way into commercial channels. Estimation of the amount of this contribution in each of the copyright industries, and in the copyright industries as a group, is the problem encountered in section II of this study. In the final analysis, all copyrightable materials are created by individuals. However, they may be created: (a) on an independent basis; (b) under a free-lance contract with others; (e) under an employee-for-hire contract with others which provides for specific creative services; or (d) under an employment contract for generalized services which contribute to or enhance the copyrightable elements in other copyrightable materials. Independent (ie., nonemployed) creators have full control of their created works, and they may lease or sell them at will. Under free-lance contracts, creators usually agree to create a certain work for which they will be paid a specified percentage or amount, either as purchase price or royalty, or both. Under employee-for-hire contracts, the employee usually transfers all rights in his creative work to his employer. This may be done by an employee hired to do creative work specifically or it may be done by an employee hired to do more generalized work which contributes to the copyrightable elements in other creative work. Creative work done under employee-for-hire contracts may be called "creation by a corporate author." Within this framework, three major groups may be recognized in estimating the revenues of creators. Group I may be called "commercial users": commercial organizations that purchase or lease copyrightable materials for commercial use, paying the individual or corporate creator either an outright purchase price or a continuing royalty, or a combination of the two. Commercial users are a major source of revenues paid to individual creators or their agents. Industries in this group may also be called the "commercial copyright industries." Group II may be called "creator-users": commercial organizations which employ individual creators on an employee-for-hire basis, taking ownership to the works created by the latter; they also create in a corporate sense, i.e., through editing, arranging, etc., they make creative additions to the work of the individual creators whom they hire. For example, through editing, arranging, combining, etc., publishers of a magazine add to the individual creative work of story authors and advertising agencies and obtain copyright on the entire magazine. Industries in this group may also be called the "creative copyright industries." Group III comprises "individual creators," not employees-for-hire, who handle their copyrightable material as individuals and receive payment for the commercial utilization of that material frequently, although not always, directly from commercial users and creator users. B. METHODS OF ESTIMATION Actual amounts paid by commercial users (group I) for the right to exploit copyrightable materials may be used directly as a measure of the revenues of creators. Similarly, the actual amounts received by individual creators (group III) for the commercial use of their copyrightable works may be used directly. "Double counting" as between those two groups must be avoided. Creator-users (group II) present a different measurement problem. When an organization hires employees for specific creative tasks, and also has on its staff other employees who in the course of their more generalized duties increase the copyrightable product of the specific creative personnel, and also has on its staff still other employees who carry on no direct or indirect creative work but in the course of generalized organizational or administrative activities enhance still further the values of contributors, editors, and arrangers, then the question arises as to just how much the organization as a whole "creates." For purposes of this study, the contribution of such a firm (or industry) to the national income has been accepted as the most appropriate basis for measurement of payments for creative work. Contribution to national income includes payments by the firm or industry of "compensation of employees, profits of corporate and unincorporated enterprises, net interest, and rental income of persons," the last item including "royalties received by persons from patents, copyrights, and rights to natural resources.' ." The estimates of revenues of creators for group II industries are based on the contribution of the industry to national income as estimated by the Office of Business Economics of the Department of Commerce. In adding the estimates of the three groups in order to obtain a total figure for the revenues of creators, it is possible to combine the three estimates without duplication. All three of the groups include the compensation of employed and individual creators, and group II includes additional revenues for the "corporative creativity" which inheres in those industries. The payments of groups I and II are largely duplicated in the receipts of individual creators or other wage and royalty recipients. In order to avoid double counting, revenues received by individual creators (group III) may not be counted to the extent that they are already measured by the payments made to individual creators by the other two groups. However, individual creators (group III) receive directly certain payments which are not included among the estimates of the payments made by the other two groups. C. THE RESULTS-SUMMARY The following table summarizes the estimates of creators' revenues in the three groups in 1954: These figures are estimates of the revenues received by creators in 1954, in the form of wages, salaries, profits, interest, and royalties, Department of Commerce, Office of Business Economics, "National Income, 1954," pp. 1 and 59. from the assignment or contractual commercial utilization of copyrightable materials. 1. Revenues of creators from commercial users (group I) This group includes the industries which purchase or lease copyrightable material for commercial use. They may purchase the copyright outright, pay continuing royalties, or make payments which combine both methods. These industries add little if anything to the copyrightable content of the materials which they purchase or lease. They are primarily organizations which arrange for and promote the commercial utilization of materials which they obtain from other persons; they "exploit" copyrights in a commercial and business sense. It is recognized that some of the industries included in this group may from time to time enhance the copyrightable elements of the materials which they utilize. However, the creative element in their operations is not of major importance, and for purposes of this study, they are presumed to add nothing creative to the copyrights which they lease or purchase. The categories of industries which purchase or lease copyrightable materials for commercial use are book publishers, phonograph record manufacturers, theatrical producers, music publishers, broadcasters and networks, and bands, orchestras, etc. The payments made by each of these groups for the commercial use of copyrightable materials are explained in detail in appendix B, and are as follows: 1 Book publishers (excluding subscription reference books) '. 1 Included in group II estimates, p. 34, infra. * Included in group III estimates, p. 34, infra. 2. Revenues of creators from creator-users (group II) Millions $56.4 2.7 16.9 20.0 2.0 98.0 The group of creator-users present the most difficult problems of estimation of any of the three groups. Included in this group are commercial organizations which are involved with copyrightable material in three relationships: (a) They employ individuals who as employees-for-hire create copyrightable material which becomes the property of the employer; (b) They purchase publication rights to materials created by individuals acting independently or through agents; (c) They create copyrightable material in a corporate sense; i.e., they combine the creative work of individuals produced either as free agents or as employees and in the course of combining these works they add to them in such a way as to make a new copyrightable work. The payments which these organizations make to individual creators, as wages, or as purchase prices for copyrightable material, or as royalties, include only a part of the payments for creative work made by them. In addition, the payments which they make to editors, compilers, etc., in fact, all the payments made by them as contributions to the national income (i.e., wages, salaries, rents, and royalties), may be counted as payments for creative processes. In this situation, the estimates made for the contributions to national income of these industrial groups may be used as a starting point to estimate the volume of creators' revenues. The categories of industries in this group, which are creators both in the sense of employing individuals for their creative efforts and also in the "corporate" creation of copyrightable materials, are newspaper publishers, periodical publishers, subscription reference book publishers, miscellaneous publishers, greeting card publishers, commercial photographers, advertising agencies, newspaper syndicates, and motion picture producers. "Contribution to national income," which is used as a starting point for estimating group II revenues, excludes payments by an industry (costs) which are necessarily included in the selling price but which, nevertheless, are not a contribution to the national income because they are paid for materials purchased from others. As an example, newsprint is purchased by a newspaper publisher as a part of the process of publishing a newspaper, but it is not a part of the contribution which that publisher makes to national income. As stated supra, note 2, the contribution to national income, as estimated by the Office of Business Economics of the Department of Commerce, is a refined form of the "value added by manufacture" as estimated by the Bureau of the Census. It is this refined form of "value added by manufacture" which is used as a basis for measuring the payments made by group II industries for their creative effort. The contributions to the national income made by the industries in this group may be counted as a measure of revenue for creative effort, to the extent that each of the industries (a) acts as a creator of copyrightable materials in the course of its entire business operation and (b) makes payments to individual creators on a free-lance or an employee-for-hire basis. The estimates for group II are explained in detail in appendix B and are as follows: 3. Payments for the creative effort of individual creators (group III) In contrast to groups I and II, figures for which are estimated in detail in appendixes A and B, group III represents groups of individual creators to whom payments are made rather than groups of users by whom payments are made. It includes payments to composer-lyricists by performing rights' organizations and payments to individual creators not elsewhere classified: sculptors, painters, etc. Of course, by far the largest part of the revenues received by this group have already been included in the estimates in groups I and II. Revenues of individual creators from performing rights' organiza- Details of the estimates of creators' revenues for each individual III. APPENDIXES APPENDIX A ESTIMATES OF THE ECONOMIC SIZE-IMPORTANCE OF INDIVIDUAL CONTENTS Page Theaters and theatrical producers, except motion pictures. Bands, orchestras, and entertainers _ _ Amusement and recreation services. |