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4 years

$157.6

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In addition, the industry had profits before taxes from income sources other than maxing. nan.. facturing, and selling records, of an amount about equal to foreigt? Ese incuse. (Prorits ar: er taxes, of course, were much less than the indicated pre-tax profits -- probably something like half. or ioss.)

Income to CORVT: th: Owyers from Records

Copyright owners are in a position sonewhat similar to that of preferred stockholders when it comes to incore from records: -- their mechanical fees get paid, record by record .. or, rather, license by license -- irrespective of whether individual records, or record makers sake any money or not. With only one set-back, in the very poor year of 1973, mechanical rovalties going to publishing companies have increased every year since 196*. oing back !!* Sarther, nechanical rova!t.es have increased every

ar saze ve ad .$',, *x3306.73, pur ata 5.10-$. n. re rear :30..

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The percentage of the recording industry's revenues from records that goes to the publishing industry averages nore than the before-tax profit that goes to the record makers! Over the past 4 years, an average o: 7.99 of revenues nas zone to the publishing industry as compared to .% of pretax profits to record makers. In doliar terms, nechanical royalties paid to the pubiashing industry over the four years came to $311.8 million as compared to the pre-tax profi:s to the recording industry from records of $?*9.9 21!!ion.

It would be interesting to compare the net profits after taxes which the two industries derive from records. The net profits after taxes for the recording industry are estimated in Exhibit 5. Unfortunately, the publishing industry has refused to provide the necessary data despite requests from Congress. In the absence of such disclosure, the best that can be done is to compare nechanical royalties bezor: :1xes with record companies' profits on records, also pe: ore axes. 2013!!y, the seca: son :200 16 del n asonadie. The pubii3173 :amoanius non ::e or so expenses in connection wich recordec music other han ) clic: the sechanical royalties. Even aoro important, the compar:30n comDiete!! sets 13:00 che rery large per:ormance fees the pupi:sning austier om recorded usic. iga:n, about "ne only cost :00 :: : nat onrec::on ...ne :niec:3n i ne ::99.

Taking into account both mechanical royalties together with performance fees from records -- which are certainly not less than one-half of the dollar value of mechanical royalties and probably considerably more than that -the publishing industry derives considerably greater dollar benefits from records than does the recording industry, itself.

Contribution of the Music Publishing Industry to Recorded Music

It is not unreasonable to inquire into the contribution of the music publishing industry to the creation, production, risk-taking and marketing of recorded ausic. The point need not be labored: No one who loves musical experiences would wish to downplay for a posent the impor:ance of tunes, Crepositions, and the unique contributions of composers. Equaliy, however, it is clear that the success over the past twenty years and growth oi recorded music is att:butable in large seasure to unique performances; to arrangeaents; to accsapan inent; to advances in elec:ronic tecnnoiogy and recording artistry; to marketing; to innovation and risk taking oy record makers and to thei: marketing efforts, iaciuding very Large put ays for advertising, designed to bring new recordings to the attention of aus:c. 1ονίης publics.

Conclusion

There is no obvious reason of justice or of economics for Congress, by legislation, to attempt to increase -- by almost 609 -- the share of the proceeds of record sales going to the music publishing industry ** which incides music publishing companies, other copyright owners, and composers. Ther: :s no sore economic reason for Cong::$$ to asteapt to erase that par.: :a: scar. i 900:1 venues an 2. sart of any :ne other part.es no r* rure :0.95 $:oser:. .:10 it $*:: inique cont:ibut:ons :3 recorded sus.. But at : na: sec:. :.5 4.2. ::3 vould 10.

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22 DONT OF AN INCREASE IN THE STATUTORY MECHANICAL ROYALTY

into account both mechanical royalties together was performans ords -- which are certainly not less than one-da!! of anical royalties and probably considerably more than :? industry derives considerably greater dollar besef u tra loes the recording industry, itself.

A. me 14 RATE WOULD GIVE A LARGE AND UNUSTIFIED WINDFALL TO

com ni XT ONNLAS

I! a statutory license royalty were increased to se, with

11°! 5:a::SIX ra: 797 Testations over ' aius 198... the everare roxa, per record ou rise about Teat Iese peraordenss w rise x arts * *2.3 v.*?.is to the t ruth. Stry and

a . Se: 467 :0 in rec2:0 SX

f the Music Publishing Industry to Recorded : unreasonable to inquire into the contribution of : 1.3. stry to the creation, production, risi-a saru..44 ic. The point need not be labored: No one do ovo Li. would wish to downpiay for a sobeat the aper:13* *2003 d the unique contributions of capcsess . We the success over the pas: :wenty years and p *

att:ibutable in large seasure to wow !: to acccapazi sent; to advances in . 111.: ! #wift *** v; :0 Barketing; to innova::gn and 7: 01. **** #: sarketing efforts, unciuding very arje shume ned to bring new recordings to the attent. f ..."

Although the scope o! music copyright owners from recordings has grown *** fasts: tas bission, avea nder the provisions of the '%c9 as, and even

sept one:1 seri, such aore financia! Seneli: fron recorded sus.. * t*CBT..Israr! , :resse.., a higher statutory rya::) o at leas per tane has been wr::ten lato the ba!! before you.

o screase in the statutory royalty from me to se does not sound like very However, this seaingly trivial "penny increase" would have a

et act on the earns of the music, the publishing industry and Bet es nicht owners, on the prices consumers pay for recordings, and easta likely the amount and kind of music recorded.

P

vious reason of justice or of economics for Compres. Itt empt to increase -- by aisest 6c9 - share the -rd sales going to the music posts 2017

publishing companies, 9t%esprimo metu 70 sore economic reason 97 sag 13 ) *** PREO :cd.d: scar: at :933 1,6 ***" :S .00 .sure. 0 5 : meer . . ll llogues Es cecorded aus: duz : Ju: • . !

** the first place, raising the nominal statutory rate from 2 to 3€

ets an increase of too. The actual increase would be considerably *pr. for it. 2223 calls for payment to the copyright owner of not just yet to, but of Se por tune, or $14. per siaut. o piaying time, or in terrat, for mace tine, : •? reator us DRDOI:& ' . t** *.431 04 aurr* 9i Sut 16. .1'. *** 2432* »

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To study the impact of the "3¢ rate" on the typical hit record and on the recording industry, an analysis was made of the Top 150 LP albues listed in Billboard magazine on March 3, 1973, selected as randon illustration. Because some albums contained two records, a total of 165 records with 1,653 tunes were examined. If, for purposes of calculation, one assumes that the current statutory rate of 24 per license and released tune was paid, the average record in this sample would have called for a royalty of 20€. If allowance is sade for royalties currently paid in excess of 2$ as a result of an additional "per minute" rate, the average bechanical royalty paid on the records in this sample is estimated to have been about 22.

The statutory royalty that, in contrast, would have been payable under the new rates proposed to this Subcommittee by the publishing cospanies was computed based on 3e per tune or 3/4$ per minute of playing time, whichever was greater. By actual count, the sia:utory Dechanical roya!:y for the average LP in this study, under the new provisions, would have been 35€, an increase of 534 over the current rate. (See Exhibit 6).

What would this increase in the mechanical royalty rate sean in teras of its impact on the profits and revenues of the publishing and recording industries: Obviously, the answer would depend upon whether one were talking about a good or a poor year.

in Exhibit 7 some data are set forth which gauge what would have been the impacts of the proposed increase of sechanical royalty rates on the two industries in each of the past four years, 1971-1974, of which two (:972 and :994) were good from the standpoint of recording industry profits, and two 119*1 ard :9*3) were bad.

isan 2 :31: *, te i.;. -152 ): item me seuran..11 royalty sales wou!d have ranged from a iow of about $45 5 21:::on to a high 9: about $46.9 31!!:on, or a sta! )* about 9:3:) 3::::09 for the four years This vou. I amcane :) an annua: average of 10: 509 2...on.

in teras i he us in these .70:25es sovi::es : me mus.- pub..--% ancus: 04. ure lae: :me 2:0. ax :::.:) ): ne :e973:? : 948

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