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 - We the creators of American music -- the composers, 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. juan, roll company might otherwise obtain a monepely), the revalty for a musical copyright is not negotiated freely in The market place today -- like virtually every other royalty 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 e. tiating ceiling, then at least it should be set high er wih 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 treath record manufactured -- 2 -- the House of Representatives, in passing the same comprehensive Copyright Beton Bill that remains before Congress today, voted to Pirm.se the 3 ceiling recommended by the Register of rights at two and one-half cents. Two and one-half rents was not a fair or adequate ceiling. It represented ut one fourth of the purchasing power that the original i reiling itself represented when first adopted in 1909. A 1-1 14, even a song that sold 24,000 1/ recordings could ant earn for its creators more than $600, 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 alty rate" ceiling for musical copyright holders should be fixed, then in 1975 that ceiling in all fairness should be at least the same relative purchasing power. Because if the tremendous inflation since 1967, we need a ceiling of at ig per selection in 1975 if Congress is meros elling at the same level as the House 3.3 revicusly. A Decade of Inflation That 2-1/2¢ ceiling was adopted as a compromise by Nuse Judiciary Subcarrittee on Copyright in 1966 on the Can. of its 1965 Hearings in which the testimony relied Jarlely on 1964 data. The House itself then ratified this .re in 1967. Compared with today, 1964-1967 was a tire very different economic conditions and dollar values in entry. Since 1964 the Consumer Price Index has risen more than 70 (and since 1967 by more than ((X). That two re-half cents today would buy only what one and onerents bought in 1964-67. 2.5 cents in 1964 I even 1967 dollars in Tolares Tents and Ly the tire this Fil Guf trext vanuary [976 (at the earliest), approximately 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 recorded song received by the record industry, and (c) adjust 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 not 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 adjustment. 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 long been issued without resort to the compulsory licensing provisions of the statute. But inasmuch as both parties know that it would be useless for the copyright holder to request more than 2 when any record company can always invoke 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 argues that a song is not even worth 24, there is no point in the copyright holder's "insisting" on the statutory ceiling because the statute will never be invoked. Thus even today, when there has been general agreement in the industry that the 66-year old 2 cent ceiling is outmoded and inequitable, negotiations on the royalty fee to be paid for most songs are still concluded at rates below that 2 cent level, with an average of 1.627 per song (less than .99 In 1965 dollars).5/ Clearly, therefore, raising the negotiating ceiling from 2 to 4 would not require any record company to increase its royalty 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 us permission to negotiate under a more realistic ceiling. As the Register of Copyrights recommended some years ago, if |