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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
bany times over. The burgeoning sales have produced
ever growing income for ausic Copyright owne:s, who have
consissently earned between 7.65 and 11.1% of record con-
pany sales -- Car 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 investedadle 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.

Seen from our present-day perspecti:e, che recordings of .909 .. when Congress thought it fair that copyright owners should get as much as ?t per recorded tune -- seen naive and quaint, both artistically and technically. Recordings were made mechanically through an inverted zegaphone and the this and scratchy results were physically pressed on one side of a "wax disc, one Cune per disc. Or a nechanical reproduc

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 througn 1. tricate electronic consoles.

This advancing technology nakes extraordinary kinds and ranges of musical expression come alive through artistry of performance, arrangenents, 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 tune 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 ne asure a natter of musical arrangement that reflects a concept. It is in very large neasure a matter of the artistry, personality, and emotion of performance. In recorded music, today, the extra dimension of the artists and technology of the generation and recording of sound is added, ind it is often this ingredient that makes for a demorable musical experience.

in less than a generation, the recording industy has gone from "L?" to Hi-Fi" to stereopnonic -9. quadrmonic sound: izom "microgroove'' : 3-channel, Sequency-sc:sened and corrected -ades.

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)
vill 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 zot
it published in the eventual hope of getting a record.
Now a song is nothing without a record at the start.

3.

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 out lays, and profits of the recording in-
dustry for the years 1953-1964 and 1967-1974. Several important
facts stand out anong these data:

Growth in Record Re:11: Sales. Between !955 and 1994, st:sateu record saius 15 902. ..30 cos cose son .ess than $280 billion to about $2.: 51:1ion. These estimated Detail sales are based on !ist prices, which has been one common standard for estimating re:11: sales over time. 3ecause 308€ recoriings 189 suid it . s::e0ie discount, low

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Foreign fee income and other aiscellaneous Incone are not included in pet 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 itess, interest, and rent. They are erpressed as a percentage of net sales to show how much they contribute to the profits recording finas make on their recording

This assumption is supported by the prices

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

Ret sales figures are from RIAA. They are based on sales at list prices. Because sales are commonly made at these days, actual retail sales are about 20-251 lower than the figures given.

sinable di sount

SOURCE: CAI surveys of recording companies are described in Exhibit S. 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.

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