I.

THE HIGH INCOME ENJOYED BY COPYRIGHT OWNERS (CONT'D.)

C.

THE MUSIC PUBLISHING INDUSTRY HAS NOT ONLY BEATEN INFLATION BY
A WIDE MARGIN, BUT HAS BENEFITED MORE FROM ADVANCES IN RECORDED
MUSIC THAN RECORD MAKERS WHO MAKE RECORDED MUSIC POSSIBLE AND
AVAILABLE

Thanks to the revolution in recording technology and in
marketing techniques, sales of recordings have risen
many times over. The burgeoning sales have produced
ever growing income for music copyright owners, who have
consistently earned between 7.6 and 11.1% of record com-
pany sales -- far more than the 5% envisaged by Congress
in the 1909 law. Copyright owners benefit greatly from
the popularity of commercial use of records. The record
makers, whose investments and ingenuity are largely re-
sponsible for the sales growth, have earned from these
sales uncertain and sharply fluctuating profits, for this
Is a high-risk industry. Record makers, who have brought the
consumer ever-better products, at a lower price than in
1909, are profiting less from the new products than the
publishing companies which have invested little or nothing
in the development of these products.

In order to reach an informed, not to say a fair judgment concerning the statutory mechanical royalty rate and whether it should be increased, one really must recognize and take under advisement some basic facts as to the nature and attraction of modern-day recorded music and the economics of the recording industry.

1. Recordings in 1909.

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Seen from our present-day perspective, the recordings of 1909
when Congress thought it fair that copyright owners should get as much
as 2t per recorded tune -- seem naive and quaint, both artistically
and technically. Recordings were made mechanically through an inverted
megaphone and the thin and scratchy results were physically pressed on
one side of a "wax" disc, one tune per disc. Or a mechanical reproduc-

44

2.

tion of sheet music was produced through perforations in a roll of paper. The experience of listening to such music -- miraculous in its day, no doubt -- bears little relationship to the experience of listening to modern recorded music, popular or classical.

Recorded Music Today.

-

The technology of recording sound has advanced tremendously. Fidelity range, responsiveness, and freedom from distortion is only one aspect of this advance. Many and varied sound and musical effects may now be created through use of multiple microphones and amplifiers, and multi-channel recording tapes controlled through intricate electronic consoles.

This advancing technology makes extraordinary kinds and ranges of musical expression come alive through artistry of performance, arrangements, musical concepts, and through sound as something to be experienced for itself.

-

A tune, alone, a configuration of musical notes indicated on a sheet of paper, makes no music, let alone a musical experience. To become music, the tume at least must be hummed or picked out with one finger on a piano. A musical experience far beyond the tune itself is in large measure a matter of musical arrangement that reflects a concept. It is in very large measure a matter of the artistry, personality, and emotion of performance. In recorded music, today, the extra dimension of the artistry and technology of the generation and recording of sound is added, and it is often this ingredient that makes for a memorable musical experience.

In less than a generation, the recording industry has gone from "?" to "Wi-Fi" to stereophonic to quadraphonic sound: om "microgroove" to 3-channel, equency-screened and corrected tapes.

45

46

3.

These facts about modern recorded music are coming to be recognized and appreciated. An article in The Wall Street Journal described "How Record Producers Use Electronic Gear to Create Big Sellers".*

Each instrument has its own microphone leading to its own
track on the big console's recording tape... [The producers]
will cut, slice, and dub tracks from the best of the musicians'
performances to eliminate flubs by one or two of them, and
they'll pick tapes from the [singer's] performances for her
best lead vocal. For her harmony parts, they can manipulate
the tapes to make her sound like a duo, a trio, a quartet
or even, if necessary, a 16-voice choir. They also will
add violin flourishes, called 'sweetners'. Finally, they
will blend and distill all this into two stereo record tracks.

Even a president of the American Guild of Authors and Composers
has acknowledged that the popularity of tunes and songs is founded
almost entirely upon successful recordings created and marketed by
recording companies. He said:

Years ago a publisher bought a song, plugged it and got
it published in the eventual hope of getting a record.
Now a song is nothing without a record at the start.

Benefits From, and Contributions to Recorded Music: Recording
Companies and Publishing Companies.

Overview. In Parts A, B, and C of Exhibit 5, estimates are given
of the revenues, various outlays, and profits of the recording in-
dustry for the years 1955-1964 and 1967-1974. Several important
facts stand out among these data:

Growth in Record Retail Sales. Between 1955 and 1974, estimated record sales at retail list prices rose from ess than $280 million to about $2.2 billion. These estimated retail sales are based on list prices, which has been the common standard for estimating retail sales over time. Because most recordings are sold at a sizeable discount, how

Wall Street Journal, eoruary 12, 374, p. 1.

¡ew Tork Times, August 3. 1960.

Foreign fee income and other miscellaneous income are not included in net sales. Foreign fee income is from the licensing of U.S. record masters for pressing overseas, and is estimated to be roughly one-half of the total figure shown. The remainder is from domestic fees from record and tape clubs, inventory adjustments, other one-time items, interest, and rent. They are expressed as a percentage of net sales to show how much they contribute to the profits recording firms make on their recording sales.

Recording firms sales are estimated to be about half of retail sales at list prices. This assumption is supported by the prices the surveyed record firms reported charging for their various types of recordings.

4Retail sales figures are from RIAA. They are based on sales at list prices. Because sales are commonly made at a sizable disount these days, actual retail sales are about 20-25% lower than the figures given.

SOURCE: CRI surveys of recording companies are described in Exhibit S-D. The actual statistics reported by the surveyed companies appear in the Technical Appendix. The figures supplied by these companies are for their U.S. operations only.

Foreign fee income and other miscellaneous income are not included in net sales. Foreign fee income is from the licensing of US record masters for pressing overseas, and is estimated to be roughly one-half of the total figure shown. The reminder is from domestic fees from record and tape clubs, Inventory adjustments, other one-time items, interest, and rent. They are expressed as a percentage of net sales to show how much they contribute to the profits recording firms make on their recording sales.

"Recording company sales are estimated to be half of retail sales at list prices. This estimate is supported by the prices the surveyed record companies reported charging for their various types of recordings.

tall sales figures are from RIAA. They are based on sales at list prices. Since sales are usually made at a sizable discount, actual retail sales are about 20-251 lower than the figures given.

Grapes sales began to develop in 1965 and were becoming significant in 1966. The 1966 figure is an estimate by CRI. No RIAA figures on tape sales are available before 1967.

Source: CR1 surveys of recording companies are described in Exhibit 5-D. The actual figures reported by the sur

vered companies appear in the Technical Appendix. The figures supplied by the companies are for their U.S. operations

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