3 of these tunes, and a 1-1/4¢ discount
was granted on the seventh tune.

In these rates, certain practices are revealed that are more or less standard in the industry. They cover situations which we have designated as artist-interest discounts, block discounts, and medley discounts. Though the amounts of discounts granted in these instances are not uniform, the examples of real bargaining between the parties concerned are rare, because the practices of any one publisher are usually standardized.

In sum, we have looked at Regular albums released over the better part of a year by two well-known record makers and have found that the royalty rates paid were the statutory rate or standard, uniformly available, variations therefrom.

57-786 0 - 76 - pt.3 - 8

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