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before you as to the fact that the ceiling is a rate or that the ceiling is not a rate. I do not understand how a congressional committee can possibly deal with that kind of subject in that kind of detail on a purely rational basis. Nor do I understand what the economic rationale would be to give a set of criteria to some kind of an organization to set rates as has been done for the public utilities.

I believe that the ceiling should be removed entirely; but if it is not, then it ought to be opened widely for negotiation. What we are dealing with here is a rate and the cost-of-living is a very important factor influencing all rates. You can tell the AFL-CIO, or the Government workers or the Federal Reserve System or any bank that they are making a lot of money and wages or interest rates should not be allowed to increase. They will not accept such curtailments in buying power. The important thing is that you must take account of bargaining considerations. The lack of an impact on changes in rates has buying power as a result of rising prices. I very strongly urge this committee to take this into account and to raise that ceiling to at least 4 cents. It will be a ceiling and everything is not going to go up by the same amount, or even in the same proportion—I think that is the second best solution. It certainly will give ample reign for some effective bargaining.

Mr. DANIELSON. Thank you, Mr. Nathan. · [Prepared joint statement of American Guild of Authors and Composers and the National Music Publishers Association follows:]

JOINT STATEMENT OF THE AMERICAN GUILD OF AUTHORS AND COMPOSERS AND THE

NATIONAL Music PUBLISHERS ASSOCIATION

SUMMARY

Since 1909, America's songwriters and other musical copyright holders have by statute been denied the right to bargain with the record companies for a royalty higher than 2¢ per song, to be divided among composer, lyricist and publisher.

The record industry has become a multi-billion dollar industry but our maximum is still 2$. The actual average paid is 1.62€.

The Copyright Revision Bill proposed by the Register of Copyrights in 1964 after a series of panels and studies recommended 3€. After the record industry warned that this could produce a horrendous 12¢ increase in the $3.98 price of a long-playing record (which now costs $6.98 or more), the House compromised on a ceiling of 2-1/2€.

Two and one-half cents! A song that sold 24,000 recordings could not earn for its creators more than $600.

Today that 2-1/2¢ ceiling is worth less than 1-1/2€. Merely to restore our ceiling to the same level of purchasing power prevously approved, we need a ceiling of more than 4€.

In this past decade, the consumer Price Index has risen by more than 70%; the standard rate for 3 hour recording sessions for musicians has increased 64%; record industry sales have increased 190%; the list price per song in a typical record album has increased 112%; but total royalty payments to musical copyright holders by the record industry, according to its own figures, have declined as a percentage of industry sales by 32%. Royalty payments per songwriter have also declined. And yet the record industry -- dominated by four giants -- still wants Congress to permit no negotiations, no discussion, no bargaining above 2-1/2€.

When 2-1/2¢ was approved it represented roughly 8% of the price per song. Now it's 3.6%.

A ceiling instead of 2-1/2¢ would not fully restore this ratio of royalty ceiling to prices; nor would it fully restore the purchasing power of 2-1/2¢ in 1965. It would do little or nothing for the majority of songs not able to reach even 2¢ today. Even if every one of the 10 songs on a typical record or tape were able to command the full 4¢ instead of 2-1/2¢, that additional 15€ per record would represent only 2% of today's price and only 5% of the last decade's price increase.

But it would give the creators of American music a fairer chance to seek a fair return.

SUMMARY TABLE

Why the 2.5 Cent Mechanical Royalty Ceiling Approved After the House Hearings of 1965

Must be Raised to 4 Cents in 1975

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Percent of typical price per song Purchasing power in 1965 dollars (15)

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Joint Statement

of the
AMERICAN GUILD OF AUTHORS AND COMPOSERS

and the
NATIONAL MUSIC PUBLISHERS ASSOCIATION

submitted to the
Judiciary Committees of the U. S. Congress

regarding copyright revision

(s. 22) (H.R. 2223)
(Sec. 115 (c) (2))

September 1975

We the creators of American music -- the composers, songwriters, lyricists and publishers of musical works -respectfully petition Congress to permit us to seek a fair compensation for the recording of our work.

PART I.

A FAIR CEILING ON OUR RATE
OF COMPENSATION: 4 CENTS

In the past we have sought the right to bargain freely with the record industry without any statutory ceiling on our earnings. The authors of books and the composers of dramatic musical works have that unrestricted bargaining right; so do recording engineers and musicians and manufacturers. There is, after all, no monopoly, no shortage of supply, no public utility characteristic, affecting the song writing and song publishing business. But that right to bargain freely has been denied us.

In the past we have sought the right to share in the enormous price increases obtained by the record industry for recordings of our songs, by converting that statutory ceiling on our royalty rate -- if there must be one -- from a flat cents per unit figure to a percentage of record prices. Recording artists and producers obtain this kind of percentage share of record prices; so do musical copyright holders in Europe and other countries. But, for U.S. musical copyright holders, that right to a fair sharing has been denied.

Instead we must continue to bargain with the giants of the record industry under a one-sided statutory ceiling that arbitrarily fixes the dollar maximum we can hope to receive but does not assure us of any minimum. Because Congress adopted in 1909 a system of compulsory Ticensing for the mechanical reproduction of music (for fear that one

piano roll company might otherwise obtain a monopoly), the royalty for a musical copyright is not negotiated freely in the market place today -- like virtually every other royalty or rate of earnings in this country. But if it is not now feasible to abolish this system entirely, if "political reality" makes it necessary for the 94th Congress to fix our negotiating ceiling, then at least it should be set high enough to give ample range for the bargaining process.

In 1967, after 58 years of our being required by statute to accept a ceiling of no more than two cents a song for each record manufactured -- 2¢ ! -- the House of Representatives, in passing the same comprehensive copyright Revision Bill that remains before Congress today, voted to compromise the 3¢ ceiling recommended by the Register of Copyrights at two and one-half cents. Two and one-half cents was not a fair or adequate ceiling. It represented about one fourth of the purchasing power that the original 2¢ ceiling itself represented when first adopted in 1909. At 2-1/2€, even a song that sold 24,000 1/ recordings could not earn for its creators more than $600, to be divided among the composer, lyricist and publisher in accordance with their private contractual arrangements.2/

But if 2-1/2¢ in 1967 did in fact represent the House's considered judgment as to where the "mechanical royalty rate" ceiling for musical copyright holders should be fixed, then in 1975 that ceiling in all fairness should have at least the same relative purchasing power. Because of the tremendous inflation since 1967, we need a ceiling of at least 4€ per selection in 1975 if Congress is merely to fix the ceiling at the same level as the House did previously.

A Decade of Inflation

That 2-1/2¢ ceiling was adopted as a compromise by the House Judiciary Subcommittee on Copyright in 1966 on the basis of its 1965 Hearings in which the testimony relied largely on 1964 data. The House itself then ratified this figure in 1967. Compared with today, 1964-1967 was a time of very different economic conditions and dollar values in this country. Since 1964 the Consumer Price Index has risen by more than 70% (and since 1967 by more than 60%). That two and one-half cents today would buy only what one and onehalf cents bought in 1964-67. To equate 2.5 cents in 1964 dollars or even 1967 dollars in today's purchasing power now requires more than 4 cents; and by the time this bill could take effect next January 1976 (at the earliest), approximately 4-1/2¢ will be required to match that 2.5 cents.3/

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