61 The amounts of payment.-It is indicated that writers for motion. pictures, television, and radio received about $25 million in 1954. Of this, it is estimated that $8.6 million went to motion picture writers, 62 leaving approximately $15 million as the revenues of writers for television and radio. No statistical material has been found as a basis for estimating the revenues of composer-lyricists in their work for radio and television broadcasters. Therefore, an amount of $5 million is arbitrarily estimated for the year 1954. Therefore, the total payments are estimated to be $20 million. For an estimate of the performance royalties received by composerlyricists from the motion picture industry, see infra, appendix B, group III-a, p. 57. (e) Bands, orchestras, and other similar performers of musical compositions Forms of payment. These commercial users of copyrighted musical materials make no direct payments to composer-lyricists. The payments are made by restaurants, hotels, theaters (except motion picture theaters), etc., which are licensed by a performing rights' organization or by individual copyright holders to perform the musical compositions under their control. Amounts of payment.-Performing royalties are paid under contract to performing rights' organizations and will be shown among the payments made by those organizations to composer-lyricists in group III (appendix B, group III-a, p. 57, infra). (f) Music publishers Method of payment. In general, music publishers hold the copyrights to musical materials in accordance with the provisions of contracts with the composer-lyricists. The contract form approved by the SPA for use by its members provides that not less than 50 percent of all royalties received by the music publisher be paid to the composer-lyricist, excluding payments made to the publisher by performing rights organizations, such as ASCAP. Amount of payment.-In 1954 the gross receipts of sheet music publishers were $10.8 million.63 However, this census classification does not include many small publishers and cannot be considered inclusive of the music publishing business. Therefore, the figure for gross receipts has been arbitrarily increased to $12 million. In 1954, a small sampling of music publishers revealed that 78 percent of their total income consists of royalties. Applying this percentage to the gross receipts of $12 million indicates that music publishers received about $9.4 million from royalties. Of this amount, some $5.4 million has already been accounted for in the form of "mechanical royalties" (see supra, p. 49), leaving $4 million from other Variety, Dec. 7, 1955; this is a report on the 1955 earnings of members of the Writers Guild of America. From this report it can be gleaned that the total for 1954 was about $25 million. Variety, May 16, 1956. U.S. Census of Business, Bulletin MC-27A, p. 13. MPPA memorandum submitted to the Department of the Treasury re personal holding company taxes. royalties, excepting performing royalties (for which, see infra, app. B, group III-a, p. 57). Of this $4 million, it is estimated that 50 percent or $2 million went to composer-lyricists for the commercial utilization of their copyrighted works. GROUP II. REVENUES OF CREATORS FROM CREATOR-USERS (a) Newspaper publishers Methods of payment.-Newspaper publishers make direct payments to their editorial staffs, to columnists, cartoonists, and feature writers. They also make indirect payments to all those employees who assist in creating the newspaper as an entity, in contrast with the copyrightable materials which are obtained separately. Amount of payment. It has been estimated that newspaper publishers in 1954 contributed $1,550 million to the national income.65 Since the end result of this entire contribution to the national income is the newspaper as a created copyrightable entity, this figure may be used as a basis for measuring payments for creative effort. It is not known the extent to which the newspaper publishing industry operates its own printing plants, or carries on other activities which are not a part of the creative process in the copyrightable sense. However, the $1,550 million contribution to national income has been arbitrarily reduced to $1,000 million to account for such activities. (b) Periodical publishers Methods of payment.-Periodical publishers purchase literary materials for at least first serial publication from authors; they usually copyright these materials under their own name without separate copyright notice on the individual contributions. However, any sophisticated author will, through his agent, make every effort to retain all rights in the property other than the periodical publication rights. The payments made to authors for the periodical publication of their creative works do not include the contribution to the final copyrightable periodical made by all others than the contributing authors. Staff members who produce columns, etc., on an employee-for-hire basis, and editors, in addition to the entire operation which produces the copyrightable periodical, all make a contribution to the final product. Amount of payment.-It has been estimated that the contribution of the periodical publishers to the national income in 1954 was $576 million. The value added by manufacture in the periodical publication industry was $796 million in 1954. Since "value added by manufacture" is a less refined form of "national income originated" these two figures appear to be in the proper relationship. The figure of $576 million will be accepted as a basis of measurement for the contribution of periodical publishers to the revenues of creators. As in the case of newspaper publishers, immediately supra; it is not known the extent to which periodical publishers carry on business operations which are not properly a part of the copyrightable creative process, such as printing. The $576 million figure is arbitrarily reduced to $450 million to account for such activities. Supra, pp. 28, 35 ff. (c) Subscription reference book publishers Methods of payment.-Publishers of encyclopedias and other reference books frequently makes sales on a subscription basis and on a time-payment plan. Hence the figures for sales may not correspond to receipts and the receipts of publishers in this group may not be wholly comparable to the receipts of book publishers who sell primarily through distributors and/or retailers. Compilers of reference books both pay for the creative work of contributors and create in their own right as editors and compilers. Consequently, the national income originated by such publishers may be used as a basis for estimating the payments made for creative effort. Amount of payment.-The sales of subscription reference books at the publisher level was 19.2 percent of the total publishers' sales in 1954.67 National income originated by all book publishers in 1954 is estimated at $390 million. If subscription publishers originated national income to the same extent as they made sales at the publishing level, then 19.2 percent of $390 million, or about $75 million, would be the amount of payment for creative effort in that part of the publishing industry. This total includes the $13.4 million paid to authors by publishers of subscription reference books, as estimated supra in appendix B, group I-a, page 48 but not included in the estimate of payments by book publishers. The $75 million figure has been arbitrarily reduced by $10 million to account for possible noncreative activities on the part of subscription reference book publishers. (d) Miscellaneous publishers (excluding music publishers) Methods of payments. This group of industries includes all establishments primarily engaged in miscellaneous publishing activities not elsewhere classified whether or not engaged in printing. Amount of payment.-For purposes of this study, it is assumed that about 50 percent of the contribution of this group to the national income is from printing and other noncreative activities rather than publishing activities. The total contribution to national income of the group is estimated at $109 million;69 therefore, the amount of payment for creative effort is arbitrarily set at $50 million. However, the amount paid to composer-lyricists by the music publishing industry has already been estimated at $2 million.70 This should be deducted from the total figure of $50 million, leaving $48 million for the payments to creators by this group of creator-users. (e) Greeting card publishers Methods of payment. Greeting card publishers frequently maintain their own printing plants in addition to designing and promoting the sale of the product. Amounts of payment.-It is estimated that the contribution of this group to national income was $95 million." This has been arbitrarily decreased by $25 million, the reduction representing national income contributed from activities other than publication. Therefore, a Supra, note. 56. This estimate includes the music publishing industry. See supra, app. B, group I-1. "Supra, pp. 28, 35 ff. 46479-60- -5 figure of $70 million will be used as a measure of payment by this industry for creative effort. (f) Commercial photographers Methods of payment.—It is not known the extent to which commercial photographers conduct their own enterprises as creators of copyrightable material and the extent to which they are employees-for-hire of corporate or other forms of business organizations. However, presumably, almost the entire contribution of commercial photographers to the national income will be reflected in wages paid out or profits made by one or the other form of commercial photography. Amount of payment.-Therefore, the total contribution of commercial photographers to the national income, or $74 million,72 may be used as a measure of the payments to creators in that industry. (g) Advertising Methods of payment. The advertising industry is paid by clients to prepare and place advertising matter in various advertising media, primarily newspapers, magazines, television, and radio. To a large degree the payments made in this process are for creative, artistic, and literary talent employed to produce advertising copy and executive salaries to individuals who supervise the process and maintain relationships with advertising clients. A portion of the advertising copy placed in all media is copyrighted and most of it is copyrightable. Therefore, the contribution which the advertising process makes to the national income may be used as a measure of the revenues for creative effort in this industry. Amounts of payment.-The contribution of advertising to the national income has been estimated at $716 million 73 and this will be used as a basis for measuring the payments by the advertising industry for creative efforts. The extent to which the industry engages in activities other than those which properly contribute to the creation of copyrightable materials is unknown. However, the $716 million figure is arbitrarily reduced to $600 million to account for such activities. (h) News syndicates Methods of payment.-The news syndicate is made up primarily of a reportorial staff with necessary administrative personnel, using leased wires for communication. 74 Amounts of payment.-The total contribution of news syndicates to the national income is estimated at $64 million. This figure, for purposes of this study, is arbitrarily reduced to $50 million, the deduction being for national income contributions from other than creative aspects of the industry. Therefore, $50 million will be used as a measure of payments to creators for this industry. (i) Motion picture producers Methods of payment.-In motion picture production creative material from both storywriters and composers is used. Motion picture producers employ creative talent both on an employee-for-hire basis and on a freelance basis. However, the business contracts for the writing and adaptation of story material between the Association of Mo 72 Supra, pp. 28, 40. 73 Supra, pp. 28, 42. 74 Supra, pp. 28, 43. tion Picture Producers and the Writers Guild of America provide almost exclusively for employees for hire and it is only in unusual cases that freelance contracts are used. Of course, motion picture producers purchase rights to story material from book publishers who hold copyrights to novels, stories, etc. In most of these cases, a large portion of the purchase price goes to the original author; generally a book publisher retains only the equivalent of an agent's 10 percent fee. As to the use of music by motion picture producers the usual practice is to employ composer-lyricists on an employee-for-hire basis. The alternative is to purchase motion picture rights to musical compositions; in practice this is done by contracting with the music publisher (copyright owner) through the instrumentality of the Harry Fox office. When purchases of music are made through this latter method the transaction is frequently not an arm's-length transaction because of the fact that music publishers are at times either wholly or partially owned by motion picture producers. Amount of payment.-The motion picture industry has been estimated to have a "cost of motion picture production" to be "in excess of $500 million" in 1954.75 It is also estimated that 5 percent of the "average production budget" is paid for story costs. Presumably this includes all payments to writers and adaptors of story material, and payments made to owners of copyrights for story material which producers lease or purchase for motion picture utilization. If these figures were to be used for a basis of estimating the payments to creators, 5 percent of $500 million would result in an estimate of $25 million. However, this fails to include any payments to motion picture producers for their activity in creating the final product of the motion picture production industries, i.e., finished, copyrightable, motion pictures. The national income originated by the motion picture industries is estimated to be $917 million." The estimate includes all parts of the motion picture industry; i. e., production, distribution, and exhibition. In order to be helpful in estimating the revenues of the creators of motion pictures, it will be necessary to make an estimate of the national income originated by the production of motion pictures, excluding distribution and exhibition. The Census of Business for 1954 includes figures for the motion picture industry which attempt to break the industry into its component parts; this attempt is not wholly successful, however, because of the intimately interwoven nature of the industry. For example, the total receipts of motion picture production from customers are shown as $137 million; the payroll paid out by production is shown as $230.3 million, or more than 150 percent of the receipts. The appended footnote points out that the figure for total receipts excludes receipts from independent distributors and company-owned distribution offices.78 No method has been found to estimate statistically the contribution of motion picture production to the national income. However, consideration of the available figures for payroll of the three major portions of the industry indicate that $350 million may be as good an arbi |