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(1) Consumer Price Index (CPI) for July 1975, U.S. Department of Labor. (2) The value for 1975 was obtained by multiplying 2.5¢ by 0.582, the ratio of the CPI for 1965 to the CPI for July 1975. (3) The value for 1975 was obtained by multiplying 2.5¢ by 1.717, the ratio of the CPI for July 1975 to the CPI for 1965. (4) For current dollar figure, survey by Robert R. Nathan Associates of royalty payments made through the Harry Fox Agency in the fourth quarter of 1974. This survey covered the sale of 145 million recorded songs. The 1965 figure is based on a similar survey for the second quarter of 1965, which covered 32 million songs. The 1975 survey included the twenty largest publishers for each of the three largest record companies. The value for 1975 in 1965 dollars was obtained by multiplying 1.62¢ by 0.612, the ratio of the average CPI for the second quarter of 1965 to the average CPI for the fourth quarter of 1974. (5) Contract scale of American Federation of Musicians (Local 802, New York). (6) As reported by the Federal Pay Advisory Commission. (7) Prices of the top 200 best selling albums as reported in Billboard, the industry trade journal, for May 5, 1965, and January 4, 1975. It should be noted that the price of a typical tape in January 1975 was $7.98. Tapes account for about 30 percent of the total sales of all recordings, thus the average price per recording is more than $7.25. (8) Based on a count of songs on the best selling albums listed in Billboard. (9) Column (7) divided by column (8). (10) 2.5¢ divided by column (9). (11) Values are for 1964 and 1974. For 1974: Record World, June 7, 1975, page 3. For 1964: Billboard 1972-73 International Music-Record Directory, page 9. (12) Values are for 1964 and 1974. As stated by the Recording Industry Association of America in material submitted to Congress. RIAA also alleges that royalty payments totalled $77.1 million in 1973. However, it appears that the RIAA data overstate total royalty payments for the following reasons:
a) In the 1974-75 International Music-Record Directory, Billboard made the following estimates for 1973:
292 million record albums and tapes sold
193 million single records sold
$58.4 million maximum royalties on albums and tapes
$ 66.1 million maximum royalties
amounted to more than $66.1 million in 1973, or $11 million less than the RIAA figure.
b) in their news release about 1974 sales (Record World, June 7, 1975) the RIAA indicated that the total dollar volume of recording sales rose by more than 9 percent in 1974, but that the number of units sold decreased as a result of the sharp rise in record prices. Because royalties depend on the number of units sold, not on the total dollar volume, total royalty payments would have fallen in 1974, not risen by 8.3 percent as alleged by the RIAA. The data for 1974 show the obvious fallacy in the RIAA argument that composers and publishers have benefitted greatly from the increase in the dollar volume of record and tape sales. Much of this increase, especially in recent years, has been the result of higher prices, not of an increase in the number of units sold. (13) Combined author, composer, and lyricist dues-paying, workpublished memberships of American Society of Composers, Authors, and Publishers (ASCAP) and Broadcast Music Incorporated (BMI), on June 30, 1965 and June 24, 1975. (14) For the values in current dollars, column (11) multiplied by column (12) divided by column (13). The value for 1975 in 1965 dollars was obtained by multiplying $2,362 by 0.582, as in (2). (15) For 2.5° in 1965, from column (10). For 4.0¢ in 1975, obtained by multiplying 4¢ by 10 (songs per album), and dividing by $6.98. (16) For 4.0¢ in 1975, obtained by multiplying 4¢ by 0.582, as in (2). (17) 15¢ divided by $6.98. (18) 154 divided by $3.00 ($6.98 minus $3.98).
ROBERT R. NATHAN ASSOCIATES, INC.,
Washington, D.C., October 24, 1975. Congressman ROBERT KASTENMEIER, Rayburn House Office Building, Washington, D.C.
DEAR CONGRESSMAN KASTENMEIER: I testified on September 11, 1975, before the Subcommittee on Courts, Civil Liberties, and the Administration of Justice of the Committee on the Judiciary on behalf of the National Music Publishers' Association. During this testimony Congressman Wiggins asked for my evaluation of Exhibit E on page 13 of the summary statement of John D. Glover on behalf of the Recording Industry Association of America (RIAA). This exhibit is titled "Mechanical royalties paid per released tune outpace inflation and median family income, 1963 vs. 1972." I had not seen this exhibit prior to the hearing of September 11, and thus I was not able to provide an evaluation of it at that time.
I have now had an opportunity to analyze this exhibit and the supporting material in the full statement by John D. Glover. I believe that this exhibit is very misleading. There are two general reasons for my belief :
(A) Questions about the exhibit itself
(B) Omission of important factors relevant to the Subcommittee's consideration of this matter.
With regard to (A), in order to calculate mechanical royalties paid per released tune, obviously it is necessary to have data on total royalty payments and on the number of released tunes. We do not have suficient data to estimate the total amount of royalties actually paid. However, we believe that the estimates presented by Mr. Glover overstate the level of royalty payments in recent years. On page 43 of his statement Mr. Glover estimates that total mechanical royalties paid by U.S. record makers were $78.2 million in 1972. But even if all royalties were paid at the 2¢ ceiling rate (which they are not, as shown conclusively in the joint statement of the American Guild of Authors and Composers (AGAC) and the National Music Publishers Association (NMPA), and confirmed by data in Mr. Glover's analysis), total payments could not have amounted to more than $62.7 million in 1972, which is $15.5 million less than Mr. Glover's estimate
Regarding the number of releases, Mr. Glover cites Billboard as the source, but no dates are given, thus I have been unable to examine the validity of his statistics on this.
It appears that Mr. Glover may have purposely selected 1963 and 1972 as the years for comparison in order to be able to draw the conclusions he desired. Accepting for the moment Mr. Glover's data on total royalty payments, the conclusions differ dramatically if more relevant points of comparison are used. For example, over the last three years for which data are available : Consumer Price Index has risen by 30 percent." Median family income has risen by 25 percent.” Record prices have risen by 28 percent. Record sales have risen by 26 percent."
Record companies' profits have risen by 42 percent (by the industry's own data, on page 157 of Mr. Glover's statement).
Royalties have risen by only 2.6 percent (based on the data on page 54 of Mr. Glover's statement). If the number of releases has remained approximately constant, then royalties per release would also have risen by only 2-3 percent.
It is especially misleading to make statements about inflation using data no more recent than 1972. In the last 10 years the Consumer Price Index has risen by 73 percent, nearly twice the 37 percent shown by Mr. Glover in Exhibit E.
1 In the 1973-74 International Music-Record Directory, Billboard made the following estimates for 1972, from RIAA date: 277 million record albums and tapes sold ; 183 million single records sold.
With 10 songs per album or tape, 2 songs per single record, and a maximum royalty of 2¢ per song: $55.4 million maximum royalties on albums and tapes ; $7.3 million maximum royalties on single records ; $62.7 million maximum royalties.
? As reported by the Bureau of Labor Statistics.
3 U.S. Department of Commerce. Bureau of the Census, Current Population Reports, Series P. 60. No. 99, July 1975. table 2, p. 7.
4 Of the Billboard list of 200 best selling albums for Jan. 15. 1972. 81 were listed at $1.98. 110 at $5.98. and 9 at $6.98. yielding an averda ke $5.62. On the Billboard list for Jan. 4. 1973 1 was listed at $3.98, 23 at $5.98. 157 at $6.98. 5 at $7.98, 1 at $8.95. 5
98 and 2 at $12.98. Vielding an average of $7.17. 6 From $1.744 million in 1971 to $2,200 in 1974. as reported on p. 6 of the Billboard 1975-76 International Music-Record Directory.