Thoroughness of the Survey

The survey, as conducted, is the most thorough and comprehensive study of the financial condition of the recording industry that has ever been undertaken (with the exception of the earlier survey we conducted for the 1965 hearings) or that is available from any source.

The materials associated with this lengthy financial survey are provided in the following pages in four parts:

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FROM: Cambridge Research Institute, Cambridge, Massachusetts
Telephone: (617) 864-1350

SUBJECT: Instructions for Completing Financial Reporting Forms

The purpose of gathering financial data from your firm and others is to develop a detailed financial picture of the record and tape manufacturing industry as a basis for analyzing the economic effects of proposed changes in the copyright law. This analysis will be presented during Congressional hearings concerning the copyright law. In order to prepare properly for hearings in mid-March, we need these forms to be completed and returned by February 9th. Many companies participated in a similar survey in 1965, preparatory to Congressional hearings at that time.

The following procedure has been established so your company financial data will be handled in a confidential manner:

1.

2.

3.

After you have completed the enclosed forms, keep one
set for your files and send one set to the CPA firm of
J. K. Lasser & Company, 1790 Broadway, New York, New
York 10019. (You may use the preaddressed envelope
that is enclosed.)

As you will notice, your forms have been pre-coded
with a company number known only to Cambridge
Research Institute. The CPA firm of J. K. Lasser &
Company will not know the name of your company. In
this way, your company's name will not be associated
with your financial data.

The financial data you send to the accountants will be
combined with data from other firms, which will pre-
vent disclosure of individual company information.
Your reporting forms will be destroyed, although you
may wish to save your copy of the forms.

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Exhibit 5, cont.

Memo to:

-2

January 15, 1973

Companies in Record and Tape

Manufacturing Industry

In filling out the forms, please follow these two basic requests:

A.

B.

If you believe something will not be clear,
please add explanatory notes. The account-
ants will then have the information necessary
to arrange data in a fashion comparable to
other reports.

If, where detailed information is requested and
consolidated information is all that you have
available, estimate the amounts attributable
to the specific accounts. Where entries are
estimated, please indicate the basis for your
estimates.

As you will note, there are six (6) reporting forms:
(1) Summary Report

(2) Cost of Goods Sold Report

(3) Balance Sheet

(4) Distribution of Sales

(5) Break Even Analysis

(6) Selected Marketing Data

Information should be provided on a calendar year basis, if possible. If information is available only on a fiscal year basis, please indicate on what date your fiscal year ends. Also, indicate any changes in fiscal years that occurred during the 1965-1972 period.

If you were not in business for any year between 1965 and 1972, please note this fact under the appropriate year(s). If for any other reason it is not possible to report data for a year--even on a best estimate basis. (Please try, of course)--write in the reason under the appropriate year(s).

Our goal is to develop a consistent financial picture of record and tape manufacturing operations in the United States. For this purpose, record and tape manufacturing is defined as the production and manufacturing of recordings, whether on records or tapes, and their sale to distributive organizations. To anticipate some of your questions, general comments are included for each account on the financial reporting forms which are attached.

If you have any questions, please contact Walter J. Campbell at Cambridge Research Institute, telephone (617) 864-1350.

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(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.)

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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)

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