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Exhibit 10

11

DONT OF AN INCREASE IN THE STATUTORY MECHANICAL ROYALTY (CONT'D)

S OF A 3¢ STATUTORY LICENSE RATE

C. DE MICHER STATUTORY MECHANICAL RATE WOULD ALSO BE COSTLY TO

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LUX ONS

I Teasing the statutory rate to Se could cost jukebox
apena: 16.5 per bud per year.

If the ixrease in the statutory rate caused record makers to raise their prices, it would raise the cost of recordings not only to consumers, Haut also to Jukebox owners.

Sucher operators, as the Subcommittee well knows, purchase aillions #dollars worth of records each year in order to provide access to cure Tot i for the listening public. Correspondingly, they bear the cost

ullions of dollar in copyright royalties. As can be seen in Exhibit 1, increase is the statutory license to 3 would imply an additional

et to these operators of $6.57 per box, substantial increase in their tants this impact, too, does not seen warranted.

$1.6 billion

16.11 (fron Exhibit 9) to cover the tory license royalty, the cost to

061 97.6 million

tistics reported that the average LP in December 1993 was $4.56. which is 241 of $5.98.

1 Fuver's Guide of September 14, 19*4 ecord sales in 1993 were of classia

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With a $* rate (specified in S.22 and MR 2223 currently before Congress), • rate of /4/sinute vould be charged for every minute of a tune's playing time over four minutes. The calculations above are based on the assumption that no 45 RPM records purchased by Jukebox owners would have more than four ainutes playing time per tune. If any simificant number of the tunes had longer plsying time, the increase in mechanical royaities at the Je rate would be greater than the figures indicated above. Singles (45 BW's) have a tune on each side, or two tunes/record. ai', financial survey of 13 leading record companies with 641 of the industry's sales indicated that in 1994 the average gross sargia of these companies was 350 of net sales. The gross margin must covor company's saios, promotional and

dainistrative costs as weis as its profits. Statistics supplied by 13 leading record companies with 1 of the industry's sales indicated that in December 1994 the average price at which a record company sold its 45 records was $0 $475. ARIMA survey of one-step distributors in early 1995 indicated that the average price at which they sold records to jukebox owners was 708. Given footnot. .. this indicates . Eross margin of n11.

the Jukebor Story, published by the Music Operators of America in 19?), indicates that there are 400,000 to $30.00 jukeboxes in the country Jukebou uners buy about 15 million records « year at cost of about $53 million 18 450.000 jukeboxes or assumed to be in sperati, then record purchases cost the average about $115 per year per ukebox, and jukebox owers on the average purchase 16records per year per jeton.

Exhibit 11

ACT OF A COPYRIGIT FEE INCREASE ON JULEBOI MEX

I! 21A57 OF AN INCREASE IN THE STATUTURY MECHANICAL ROYALTY (CANT'!)

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To Mi RATE MIOT CAUSE RECORD MANERS TO RICCRD LESS MUSIC

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11.40

11 recart nalers passed on the substantial increase in license roya:ties "

:

3wid eact, the higher prices charged consumers and jukehus Det har testing would undoubtedly generate at least sone, if not c.951Gral.. beret res.stance, Sales of recordings might fall, and record makers og beder pressure to seek still further alternate strategies for coping .tk 1 14* asilion increase in their mechanical royalty payments, in order

* ***onary increases in price at the retail level. Given their statisti toborthe increase out of profits, and still make a return com

tute with tisk 24 lavestment. still further detensive measures would be

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mer #tornatative seasuros nicht & record saker take to ensure his but

".. if the statutory rat. is increased so steep.yt

1 to $ 22 and 233 current iy sofort ****
harged for every 21 Sute of tone o piar.
ations above are based on the are... 0
Dor owners wouid Aare sure that .. . ).

ant number of the tunes a longer ).. " waities at the $4 rate would be greater than the fores

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tune on each side, or twe tunes 'rocard 13 leading record compasses vi!ut of the N "4 the average fross urgia of Ms 1 8. *** LA rgin must cover comesysaias, pragt:m. I as its profits. pading record companies with mi at the feet

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distributors is early 19° istiest mat mp ords to Jukebox wwers we

r e fots 4.

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d by the M

i6 Operators of series

ar at a cost of about f , the record purs Jukebou ownert

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Some cutting down on the number of tunes on a recording has already occurred over the last 10 years. Record makers currently try to keep their mechanical royalties per LP down to a reasonable level. If the royalty for any tune is greater than the statutory rate because of its longer playing time, a record maker may tend to reduce the number of tunes on the recording in order to keep within his total budget for mechanical royalties on the recording. As can be seen in Exhibit 12, the average playing time per tune has risen a whole minute since 1965. This trend is related to changing tastes which enjoy more complex and sophis. ticated renditions and recordings of music. Record makers have compensated for tnis longer playing time and the resulting increase in the mechanical royaltios per tune in part by cutting down on the number of tunes on an .

Because the copyright bill currently before Congress proposes to increase not only the royalty per tune but also to increase the playing time rate and to impose it on any tune longer than four minutes, record makers aight try to hold down the playing time of tunes and try to keep as many as possible under four minutes. In sum, the increase in the statutory license rate may cause record makers to record fewer copyrighted tunes and to be more selective about the tunes they do record.

efforts to reduce the use of copyrighted music on recordings would, of course, hurt publishing companies, composers and other copyright owers, for fever of their tunes would be recorded. There would be fewer tunes earning mechanical royalties and performance fees from recordings. Popular established composers would still get their tunes recorded, no doubt, but the new tunesmiths and composers of experimental or classical music night face greater obstacles in gaining public ezposure.

If the increase in the statutory license royalty caused record makers to put fewer tunes on LP's or tapes, fewer musicians and artists would be

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down on the number of tunes on a recordiny has a trade last 10 years. Record sakers currently try to isen oyalties per LP down to a reasonable level If the ne is greater than the statutory rate because of 10

, a record maker way tend to reduce the number of ling in order to keep within his total budget for me.

the recording. As can be seen in Etiba: 12, the . per tune has risen a whole sinute since %$ 2. changing tastes which enjoy more compies and supé."nd recordings of music. Record miers have cau*ms

2.14. ing time and the resulting increase in the 7 part by cutting down on tre number ! I om at

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# mari. 1. based on the titop 150 LP albes 11ted in 8!!!hcard O , 19$ and the top 180 of the Top 20** LP albums listed in

e Mar 3, !93. Only the 150 of the Top "0" albums were #*. !to povide direct comparison with the 15 list, which 08. Buat y 15 abans. Bec se some amas contained two records, #totes of 145 recond, with 1.653 tunes were tined from the 1973 hits.

right bill currently before Congress propese to :
per tune but also to increase the plaviy tim tuto at
une longer than four dimutes, record nudert op try *
time of tunes and try to loop as may as possib.. mer

the increase in the statutory licene sate may be
d fewer copyrighead tunes and to be more w t. shout
rd.
the use of copyrighted music of recording to

companies, composers and other copyrigt er, far
ald be recorded. There would be fever as mr.
performance fees from recordings Popular **** elad

lite t their tunes recorded, no doubt, but the experimental or classical music ught face pret

But the Top 15C 'analysed averaged only 10 tunes per record

41* U must have around 11 tunos. According to ***.*11* repented by i rourd companies with #bjut Sit of the M "* *****, &* 19"7 M. average rochanical royalty per popular

# *** :* $ at the rat.). 16 flat license rate o! ¢ per * J *** .. .. ward to that the **71. a)* ! nad 11 S tarta *$:21 S tumes do pay # license fee based on playing * ****!.. . Wome e pel», put the tunes, being from the

* e

asies raong the 13 included in the CRI financial

ic exposure.

he statutory license royalty c areer wiwe I or tapes, fewer mustelans and art. 6th wined

*** tai turite pad on the sampl131 '. probat. *vorned

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average toys.ty between 13 and 19") va

miya

81

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