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arrived at in the exhibit are self-explanatory and are discussed in the text. The enphasis in this exhibit is on the effect of a 598 increase in mechanical royalty payments on U.S. recording company pre-tax profits from all sources.
Exhibit 8 -- MECHANICAL ROYALTIES COMPARED TO RECORDING INDUSTRY
PRE-TAX PROFITS FROM RECORDS MADE AND SOLD IN THE
This exhibit shows in similar fashion the effect of the proposed 3¢ rate on pre-tax donestic recording industry profits (line 11, Exhibit 5-C, p. 49). Mechanical royalties are paid on the basis of recordings made and sold in the U.S. As the exhibit illustrates, the potential impact of a higher rate on domestic profits is disastrous.
Exhibit 9 -- IMPACT OF A COPYRIGHT ROYALTY INCREASE
ON CONSUMER PRICE
This exhibit is self-explanatory. However, it is important to recognize that the prices and dollar margins presented are only illustrations, based on a $6.98 list price record. The average price paid by consumers on all records is much less than the average $5.77 they pay for a $6.98 record.
The exhibit also shows the more moderate impact on the consumer price a mechanical rate increase of 1/24 would have, as compared to the proposed 14 increase.
It must be recognized that a cost increase at the producer level cannot be passed along without increases along the way. The increase in cost to ziddlemen that would result from an increase in the mechanical royalty being passed on by recording companies would lcad to still further increases by aiddlemen in order that they be able to maintain their margins. Such further increases would be justified by the additional costs they would incur, such as for insurance, inventories, financing, bad debts, and the like.
57-786 0.76 - pt.3 - 12
Exhibit 10 -- COST TO COYSEVERS OF A 3 STATUTORY LICES. RATE
This exhibit, with footnotes, is self-explanatory. (RIAA estimates of retail sales of recordings, at list prices, are made annually.)
Exhibit 11 -- IMPACT OF A COPYRIGHT FEE INCREASE
ON JUKE BOX ONERS
Statistics for this exhibit are derived from the principal financial survey, as explained in the footnotes to the exhibit.
Exhibit 12 .. TUNES AND PLAYING TIME OF TOP 150
LE ALELL RICORDS
The exhibit, with footnotes, is self-explanatory.
Exhibit 13 -- Beroep MAYERS UNIT SALES PER RELEASE AND
BKIAALVEN POR Vis 193
Date in this exhibit are based on an analysis of results that were as integral part of the 19'3 financial survey. (See Technical Appendix, on Ext bits). The distribution of sales by volume is from Fon (5) of the questionnaire. The breakeven infonation is from for . (4). and is summarized on the following page:
BREAKEVEN ANALYSIS 1972
1. Net Factory Selling Price per Record
- Artists Royalties
- Variable Selling, Promotion, and General Costs
- Fixed A&R, Studio, Recording, and Talent Costs
- Fixed Depreciation Costs
per Release to Break Even in Terms of Average
0. 1 35
* These costs are charged to the records which are manufactured before the tapes. Tapes are produced only when
No explanation was given by the reporting company of why a negative number was given for "fixed manufacturing
Exhibit 14 -- RECORD RETURNS, 1969-1974
The industry has long had a practice of allowing free returns of unsold merchandise to manufacturers. This exhibit summarized the dollar magnitude of this activity.
Exhibit 15 -. CONCENTRATION IN THE PHONOGRAPH
RECORD INDUSTRY 1947-1970
The exhibit shows clearly that the trend toward reduced concentration which began at the end of World War II has continued since the 1965 hearings. Concentration in the recording industry is declining.
Exhibits 16-21 -- DISTRIBUTION OF ROYALTY RATES
PAID ON COPYRIGHTS BY TYPE OF
The final six exhibits provide specific, new information on what has come to be known as the "ceiling vs. rate" issue.
To obtain the data contained in these exhibits, CRI undertook a comprehensive study of all licenses issued in 1974 by two companies and for which data were available at the time of the study. The nature of the study is spelled out in detail in pp. 82-118 of the main report.
As an aid to understanding this section of the report, the following guide to the exhibits might prove useful:
Basically, the exhibits fall into two main groups -- (1) tabular
Looking at the total of tunes studies, the frequency dis.
Lahibit 18- on page 94 demonstrates explicitly the standard
A study of licensing needs to be based upon a sample of licenses. Studies deset ce samples of records sold are interesting but they are not directly rele. **** t® # **** nation of the licensing process. For example: in a study of 1. #1.8 190 licrases are examined; 98 are at 24, and 2 are at 1.54. The
...nt of 11censing rates derived is quite different than in the sample were
In my event, licensing routinely occurs before anyone knows what the
of males will be for • particular licensed recording: consequently, the perut.fy for sales volume (which comes after) to affect the pricing of # *** transaction (which comes before) is highly limited.
1 percentage distribution of various rate categories reported from the ai stoly of licenses has not been distorted by weighting for sales volume. 1 pr.to a comprehensive picture. #11 licenses signed by two leading lins fr.4 ment of 19'4 were included in the study.