8. The ceiling embodied in that second draft was at a compromise level of 3 per composition. To the surprise of the composers and publishers, the Recording Industry Association of America was still opposed and attacked this proposal at the House Judiciary Subcommittee Hearings of 1965. An elaborate RIAA statistical presentation argued that the billion dollar record industry was actually operating at a marginal profit, that even the 2 ceiling was excessive, and that a 3 ceiling threatened to raise the retail price of $2.83 records to $3.03 (they now are listed at $6.98 and more). The Bill finally reported by the House Judiciary Committee in 1966 and passed by the House early in 1967 (H.R. 2512, 91st Congress) 'compromised" the ceiling still further at 2-1/24. In 1969, after additional Senate hearings, a lengthy Library of Congress economic analysis of the recording and music publishing industries (the "Knight Report") requested by the Senate Judiciary Subcommittee reported doubt as to whether available data could be certain of the economic effect of whatever statutory figure was to be adopted, noting that this figure would serve only as a ceiling beneath which "the actual rates charged would depend upon prevailing market conditions and the relative bargaining strength of the parties involved. "12/ This same fact that the statutory rate is a ceiling had also been emphasized by the Register of Copyrights in his Report (Part 6) to the House of Representatives in 1958: "... If the present 2 cents ceiling is raised, The copyright proprietors sought as a matter of equity to restore in the Senate Subcommittee the concept of a percentage royalty rate ceiling 8% of the suggested retail list price instead of a fixed rate; but this effort was again defeated by the record industry. - Finally, in 1974, the Copyright Revision bill which was reported by the Senate Judiciary Committee and passed by the Senate returned to the 3d ceiling originally recommended by the Register of Copyrights and introduced in the House back in 1964. That bill has been reintroduced in both Houses this year. PART III. THE ECONOMIC CONSEQUENCES 9. Costs As pointed out in Part I, raising the ceiling will only increase the room for negotiations. It will not weaken a record company's bargaining position, automatically raise any actual rates or costs, guarantee any return to composers or enable the kind of song that was previously unable to earn 2 to suddenly earn more. Only the kind of song that has been penalized by the 2 ceiling because it deserved and could have earned more if the parties had been free to bargain for more will definitely be affected. Equally obvious is the fact that all existing licenses which specify a figure will remain at their present level, averaging as noted above less than 24. - - - - For these reasons there is simply no basis whatsoever for record industry assertions on which all their dire calculations appear to be based that an increase in the statutory ceiling of 2 cents would automatically result in a proportionate increase in the cost of music for their industry, their consumers, and their customers in the jukebox industry. The 1969 Library of Congress Report to the Senate Judiciary Subcommittee politely termed "highly conjectural" the record industry's contention that "an increase in the statutory rate would simply involve an automatic and proportional increase in existing mechanical royalty fees."14/ - - Moreover, in the light of both record company profits and the prevalence (acknowledged by the RIAA testimony of 1965) of retail record discounting, the record industry's insistent claim that all royalty increases plus mark-ups as well will be passed on to the consumer (including the juke-box industry) is simply unsupportable. But even if we were discussing a guaranteed 4 rate instead of a ceiling, even if every song on that typical 10 song record were now paid at the ceiling rate and would all be paid at the new 4 cent ceiling, even then that increase of 1-1/2 per song over the 2-1/24 per song set by the House Committee in 1966 would constitute at most a cost increase of only 15 per record.15/ - - only 2% over a decade A maximum 15¢ per record increase of today's typical $6.98 list price during which the cost of living has risen more than 70% is hardly exorbitant. 10. - a maximum 15¢ per record increase is only 5% of the total amount by which the industry has increased the price of that typical record over the last 10 years. a maximum 15¢ per record increase (a 4¢ instead of a 2-1/2 royalty per song) would still give those who created the music a much smaller share of the current purchase price per composition on today's typical 10 song album than the original 2-1/2 per song would have given us on the typical 12 song album back in 1965. (Nor, as already demonstrated, would that 4g today purchase as much as 2-1/2 would purchase in 1965.) 16/ Prices Indeed it is the record industry's own history of price increases over the last ten years that destroys the credibility of its renewed protestations on the consumer's behalf. Before the Members of the House and Senate Judiciary Committees consider this year's presentation of economic prophecy by the Recording Industry Association of America and its consultant Professor Glover, they should contemplate their Judiciary Committee's summary of the same predictions made by the same Association using the same consultant to the House and Senate in 1964-1967: "On the basis of the situation existing at the rely more on the public domain for popular material." 11. This is identical with the record industry's current predictions. In testimony before the House Committee, Professor Glover also warned with elaborate statistical "proof" that this increase of 20% in record prices -- an increase of 7% from $2.83 or 5% from $3.98 -- would cause a sharp decline in sales and threaten the survival of countless record manufacturers, wholesalers and retailers 18/ (again all predictions repeated this year). In the decade since those 1965 House Hearings, without any increase whatsoever in the 2 cent ceiling on payments to musical copyright holders, the record industry has increased its list price per song to consumers by more than 110% --not 5% or 7% but 110%: Yet the RIAA has recently announced not a sharp decline in sales as a result of these constant price increases but an all-time high in record sales. There has been no discernible restriction in the variety of musical offerings, no deterioration in quality, no fewer opportunities for unknown composers, no lack of recordings of new, novel or lengthy compositions. There has been not a decline but a steady growth in the number, size and value of companies engaged in the record business and in the number and wages of their employees. Not one of Professor Glover's predictions about the disasters which would follow a 7% increase in prices came true after a 110% increase in prices. On the contrary, as sales boomed to new heights each year, as monos gave way to stereo, and as stereos now give way to still higherpriced and more highly profitable tapes and cassettes, the entire level of industry compensation rates has been upgraded for everyone involved except those who created the music. - Compared with what they would have paid in 1964 for the same number of long-playing and single units, consumers last year paid an additional $1 billion (one billion dollars) 19/ for their recorded music - but the creators of that music are still restricted to 24 or less per selection. As a result, our maximum share of the typical price per album has been cut by more than half: from 6% in 1965 to less than 3% in 1975. 12. The House in 1965 was willing to give us, in the form of a 2-1/2 ceiling, approximately 8% of that year's typical list price -- a share which today even a 5 ceiling would not wholly restore. We believe that we should be compensated, like our European counterparts, at 8% of list price. But if the percentage approach is to be denied us in favor of a fixed cents-per-song figure, that figure should at least give us a ceiling comparable in its ratio to current prices to the level which the House was willing to give us a decade ago. Yet even a 5g ceiling would not wholly restore that fair share. For record companies to pocket their price increase of 110% per song while complaining about our request for a ceiling increase amounting to 2% of today's typical price would be laughable were it not so tragic for so many songwriters and composers. One of the industry witnesses expressing alarm for the consumer in those earlier hearings was Mr. Clive Davis, then Vice President and General Manager of CBS Records, who warned that any increase in the $3.79 price of a monaural long-playing record surely would harm the consumer if it were passed along, and surely force record companies out of business if it were not.20/ But in his 1974 autobiography, Mr. Davis proudly observed that on his own volition he had in 1967: "raised the list price of the monaural pop record (from $3.79) to $4.79 (the stereo level) ... (to) give us another raise in album prices... (and) a golden opportunity to move toward better profit margins.... The stereo record was no longer any more expensive to produce, though the 'myth' of its greater expense persisted. "21/ All the other companies followed suit. No inflationary cost increase required this rise, which the entire industry adopted, no concern for the consumer deterred it, and no composer shared in it. The sympathy for the consumer professed by the record industry -- which virtually alone among all the industries affected refused to pass on to the consumer the savings made possible by the repeal of the excise tax in 1965 -- will surely not fool all of the Congress all of the time. Ability to Pay The record companies - led by CBS, RCA, MCA and Warners continue in the debate over this ceiling to plead poverty (as though they would dare to urge their utilities or trucking - |