Joint Statement of the AMERICAN GUILD OF AUTHORS AND COMPOSERS NATIONAL MUSIC PUBLISHERS ASSOCIATION submitted to the Judiciary Committees of the U. S. Congress September 1975 - the composers, We the creators of American music songwriters, lyricists and publishers of musical works respectfully petition Congress to permit us to seek a fair compensation for the recording of our work. PART I. A FAIR CEILING ON OUR RATE OF COMPENSATION: 4 CENTS In the past we have sought the right to bargain freely with the record industry without any statutory ceiling on our earnings. The authors of books and the composers of dramatic musical works have that unrestricted bargaining right; so do recording engineers and musicians and manufacturers. There is, after all, no monopoly, no shortage of supply, no public utility characteristic, affecting the song writing and song publishing business. But that right to bargain freely has been denied us. - In the past we have sought the right to share in the enormous price increases obtained by the record industry for recordings of our songs, by converting that statutory ceiling on our royalty rate if there must be one -- from a flat cents per unit figure to a percentage of record prices. Recording artists and producers obtain this kind of percentage share of record prices; so do musical copyright holders in Europe and other countries. But, for U.S. musical copyright holders, that right to a fair sharing has been denied. Instead we must continue to bargain with the giants of the record industry under a one-sided statutory ceiling that arbitrarily fixes the dollar maximum we can hope to receive but does not assure us of any minimum. Because Congress adopted in 1909 a system of compulsory licensing for the mechanical reproduction of music (for fear that one 2. piano roll company might otherwise obtain a monopoly), the royalty for a musical copyright is not negotiated freely in the market place today -- like virtually every other royalty or rate of earnings in this country. But if it is not now feasible to abolish this system entirely, if "political reality" makes it necessary for the 94th Congress to fix our negotiating ceiling, then at least it should be set high enough to give ample range for the bargaining process. In 1967, after 58 years of our being required by statute to accept a ceiling of no more than two cents a song for each record manufactured -- 2!-- the House of Representatives, in passing the same comprehensive Copyright Revision Bill that remains before Congress today, voted to compromise the 3 ceiling recommended by the Register of Copyrights at two and one-half cents. Two and one-half cents was not a fair or adequate ceiling. It represented about one fourth of the purchasing power that the original 2 ceiling itself represented when first adopted in 1909. At 2-1/24, even a song that sold 24,000 1/ recordings could not earn for its creators more than $6007 to be divided among the composer, lyricist and publisher in accordance with their private contractual arrangements.2/ But if 2-1/2 in 1967 did in fact represent the House's considered judgment as to where the "mechanical royalty rate" ceiling for musical copyright holders should be fixed, then in 1975 that ceiling in all fairness should have at least the same relative purchasing power. Because of the tremendous inflation since 1967, we need a ceiling of at least 4 per selection in 1975 if Congress is merely to Fix the ceiling at the same level as the House did previously. A Decade of Inflation That 2-1/2 ceiling was adopted as a compromise by the House Judiciary Subcommittee on Copyright in 1966 on the basis of its 1965 Hearings in which the testimony relied largely on 1964 data. The House itself then ratified this figure in 1967. Compared with today, 1964-1967 was a time of very different economic conditions and dollar values in this country. Since 1964 the Consumer Price Index has risen by more than 70% (and since 1967 by more than 60%). That two and one-half cents today would buy only what one and onehalf cents bought in 1964-67. To equate 2.5 cents in 1964 dollars or even 1967 dollars in today's purchasing power now requires more than 4 cents; and by the time this bill could take effect next January 1976 (at the earliest), approximately 4-1/2′′ will be required to match that 2.5 cents.3/ 3. During this decade of inflation, as record companies doubled their price per song without one cent of the increase going to the composer, as the standard rate per 3 hour recording session for musicians increased 64%, and as record artists, producers and company officials obtained higher and higher wages, salaries and royalties, the average royalty per recorded selection paid to the creators of the music (the only group unable to obtain an inflation adjustment without Congressional action) actually fell by more than one-third. With the 2 ceiling still in effect, the average royalty fell, in terms of 1965 dollars, from 1.51 cents per song in 1965 to less than .99 cents per song in 1974. 4/ For Congress to allow this steadily shrinking real rate of compensation for music creators and their families to continue, by freezing the statutory ceiling at the level originally approved by the House in the 1965-67 period -while leaving record companies, the rest of the music industry and virtually all other segments of the economy free to increase their prices and earnings -- would be grossly unfair and in our society unprecedented. Congress has recognized the ravages of inflation in Social Security, in civil service and military pensions, in governmental salaries and in other legislation; and it cannot in good conscience fail to take account of it here, particularly in setting not a fixed rate but merely a ceiling rate. A Reasonable Base for the Tribunal If in the future a Copyright Tribunal, as proposed in Chapter 8 of the pending bill, is to review periodically the mechanical royalty rate ceiling set by Congress in order to consider subsequent developments, then Congress has a special obligation to make certain that the basic level it now fixes represents the fairest figure as of the date of the law's enactment. If the bill soon becomes law, the Tribunal can at its first review take into account any increase or decline in the ceiling's value or other developments occurring between now and then. But the unprecedented inflation since 1965 -- which before this bill becomes law will have cut the value of the 2-1/2 based on that year's data almost in half -- is for this Congress to take into account. Fixing a 1975 ceiling below 4 or 4.5 cents would not only give musical copyright holders less than the House was willing to give them previously but also give the Tribunal an artificially and inequitably low base for its future calculations. We have not the slightest doubt that, had this bill become law a decade ago, as intended, with the 2-1/2¢ ceiling included, a Copyright Tribunal meeting today would a take note of the 72% increase in the cost of living, (b) take note of the even greater increase in the price per recried song received by the record industry, and (c) adust the ceiling to at least 4 in order to give musical creators an opportunity to negotiate for no less than Congress had intended to give them originally. Although the law was art enacted a decade ago, there is no reason why the creators of music should be penalized by this prolongation of the legislative process. Today Congress and its Committees must act as that "tribunal" for purposes of this simple inflation adtustment. A Ceiling, Not a Rate Bear in mind that whatever figure is adopted by Congress will serve merely as a ceiling on negotiations and not as the actual rate paid. Musical copyright holders are of course willing to negotiate with any and all legitimate record companies for mechanical licenses on any and all Compositions (and would do so even in the absence of statutory compulsion); and thus virtually every license has ing been issued without resort to the compulsory licensing provisions of the statute. But inasmuch as both parties w that it would be useless for the copyright holder to request more than 2 when any record company can always inv ke the statute and thereby obtain a compulsory license at that level, all negotiations (with the customary exception for those few involving compositions of extended length) necessarily take place beneath that absolute ceiling. Similarly, if the record company arques that a song is not even worth 1. there is no point in the copyright holder's "insisting" on the statutory ceiling because the statute will never be lewked. Thus even today, when there has been general #greement in the industry that the 66-year old 2 cent ceiling is outmoded and inequitable, negotiations on the royalty fee jaid for most songs are st99 concluded at rates felow 2mert level, with an average of 1.62 per song (Tesi In 1965 dollars).5/ Clearly, therefore, raising the negotiating ceiling from 2 to 4₫ would not require any record company to increase ita reyalty payments to that level or by that same amount or percentage. Nor would it assure composers and publishers of receiving any increase of any amount. It would merely grant * permission to negotiate under a more realistic ceiling. As the Register of Copyrights recommended some years ago, if The main issue that is presented here, with respect to a variation from the 21-cent rovalty ceiling which the Congress enacted 8 years ago now, concerns the matter of inflation that has taken place since then. I would emphasize again that I am talking here about a rate, a royalty rate, not aggregate numbers. If one tried to compare, say the price index with aggregate numbers, one finds that in any growing or expanding area, the aggregate numbers will go far beyond the price index. It is a meaningless comparison. For instance, if one went back to 1909, and studied the automobile industry, I would be surprised if automobile sales today are not a thousand, or many thousand times over what they were in 1909. To say that the cost of living has gone up sixfold, whereas automobile sales have increased a thousand fold. means that the automobile prices ought to be where they were in 1909, is, I think, a meaningless comparison. Here, we are talking about a rate, which is a price, which is a unit cost, and the royalty rate, I think has to be looked upon in that perspective. Now, if I may turn just briefly to the charts. The first chart I haveand by the way. I am only showing here only some of the charts from the numbers that are included in this presentation for you. But here we see a chart, the Consumer Price Index from 1965 through July 1975. You see a phenomenon which is just as disturbing, I am sure, to every member of this committee as it is to most citizens in the United States: we have had a very serious inflation in this country. Prices have risen very substantially, to an unprecedented degree in the entire peacetime history of this country. Since 1965, when testimony was presented on this issue before this committee, we have had an increase, of some 72 percent in consumer prices. I also did a projection for January 1976 on, I think, the unrealistic expectation when I did this that the bill might be enacted and implemented by then. We would expect about a 75-percent price increase from 1965 to January 1976. Or if we looked at the series on any other basis, we find a very substantial amount of inflation. Now, if I may turn to another chart. Here we find Chart No. 4. It is entitled Purchasing Power in July 1975, and in January 1976, of the 21-cents royalty ceiling rate, either in 1965 dollars, when the testimony was presented before this committee in 1965 prices, and in 1967 dollars, when the 21-cents royalty rate was enacted. Let's look at just 1967; we find that in July of 1975, 2% cents enacted in 1967 will now buy only 1.54 cents of the same goods and services as at that time. In other words, the buying power of that 21, cents, in those prices, has shrunk to about 11, cents, Roughly, the same thing would be true next January. So we see what has happened in terms of inflation. Now, the next chart is chart No. 3. I reversed these. This shows, gentlemen, the key element that we are proposing here, namely that if the 21 cents in 1967 were considered an adequate ceiling rate of payment in terms of its command over goods and services, then that 21 cents is hopelessly inadequate today, because of rising prices, If we looked again at only 1967, if today this Congress said we want to preserve that 2 cents we enacted in 1967, and wanted to have the same buying power, in July 1975, the ceiling would need to be 4.1 cents per selection. Next January, it would need to be 42 cents. So here we we the ravages of inflation in terms of the in pact. This is why we are saying, in a meaningful sense, that a 4 cent plus ceiling *y is new life asonable terms, |