parties. As I pointed out 10 years ago, some might question the legality of a situation in which a publishing company accepted royalty rates not regularly made available by it to all record companies on a non-discriminatory basis, or in which a recording company pays rates not regularly paid by it on a nondiscriminatory basis to all publishing companies. It might be argued that payment and receipt of different royalty rates arrived at, case by case, on the basis of "relative bargaining positions of the parties" would undermine the intent of Congress to make copyright music available to all and to prevent more powerful companies - whether publishing companies or recording companies from achieving monopoly positions. - Let us turn now to a re-examination of the merits of the argument of publishing companies that raising the statutory rate would "merely" raise the ceiling below which, or up to which, publishing companies and recording companies would "bargain according to their relative strengths". We have just examined in great detail a large sample of records issued recently by two recording companies. In mid-December, 1974, we asked two large record companies, one being among the four largest firms in the industry and the other among the next four, to cooperate with us in the preparation of an extensive copyright royalty analysis. We asked them to provide us with mechanical rates agreed to be paid on licenses for all tunes included on all records which they had released in 1974 up to that time. One of these companies, which updated its files only on a quarterly basis, supplied us with information on all of its releases for the first three quarters, or 9 months, of 1974; the other provided us with information for all 1974 releases through the end of November. These data, covering the royalties paid for all of the copyrights on all of the records released by the two record companies in those periods, formed the basis for our analysis. To give some idea of the size of the two companies who provided the data, it is estimated that in 1974 they had record sales (not including tapes) on the order of 50 million records. The data are in two parts. The first part covers records distributed through the trade and the second consists of records distributed only through record clubs, or as premiums through non-music channels. Each part will be analyzed separately. First it is necessary to distinguish among three broad classes of these records released through the trade: 88 a) "Singles", that is, 45 RPM records, usually with 2 tunes, one on b) Regular Price LP albums of popular or classical music, usually c) Other LP albums issued for budget priced distribution as, for example, reissues of older records under "budget" labels. In Exhibit 16, the data relate to the numbers of separate tunes included on each of the three types of records, classified by the level of the mechanical royalty rate to be paid for each copyright. The exhibit covers data on 1,723 separate tunes: 324 on "Singles"; 1,219 on "Regular Price" LP albums ; and 180 licenses on tunes on "Budget" albums." Also, one should note that no royalty was paid on many tunes. In practically all of these cases, the tunes are in the public domain, and of course, no royalty is required of the record company. These tunes are, primarily, classical music. In a few cases, the company providing the data acted only as the distributor of the record released. The license fee or fees, if any, in these instances would have been paid by the independent record producer or other party for whom the record company was acting as distributor. The numbers of tunes on which no royalty was paid are shown in the lower section of the table. The distribution patterns of royalty levels vary markedly among the three types of records: 1. For singles, the statutory rate of 24 was paid in 95.9% of the cases. Only 4.1% of the rates were below 24. None were paid at more than 24. As a generality, rates that are paid at more than 24 are paid in connection with Because of the marked differences among the three patterns of rates paid 89 Exhibit 16 DISTRIBUTION OF ROYALTY RATES PAID ON COPYRIGHTS, BY TYPE OF RECORD, ON REGULAR PRICE AND BUDGET-LABEL RECORDS *Does not include 15 tunes individually licensed in the 1974 period, but where the entire record was not released in the period. These 15 tunes include 5 on Singles at 24, 4 on regular price LP's at 24, 1 on a regular price LP at more than 24, and 5 on regular price LP's with a fee. None of these tunes were licensed at a discount. Note: Exhibits 17, 18-A, and 19 show the tune by tune royalties paid for each 91 the renditions of tunes that run longer than 5 minutes. It is difficult, if For not impossible, to get more than 5 minutes of music on a 45 RPM single. 2. For Regular Price LP albums, the statutory rate is also the standard 3. For Budget LP albums, the pattern is quite different. On these records, discount rates are a prevailing practice. On these albums, nearly two-thirds of all the licenses were at less than 24. About one-third of the licenses were at the 2¢ statutory rate. Having established the existence of these three patterns, we then set out to ascertain the reasons for appearances of rates other than the 2¢ statutory rate in each record category. Specifically, three types of discounted rates appear in connection with Regular Price records: 1. "Artist Interest" This sort of discounted rate occurs on both singles and albums when the performing artist has an interest in the copyright of the tunes. 2. "Block Discount" This discount occurs when several tunes on an album record are owned by a single holder. 3. "Medley Discount" This discounted rate occurs when several tunes are interwoven in a rendition, where a fragment of a tune is used in transition between two tunes, or in other instances, where a tune is used for only a short duration. The extent of a medley discount in a particular instance seems to be governed in part by the length of time the medley, theme, or excerpt is used. Because of the differences in rate patterns among the three types of records, which was noted above, we prepared a separate tabulation for each type of record. Exhibit 17 covers the Singles; 18-A & B, the Regular Price LP albums; and Exhibit 19 covers the Budget label albums. Royalty Rates on Singles As regards "Singles", a cursory glance at Exhibit 17 is all that is needed to show that the statutory rate is the standard rate for such records, and that discounted rates are very rare. Of the 162 records covered, there were discounted rates on only 7 records, and as indicated above, the discounted rates applied to only 13 licenses, only 4.3% of the total of 315 licensed tunes. In each of these 13 instances, the performing artist either owned or had an ownership interest in the copyright of the tune being performed, and granted a flat mechanical rate for the entire record. Of these rates discounted because of artist interest, 11 or 85% were at 1.504, and 2 or 15% were at 1.75¢. The one record with two rates at 1.75¢ suggests the possibility that real negotiation as to royalty may occasionally take place with singles. However, it is more likely that the rate arrived at reflects other provisions in the contractual arrangement between artist and recording company in addition to the "relative bargaining strengths" of the parties. Most of the "bargaining" in these instances seems to relate more to payments for the artist's performance, or to the price of the master tape which may be produced by the artist himself, rather than to the royalty rate paid on the copyright, as such. In summary, 24 is the prevailing rate for singles. Departures from that rate represent standard, common recognized variations from that 2 standard. Royalty Rates on List Priced LP's We now turn to royalty rates paid on licenses for tunes on List Priced As shown in Exhibit 16, the sample included 168 such albums |