SIZE OF THE COPYRIGHT INDUSTRIES

I. THE ECONOMIC SIZE-IMPORTANCE OF THE COPYRIGHT INDUSTRIES

A. THE PROBLEM

Of what quantitative importance in the total economy of the United States are the industries that depend upon the exploitation of copyrightable material? What parts of the economy are dependent upon such material? Some measure of size is required; what logical measure is appropriate to indicate the size-importance of the copyright industries? How does the size-importance of the copyright industries compare with that of other industries?

B. THE RESULTS SUMMARY

Study of these questions has led to the following conclusions: 1. The segments of the economy which exploit copyrightable material for purposes of profit are the basis of any such investigation; these may be either manufacturing, processing, wholesale, or retail activities, and together they may be called the "copyright industries." 2. The most suitable measure of the economic size-importance of the copyright industries is the contribution which they make to the national income. This unit of measure is applicable to any level of economic activity; it also avoids duplication among the various economic levels, and thus lends itself to summation.

3. In 1954, the copyright industries, as a group, contributed an estimated $6.1 billion to the total national income of $299.7 billion. For purposes of comparison, it is noted that the copyright industries contributed more than mining or banking or the electric and gas ultilities; they contributed slightly less than the automobile manufacturing industry or railroad transportation. These comparisons are shown in table I, page 28.

4. Individual copyright industries range in size-importance from a high of $1,550 million national income originated by the newspaper publishing industry, down to $22 million national income originated by retail music stores. The economic size-importance of individual copyright industries is shown in table II, page 28.

TABLE I.-Selected national income estimates, calendar year 19541

1 From U.S. Department of Commerce, Office of Business Economics, "Survey of Current Business," July 1955, p. 14, table 13; except for copyright industries which are shown as estimated in this study.

TABLE II.-Estimated national income originated by each of the copyright industries, calendar year 1954

Bands, orchestras, and entertainers.

58

7999.

Amusement and recreation services, n.e.c.2 (operation of automatic coin-operated
phonographs).

242

Miscellaneous copyright industries..

125

Total...

6, 124

1 As set forth in the "Standard Industrial Classification Manual," Bureau of the Budget, 1945. This publication will be cited as "SIC Manual."

Parts of this code have been excluded as being noncopyright in nature. For details of the estimates in this table, see app. A, infra.

C. THE COPYRIGHT INDUSTRIES DEFINED

As such, the individual creator of literary or artistic property cannot be considered to be part of any copyright industry. Creation of such property does not imply economic importance; only if the property is exploited for profit purposes does it assume importance from the economic viewpoint. Therefore, any economic activity which exploits copyrightable material for purposes of profit should be included among the copyright industries.

The various kinds of copyrightable materials are classified in 13 categories in the copyright law. This classification is further broken down into 14 categories in the Annual Report of the Register of Copyrights and it is the major source of identification for the copyright industries. Most of these 14 categories can be more or less closely associated with accepted statistical classifications of industries that exploit such materials.

However, a number of industries which participate in the exploitation of copyrightable material for profit do not appear as registrants of copyrightable materials. These include phonograph record manufacturers and retailers; certain other users of copyright music, such as bands, orchestras, and jukebox operators; and retail outlets for books, periodicals, and music.

Parts of other miscellaneous industries also exploit copyrightable materials for profit. In order to cover these, insofar as they are engaged in exploiting such material for profit, an arbitrary addition has been made to the total size-importance of the copyright industries. (See table II, p. 28, final item.)

It should be observed that the copyright industries, as defined for purposes of this study, do not cover all commercial uses of copyrightable material. Virtually every industry makes some incidental use of such material, for example, in reports and publications and in designing, packaging, and advertising its products. The extent of such incidental uses cannot be estimated, but would probably be considerable in aggregate volume. This study, however, pertains only to those industries that are engaged in the business of exploiting copyrightable material for profit.

The list of industries shown in table II, page 28, has been developed from the 14 categories of copyrightable material specified in the 1954 Annual Report of the Register of Copyrights, together with the other groups which exploit copyrightable material to some extent. For statistical purposes, the classifications of the Copyright Office have been adjusted to conform with the Standard Industrial Classification of the Bureau of the Budget, as shown in the "SIC Manual."

D. METHODOLOGY: THE MEASUREMENT OF ECONOMIC SIZE-IMPORTANCE

The more usual measures of economic size-importance are not appropriate for measuring the size-importance of the copyright industries. "Net income" or "profitability" both fail to include firms which may be important but unprofitable. "Number of employees" does not accurately reflect economic importance: a highly mechanized industry with only a few employees may make an important contribution to the economy. "Capital investment" is not necessarily proportional to the contribution of the firm to the economy; capital may be turned over rapidly or slowly. "Total sales" ("total receipts" or "total revenues") usually includes more than the contribution of the firm to the economy, since it is the rare firm that does not purchase raw materials, components, or inventory from other firms; such purchases are reflected in the final sales prices but they do not represent a contribution of that firm to the economy. "Total sales" is particularly inappropriate as a measure of economic size-importance in situations where interdependent industries are among those to be measured; e.g., if the sales figure for

book publishers, book wholesalers, and book retailers were added, serious duplication would exist in the final total. It is not to be inferred that the units of measure discussed in this paragraph are useless for other purposes; it is only concluded that they are not suitable for measurement of the size-importance of the copyright industries.

The concept of "national income" may be used to measure the economic size-importance of an individual industry in the form of "national income originated" by that industry. "National income" is defined as "the aggregate earnings of labor and property which arise from current production." It may be measured by adding together the payments which are made to the factors of production. These payments comprise: (a) the compensation of all types of workers; (b) interest; (c) rent, including payments for the use of copyright property; and (d) profits. Only these categories of payment reflect unique and unduplicated contributions to the current production process, and they afford the basis for a unit of measurement of economic size-importance which is comparable as among industries and which may be summated without duplication to indicate the size-importance of a group of industries. The figures in table II, page 28, have been estimated for the various copyright industries on the basis of this concept.

E. METHODOLOGY: METHODS OF ESTIMATION

In general, the annual estimates of national income of the Office of Business Economics of the Department of Commerce form the basis of the size-importance estimates of the copyright industries. Because of the varying kinds of data available, different methods have been used for different copyright industries. In two cases-radio broadcasting and television, and motion pictures-the estimates of the OBE are used without change. In other cases it has been necessary to extract the copyright industries from the industrial categories shown by the OBE. Of greatest importance as guides to the breakdown of the OBE national income figures have been the "value added by manufacture" (from Bureau of Census sources) and "total annual wages paid" (from Bureau of Labor Statistics sources). In some instances it has been necessary to devise special techniques to overcome the paucity of data.

It has been necessary to choose the calendar year 1954 for these estimates because the "1954 Census of Business" (Bureau of the Census) is the most recent available.

Details of the methods of estimation applied to each of the individual copyright industries are set forth in appendix A, infra.

II. REVENUES OF CREATORS OF COPYRIGHTABLE MATERIALS

A. THE PROBLEM ANALYZED

As a part of the entire national income originated by the copyright industries, what contribution is made by creators of copyright material? The amount of this contribution will equate with the revenues received by creators in exchange for all creative effort which finds its

a Department of Commerce, Office of Business Economics, "National Income, 1954," p. 1. "National income originated" is a refined form of the "value added by manufacture." Cf. Department of Commerce, Office of Business Economics, "National Income, 1954," p. 176, footnote 1.