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1478

Exhibit 14

RELORD RETURNS: 1969-1974

815 failed in 19*2. Sia:larly, the treate Lorated to the point where *** do not break ever *

3. And, of course, the losses sustained so that we 't break even are such, much greater.

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tion that the record bus iness has become more **** • che growing probiea record makers have with persons in alers and retailers. Exhibit 14 shows that sini, - risen from 168 to 211 of record manufatum pomag cost each year of returns has been so ** is cost has gone up to $3:1 allian ia :941 - the increasing extent to which reser: makers mus sou

ves to risks -- in the manufacture and dista...t nout the assurance even of a finai sale, ie: data

19.11 19.01

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ecording bus iness is exceedingly rishy ne recesi
ast success are especially difficult for the same pro sp

can produce only a few releases a rare un nou
les, if not passed on, wouid raise the brain

success for all record people still toghera
isleading to assert, as the publish.4 csmus in how
sed new mechanical rate vould "anty nine the thin
tage points. It is true, for example, that to be
the increase in rate not passed on, the perim!
ds which did not break even -- this the h

from 811 to 836, a "were two plats AS !h por
ut really counts: The success rate, sirtadi bu
176. For the marginally profilatie, s** tom
of success would be forbid124, mot fails
11cense rate could discourage even further the point

ordings, which are currently finer.d - san..

here -- to a very large extat my pada para pour pher royalties, if not passend om, at mar"

Exhibit 11

DPACT OF A COPYRIQIT FEE INCREASE ON JUKEBOX ONNERS

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With a se rate (specified in S. 22 and H.R. m3 currently before Congress). • rate of 3/4€/minute would be charged for every minute of , tune's playing line over four minutes. The calculations above are based on the assueption that no 45 RPM records purchased by Jukebox owners would have more than four ainutes playing tise per tune. If any sinificant number of the tunes had a longer playing time, the increase in mechanical royalties at the strate would be greater than the figures indicated above. singles (45 RPWS) have a tune on each side, or two tunes/record, al's financial survey of 13 leading record companies with 1 of the industry's wles indicated that in 1994 the average cross margin of these companies was 151 of net sales. The TOSS margin tust cover . coepany's sales, promotional and

daisistrative costs as well as its profits. Statistics supplied by 13 leading record companies with 641 of the industry's sales indicated that in December 194 the average price of which record company so14 1ts 45 W records was so 5475 ARIM survey of "one-step" distributors in early 1975 indicated that the average price at which they sold records to Jukebox owners ww Tor. Given footnote d. this indicates . gross margin of 211.

The Jukebox Stery, published by the Music Operators of America in 1973, indicates that there are 400, 300 to 530.000 Jukebores in the country Jukebox owners buy about 15 million records .year at cost of about $52 millon 1f 450.300 jukeboxes are assumed to be in operation, then record purchases cost on the average about $115 per year per ukebol, and Jukebor owners on the average purchase 167 records per year per jukeber.

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1470

Exhibit 11

F A COPYRIQIT FEE INCREASE ON JULEBOI ONERS

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1! record sters passed on the substantial increase in license royalties 0. 2223 vould exact, the higher prices charged consumers and jukebox PORT: fer recordings would undoubtedly generate at least sone, if not consi dru8.byer resistance Sales of recordings night fall, and record makers .6 ben ander pressure to seek still further alternate strategies for coping

1 347 million increase in their nechanical Toyalty payments, in order

1-2 necessary increases in price at the retail level. Given their ta::.!Y to absorb the increase out of profits, and still make a return conSet 3. with risk and investment, still further defensive nessures would be

Wat alternatative measures aight # record maker tako to ensure his sur 1.28. of the statutory rate is increased so steeply?

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I ntocing the use of copyrighted Music

Decod vith sach o dramatic rise in their nechanical royalty payments, PRE34 sem sight lect to reduce their use of copyrighted music The 101

* way to reduce the use of copyrighted music is to reduce the number of ten por record. As an alternative, this is not particularly attractive, but . .U ination with other defensive actions. This unfortunate stop

Sone 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 this longer playing time and the resulting increase in the mechanical royalties per tune in part by cutting down on ene number uf tunes on an LP.

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 night 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 owners, for fever of their tunes would be recorded. There would be fever 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 might face greater obstacles in gaining public exposure.

I! 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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wn on the number of tunes on a recording has airtrade st 10 years. Record makers currently try to keep ilties per LP down to a reasonable level If the is greater than the statutory rate because of its a record saker may tend to reduce the tuber of B in order to keep within his total budget for mechne recording. As can be seen in END!! :, tre ler tune has risen a whole ainute since :95 2.1 anging tastes which enjoy more complex and sops

recordings of music. Record makers teve competun 1 time and the resulting increase in the mec. 949.64. art by cutting down on ene number of tumos u

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she bill currently before Congress prapores to .**** r tune but also to increase the plaviy timore!) all ► longer than four minutes, record naders aigut eru me of tunes and try to keep as esty pono1).. mint he increase in the statutory license rate may fewer copyrighted tunes and to be more vist.keral

t init is based on the top 150" LP albums listed in Billboard

**, is and the top 150 of the top 20 LP albums listed in .. on March 3, 19'). Only the 150 of the Top O albums were

1 ") to provide direct comparison with the 110$ list, which #staf sely 1$$ albums because sone a buns contained to records, # ***. *165 records with 1.653 tunes were tired from the 1973 hits.

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e use of copyrighted music or recordingt mida ompanies, composers and other copyright serifar

be recorded. There would be fewer tan anu erformance fees from recordingt Popedas esta che their tunes recorded, no doubt, but the testam perimental or classical music vide fase grueer

exposure. statutory license royalty caused roosit B641 or tapes, fewer musicians and artists will be

*tho ap 18€ LP', analysed averaged only 10 tuna* per record 1.), the "+91:al" U munt have around 11 tunes Accortly to ****.!!* turi 4 by Iraard companies with abst 3:1 of the 2247' *.*, is in the average behanical royalty per popular Jh ** $ at the le rate). 16. flat license tato of de per wa wate 4.4, 1. wouid indicate that the "mia!* D had il 25

het is. 10). Sone tunes do pay a license fee based on playing * * w tea is sete bel

t Sute tuner, being from the

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*asies were among the 13 iaciuded in the CRL financial

**** patire is r

rally to topiesent the le per tun. nat. with

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