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NOTE: The year :973 is used in this Exhibit, Seing the latest year for which data of performance fees and royalties from fare:

record companies were available. The two figures tiven for 1973 copyright royuldies paid by U.S. record companies are based on two different CRI surveys of record companies. The lower Siguro 377 1111on), which is estimated from statistics supplied by thirteen record companies with about 571 of the industry's sales, ill be found in Exhibit S-C. lin. 9. page 17. The higher !irure (58) aillion), which is estimated from statistics supplied by 54 record companies with about 98% of the industry's sales, is explained in the last section of Exhibit 5-0, pag. 18. The lower •stinate is clearly too low, for the financial records of the 34 spanies in the larger survey show that these companies alone paid $80. 6 aillion in sechanical fees in

Nevertheless, we shall use the Tower 7igure whenever we are conparing it to trer data on the company survey or when we are making trend analyses. We shall us. the higher figure only when

wako & single point estimate of the level of bechanical royalty payaents.

the explanation for the two different figures given for 1974 is the same as given in footnoto "?" above. *1973 and 943 performance fees were osti cod. See Technical Appendix.

Source:

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The 1953 ii pures are from the 1965 Slover report before the subcoirteen Piceno, ir cevaks. an onvrights
of the Comate n the udiciary. 3.3. House of Representatives, 19th Congress, First Session
The 975 ?. pure on foreign sechanical rovaltios as stinates on siiboare repor:s about sales abroad of recordings of
1.. susic.
The two 1973 174301 an sechanicai isyalties paid by 1.3. :'cording !! ire troa Exhibit 5 and lotes thereto. See
tootnote '2" above.

:37!.gure for sechanical praties 7814 y J.S. recording lins i tron Inibit S and 13 ased yn statistics supplied by * :ecord users.

40

2. Mechanical Royalties from U.S. Record Makers

Between 1963 and 1973, mechanical royalties paid by U.S. record companies more than doubled from $37.6 million to $77.1 million. That is an increase of something of the order of 1131. This is to be compared to the increase of 454 in the cost of Living Index and the increase of 933 in Median Family Income. Mechanical Royalties from Foreign Record Companies

in addition to those domestic mechanical royalties, copyright owners also receive royalties from foreign record makers. A substantial fraction of those foreign royalties come from the use of master recordings made by U.S. recording companies in the United States and that are licensed for manufacture and distribution abroad by non-U.S. companies. Foreign royalties have grown even faster than U.S. royalties. Mechanical royalties received by U.S. copyright owners fron record companies abroad rose from $6.9 million in 1963 to $35 million in 1974. That is an increase of 407$. Total Mechanical Royalties

Total mechanical royalties paid to publishing companies rose, therefore, from $44.5 million to somewhere around $115 million, say

by something like 1581. 5. Incones to the Publishing Industry from Commercial Use of Recordings

In addition to mechanical royalties from record makers, copyright owners get large and growing incones from the use of recordings in radio and talevision broadcasting and in commercially supplied "background" music. These are known as performance rovalties. In 1963, fub!isning compan:es ind oche:s 300 iom oroadcasters and schers, somecing 11 e 15.ni:11on ?or the use of recorded music. In :973, they obtained at least $44.4 aillion from those sources. This represents an increase of 2931. in addition, this bi!! provides that pubiishers and composers will, for the :103: time, receive performance income from jukebox operators who piay sound recordings. This is estimated to provide an idditional si aillion income each year.

6.

It should be noted in passing that, unlike the music publishing industry, recording companies receive not one penny in the form of performance royalties from comercial uses of their products, as in broadcasting and "background" music. Copyright Owners' Total income from Records

Taking these several incomes together, publishing companies and others, in 1963, derived from records and their commercial use a total income amounting to $60.2 million. These kinds of incomes, in 1973, cane to something like $159 million. The 1973 figure represented an increase of over 2608, as compared to the increase of 458 in the Cost of Living Index and of 927 in Median Family Income. These are the facts as to how music publishing companies and other copy. right owners fared from recorded music in comparison to inflation. Increase in Royalties Pet Tune

Not only have royaities to copyright owners increased faster than inflation in the aggregate, royalties per tune have also increased faster. This has occurred because of two reasons: first, because of the expansion in recording media, a new tune is often released in nunerous mechanical forms -- on a 45 RPM single, as a band on an LP, on an 3-channel tape or a tape-cassette. Royalties are paid on each unit of each of these forms, many times under several different licenses. Additional paying licenses will occur if the tune is later released through a record club, or if re-recorded on a budget album. Second, if a second or third or fourth artist also perforas the tune, a separate license for each release will result in further royalties for the same, original tune.

1.

Accordiagly, a reasonably popular tune can be the subiect of do:ens ind so:ens se separate. ::censed .euses. :nu singie vear is runper or leases of a single perdornance bas been tending :0 increase us the numbers and popularity 3f ferent recording sedia Save been 10:43sing, and with tissues, aften en budget:abe's, of lone: !ivor::es.

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ld be noted in passing that, unlike the susic putas: cording companies receive not one penny in the team royalties from commercial uses of their proexo, a 3

and "background" music. hers' Total Iacose from Records hese several incomes together, publista compat: 63, derived fron records and their commercial use !!*. 198 to $60.2 2111108. Dese kinds of Escanes, a "I ning like $159 m2!1:31. 5e :9*3 :pre represente e er 2604, as compared to the extrase of an am # and of 929 da edi u 30 facts as to how misis publishing :41 a **T he

.. cred from recorded us: in

w of sechanical royalties paid in one year by the number of release In the year, and to compare that figure with the corresponding value in mother year. That is done in Exhibit 4, which seasures the trend in waitio per released tune as between 1963 and 1972. Royalties per

ased tune went from $656 to $1,399, an increase of 1131. That per etape iarase is a reasonable measure of the percentage increase in mechanical royalties per tune, although the dollar income per average tane would be considerably higher because of multiple releases per tune Acuerd.ngiy, the dollars of royalties per tune were going up faster than the royaltius per release of that tune, which, themselves, were going up faster tuus infiation.

It thowed but noted and emphasized that these donestic mechanica: pr.t.constituted only part of the incoge received by copyright war fram recorded music. They also received $12.able foreign sech*.citova: 14 as Lahibits 2 and 3 sake clear. In addition, their e n from performances were about as great as the mechanical roya... und wer* also cring faster than inflation.

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wall now turn to an examination of what has brought about the tre larenes in lacenes of copyright over from recorded music.

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Note: For this Exhibit, the year 1972 was used because it was the latest

year for which she numbers and releases were available.

statistics on releases are from 31!:board. The 11.25 unes per 12 was ulicuiarea is follows: In :963, there were approximately 12 tunes per popular LP. CRI's survey of 13 leading record companies, with 61% of the industry's 1972 sales, indicated that, on the average in 1972, a nechanical royalty of 22.5° was paid for each popula: LP. Vith a ?: rate, this would indicate that the average popular L? had !1.25 tunes in 1972. "This overstates the number of times released, for nne une may be recorded on both i single and an L?, 2 pric::ce chat was more common in 1972 Chan in 1963. Also. a given tune yay be recoried several disserent versions on -?'s or 51.7g.or coch. The number of unes cecorded is only some iraco:on o: che number of reieases. The 100ve zures Jt releases io act inciude :apes. The copyr:gnt 10.uers eam nec.nanici. Povilcies on the sales of their cunes on cape, 15 'eil 15 on deco:as. For source of data, iee 3.0.5. D.

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