(1) SUMMARY REPORT and (2) COST of GOODS SOLD REPORT (Comments on Accounts)

Gross Sales

(Gross sales should include all domestic and export sales of
records and tapes. Since record clubs are being considered
as "retailing" or "distributing" operations for our purposes,
sales to, not by, record clubs will be reported in gross sales
just as sales made to any other type of distributive organiza-
tion. If your company sells through a wholly owned sales
subsidiary, sales, as well as the expenses of your sales
subsidiary, should be included in your financial reporting of
record manufacturing operations. If your company sells or
markets records through partially or wholly owned distribu-
tors, financial results of the distributor organization would
not be reported, although sales to distributors would be. In
addition, income from activities other than record manu-
facturing, such as publishing, should not be included in the
financial reporting forms, although income from leased
facilities or custom pressing of records for others will be
accounted for in other accounts.)

(Include all returns on shipments regardless

of whether the returns are then dumped or destroyed.)

• Exchanges, Allowances, Cash Discounts,

Bad Debts, State Excise Taxes

(These items will be deducted from Gross
Sales to arrive at a net sales figure.)

(Bad debts arising from record club
operation should be included in this
account. Record club bad debts are
included in record manufacturing opera-
tions so as to avoid a misleading picture
of bad debts in those cases where record
manufacturers sell to their own record
clubs and hence avoid the bad debts
associated with these sales.)

(Also, for 1965 include any Federal excise
taxes paid and footnote the amount.)

137

Cost of Goods Sold (Details of C of GS are on Form #(2) )

A&R Costs

(These costs would be the salaries and expenses of the
A&R Department in your company and/or wages paid
to part-time A&R personnel.)

Studio Costs

(Salaries of engineers and technicians and costs of
studio facilities would be included in this account.
Such costs usually include editing and manufacture
of a so-called "lacquer". If your firm owns studios
which are leased to others, then income derived
from this activity should be deducted from your
Studio Costs. If your firm does not own a studio
but leases studios owned by others for recording
sessions, your leasing costs would be included in
this account.)

Recording Session Costs

(These costs are often referred to as talent costs and
include all payments made to musicians, vocalists,
leaders, arrangers, orchestrators, copyists or other
"talents".

Artists' royalties should not be included. Also, any
advances against royalties and any unrecoupable flat
payments to the artist should not be included.)

Artists' Royalty Payments

(Self-explanatory)

138

D. Mechanical Royalties Outpace Inflation and Median Family Income,
1963-1973

123

E.

Mechanical Royalties Paid Per Released Tune Outpace Inflation
and Median Family Income, 1963-1972

123

J.

In 1974 as in 1963 Tunes were Licensed at 24 or Standard
Variations

124

2 & 3.

4.

INCOME TO COPYRIGHT OWNERS FROM RECORDINGS, 1973 vs. 1963
STATUTORY MECHANICAL ROYALTIES PAID PER RELEASE OF RECORDED TUNES:
1963 vs. 1972

126

132

5.

ESTIMATED FINANCIAL STATISTICS AND INCOME STATEMENT FOR THE U.S.
RECORDING INDUSTRY, 1955-1974

132

6. STATUTORY LICENSE ROYALTIES PER TOP 150 LP ALBUMS IN 1973 AT VARIOUS 158 STATUTORY RATES

7.

8.

9.

FINANCIAL IMPACTS OF PROPOSED INCREASED MECHANICAL ROYALTIES ON
MUSIC PUBLISHING INDUSTRY AND RECORDING INDUSTRY, 1971-1974
MECHANICAL ROYALTIES COMPARED TO RECORDING INDUSTRY PRE-TAX
PROFITS FROM RECORDS MADE AND SOLD IN THE UNITED STATES, 1971-1974
IMPACT OF A COPYRIGHT ROYALTY INCREASE ON CONSUMER PRICE

159

160

160

10.

COST TO CONSUMERS OF A 3 STATUTORY LICENSE RATE

161

11. IMPACT OF A COPYRIGHT FEE INCREASE ON JUKEBOX OWNERS

13. RECORD MAKERS UNIT SALES PER RELEASE AND BREAKEVEN POINTS (1972)

122

Page

161

161

161

163

163

163

SUMMARY EXHIBITS

For data supporting material in the "Summary Statement", see the appropriate sections in the full statement (pp. 33-118) and in this Technical Appendix.

Exhibit A

No Economic Justification for an Increase

This exhibit summarizes the conclusions of the full statement. The basis for the finding that copyright owners' income has outpaced inflation is provided in Section I.B. of the full statement, pp. 37 to 43. The impacts of an increased statutory rate are spelled out in Section II.A. to II.D. of the full statement, pp. 56 to 81.

Exhibit B Price Per Tune is Down; Copyright Owners' Share is Up

This conclusion is based on Exhibit 1, p. 36. It should be noted that the price per tune received by record companies has declined in current dollars since 1909, even though today's product is far superior in quality.

Exhibit C

Mechanical Royalties Have More Than Doubled

The data in this exhibit are based upon Exhibit 3 in the main report,
P. 39.
The source of the figures is CRI's financial survey of recording
companies, which is explained in detail later in this appendix under "Exhibit

5".

Exhibit D

-

Mechanical Royalties Outpace Inflation and
Median Family Income, 1963-1973

These data are also based on Exhibit 3 in the main report, p. 39. Data pertaining to the Consumer Price Index and Median Family Income are from the Statistical Abstract of the United States.

Exhibit E

-

Mechanical Royalties Paid Per Released Tune
Outpace Inflation and Median Family Income, 1963-1972

These data are based upon the analysis in Exhibit 4 of the main report,

p. 43. The assumptions behind the exhibit are discussed later in this technical appendix under "Exhibit 4".

123