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vyed ton es are based on the assapelan that industry sales are about half retail wi ll supported by the prises the surveyed companies reported charge for their

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the figures here are cely for the US operations of the record comperies surveyed

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nii exhibit, together with the discussion on pages $6 and 57 is fairly seiler.anstory Nevertheless, it is important that the derivation of the 300 foto be completely understood.

The calculation is based on a sample of the top 150 of the Top 200" Dabas free !!!!ard, March 3, 1993, these albums accounted for 165 LP Hirts se sase atums contained two records) and 1,653 tunes. The Member of tes per record was counted, and playing times were measured. t. .** This, ciearly is me a sample of all recordings. Tapes and 8.16:es were ex. ide! There would be some releases on singles which did met appear on 's, but there would be virtually no tape releases which did 6.& not out on LP's or singles Probably, the top 150 wouid be repre****#'.it of the mority of U S. sales, but they are not staristically

*a!in. of total US releases or sales har r es of cal via:ip, it was ass red that each of the tures in that," was at the as statutory meanical royalty rate. In fact, Sune tav bave been at Mager rate, some at a lower rate, and there could have be I sme public domain tunes at 0e. Most likely, there was little Bm putlc domain material included, it does not "sell "

12 24tion, the current general (but not universal) practice of paying

4.'. royaity of 12 per minute of playing time over five sinut es **, !et ia the calculation of 22€ as the average mechanical royalty per

er the 2*****t law and presons practice. That would take care of the tees that were over 2.

here was then calculatod what the sechanical royalty would be under
***), fume by tune, applying the proposed statutory provisions to the

funer per record and on playing time. The result of this calculation se merge mechanical royalty of 35€ per record.

No Increase frua 2.4 to 35 is $94, as reported ramt any of a un samp!. mctually were diensed at less than it, as me

159

probably were, is immaterial to the calculation of the 591. The calculation
can be looked upon as expressing the statutory rate change (taking account of
the current playing time practice); or it can be regarded as a measure of
the change if, whatever the actual rate, all licenses moved up by 508 (and
the playing time provision in H.R. 2223 were taken account of).

If we had not taken account of the current practice of paying 1/24 per
minute over five ainutes, the percentage increase shown would be greater than
591. As it is, since as we understand this playing time practice is not
universal, probably we are slightly understating the percentage increase of
$98.

As to the fact that singles were excluded from the sample, two points are in order. First, their exclusion tends, if anything, to understate what the calculated percentage increase (591) would be were they to be included in the sample. This is so because there is only one tune per side on a single, on an LP, a longer band (incurring the playing time provision of H.R. 2223) subtracts from the playing time available for other bands on the same side. Second, LP's - taken by themselves • constitute a large and significant portion of total unit sales of recordings. We do not know precisely what portion, but we do know that LP's accounted for about 621 of dollar sales in 1974.

Were tapes to have been included in the sample, the results probably would have been little different. Tunes released are essentially the same as those on records (LP's in the main, we understand). And, far fever licenses on tape are at less than 24, we are told; the sechanical royalty rate, tune by tune, otherwise is very similar to, or exactly the same as, the rate for iP's.

Note that 1973 data were employed. The results could be somewhat different 16 1974 data were examined.

Exhibit 7 -- FINANCIAL IMPACTS C# PR75A) INCREASED MECHANICAL

This exhibit applies the 59t figure developed in Exhibit 6 to total mechanical royalties paid during the four-year period. 1971-1974. Totals

160

Tived at ia the exhibit are self-explanatory and are discussed in the text.

231s in this exhibit is on the effect of a 598 increase in mechanical poranty payments on U.S. recording company pre-tax profits from all sources.

Libit 8 - MECHANICAL ROYALTIES COMPARED TO RECORDING INDUSTRY

PRE- TAI NETne ws MUT AND S3 IS THE
UNI: ST1:15, 11-14

Mis exhibit shows in similar fashion the effect of the proposed 36 rate to L '

u s :1c recording industry profits (11ne 11, Exhibit s.c. p. 49). . ..di reysities are paid on the basis of recordings made and soid in

S As the exhibit illustrates, the potential impact of a higher rate un émettic profits is disastrous,

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s exibit is self-explanatory. However, it is important to recognize that the prices and deliar aartins presented are only illustrations, based on #1150 price record. The average price paid by consusers on all records la ac loss than the average $5.77 they pay for a $6.98 record.

no enibit also shows the more moderate impact on the consumer price 4 *: lal rate increase of 1/2e would have, as compared to the pr-posed le Increase

It samt be recognised that a cost increase at the producer level cannot ** * along without increases aiong the way. The increase in cost to

44.here that would result from an increase in the mechanical royalty being 2014 c by recording companies would lead to still further increases by

them in order that may be able to maintain their margins Such furtker * *** vo14 justified by the addional cost they uru14 in ur. **ch

Top liuteno, Inventorie, finan, Ire bad debts, as the like.

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Exhibit 10 -- COST TO CONSUMERS OF A 36 STATUTORY LICENSE 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 JUALBOX CASERS

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

LF ALBIN RICUS

The exhibit, with footnotes, is self-explanatory.

Exhibit 13 -- RECORO MAKERS UNIT SALFS PER RELEASE AND

BALANLVEN POINIS 19

Date in this exhibit are based on an analysis of results that were an integral part of the 1975 financial survey. (See Technical Appendix, on Extbit 5). The distribution of sales by volume is from Fon ! (5) of the questionnaire. The breakeven information is from Fon . (4), and is suamarized on the following page :

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