Once in a position to limit the utilization of the property, in the absence of compulsory license, it seems more probable that the composers and music publishers would use their position to maximize profits with respect to the recording of each composition rather than optioning the use of large blocks of properties at a bulk price. However, it is conceivable that this situation would turn entirely on the price and other provisions of such an option. Were the price sufficiently high and were the music publishers still free to negotiate a specific price for the actual use of each individual optioned property, i.e., if the original option were only for the right to negotiate for the recording of the compositions in the catalog, the songwriters and publishers might be willing to enter such a contract. However, if a record manufacturer were to purchase an option under such conditions, there is some question as to its profitability for him, and he would undoubtedly not exercise his option on many of the compositions in a particular publisher's catalog. He might try to take what he thinks is the "cream", but the popularity of a particular composition is highly unpredictable. Perhaps the most that can be said is that songwriters and music publishers would not give up their new negotiating strength without getting a quid pro quo which the record producers might not be willing to give.

It is also possible that the reverse result might develop; namely, music publishers might begin to produce records. This would depend of course on the availability of talent but in the rather confused organization of the music business, particularly with music publishers taking on functions of talent agents, it is not improbable that talent "stables" could be slowly built up. The techniques of recordmaking would probably not present a barrier. Thus, within the past few months, announcement has been made of a new record pressing machine priced at only $7,500 which is capable of turning out highquality disks at a rate of nearly one per second; it is described as being simple to operate and the costs are said to be competitive.43

Are the sizes of the firms and the concentration of productive capacity in the phonograph record industry such that it would be easy for the music-publishing industry to control it in the absence of compulsory license? Conversely, are the sizes of firms and the concentration of capacity in the music-publishing business such that it would be easy for the phonograph record industry to control it in the absence of compulsory license? Available figures on these aspects of the industries indicate that the answer to both these questions is in the negative.

The RIAA, with 52 members in 1957, represents a large part of the total record production-perhaps as much as 90 percent. It has four class A members-those with a gross annual sales volume of more than $10 million each; this number has remained unchanged since the founding of the association in 1952. Currently it also has four members in class B-those with a gross annual sales volume of more than $22 million but less than $10 million each; there were only three such members from 1952 to 1956, the fourth having been added in 1957.44

43 Variety, Jan. 23, 1957.

Annual Report of the RIAA, 1955, p. 5, and bylaws of the RIAA, art. 2, sec. 2.

46

It is generally assumed that the four major record producers are Capitol, Columbia, Decca (New York), and RCA-Victor. Two of these regularly publish their volume of sales: Capitol and Decca; in 1957 Capitol had gross sales of $43.7 million and Decca had gross sales of $31.8 million, a total of $75.5 million for the two. It is probable that the other two major producers are somewhat larger, perhaps accounting for a total gross sales figure of close to $100 million. Total record production for 1957 is estimated at $190 to $200 million, at the producer level," so the four major producers may account for about 80 to 85 percent of the total industry production.

Such a concentration of production may mean a strong monopolistic tendency in the industry. Regardless of monopoly or competition, the structure of the industry does not lend itself to easy acquisition by the music publishers.

49

As to the structure of the music-publishing industry, not too much is known. However, there are several thousand music publishers in various stages of publishing activity, some of which are large. ASCAP, the major performing rights organization, had three music publisher board members with incomes from performing royalties of $1.8 million, $1.4 million, and $1.3 million, respectively." This does not include music publishers' income from other sources. Most of the 1,000 music publisher members of ASCAP are obviously small, but there are large ones among them. In addition in 1956 about 2,590 music publishers were affiliated with BMI, but the size of these firms is not known, except to the extent that some of them are large.50 Considering the size and number of music publishers, it is difficult to imagine that there is danger of the recording companies taking control of the music publishers in order that they might control the use of tunes for recording, absent compulsory license.

This indicates clearly that the contending parties in the record production industry currently subject to compulsory license are not of unequal stature. In the absence of a compulsory license, the relatively equal strength of the two groups would tend to assure a fair basis for bargaining while the number of strong companies on each side would tend to maintain competitive conditions within each group. It is perhaps significant that in the past the record industry has been unable to make up its mind whether, in the absence of compulsory license, the music publishers would take on the aspects of a monopoly. For example in 1929 and 1930 the record industry appears to have feared a combination of publishers and/or copyright

45 Columbia and RCA-Victor are closely associated, respectively, with CBS and NBC; Decca (New York) owns the largest part of the voting stock of Universal Pictures Co., Inc., a major motion picture producer; and Capitol is owned almost entirely by Electrical and Musical Industries of London (EMI), the major British record and electronics producer. Billboard, Aug. 18, 1958, and Variety, Mar. 12, 1958.

Billboard, Apr. 14, 1958. The gross retail sales are estimated to have been $400 million to $420 million. This has been divided by 2.1 to get the estimated producers' sales.

In the latter part of 1956 and the early part of 1957 the trade press reported an Investigation of the record producing industry by the Department of Justice re possible monopoly in the pricing of LP records. However, there has been no prosecution alleging such monopoly practices.

Hearings before Subcommittee No. 5, House Select Committee on Small Business, 85th Cong., 2d sess., pursuant to H. R. 56, "Policies of ASCAP," p. 531.

Hearings before the Antitrust Subcommittee (Subcommittee No. 5) of the Committee on the Judiciary, House of Representatives, 84th Cong., 2d sess., "Monopoly Problems in Regulated Industries" (1956), p. 4942. Mr. Carl Haverlin, president of BMI, testified that BMI had contracts with "about 2,590 publishers," of which "approximately 2,230" are inactive.

owners.51 On the other hand in 1939 the record manufacturers did not refer to this danger but concentrated their arguments on other aspects.52

C. THE EFFECTS ON RETAIL PRICES AND VOLUME

On the average, record producers pay 6.5 percent of their gross revenues in the form of mechanical royalties. If this percentage were doubled in the absence of compulsory license the average wholesale price of records might justifiably increase from about 48 cents to about 52 cents. It has been indicated that the retail price of records is quite unpredictable ranging all the way from a few cents above wholesale to the suggested retail price which is approximately twice the wholesale price. It is possible that a doubling of the mechanical royalties would increase the lower ranges of the retail prices by a few cents but it is doubtful whether an increase of such a magnitude would seriously affect the volume of retail purchases, particularly in the buoyant current situation of the music market.

One result of the compulsory license provision has been that the public may be offered a variety of recorded versions of a particular composition. As already pointed out, under the compulsory license, when one record company issues a recording of a composition that promises to catch the public fancy, other companies are quick to issue recordings by other performers of the same composition. This might or might not be true if the compulsory license were eliminated, depending upon whether the authors and music publishers found it to their advantage to give exclusive licenses. If exclusive licenses were granted, the result might well be that instead of several recorded versions of the composition, a larger number compositions would be offered to the public on records issued by the various companies.

V. THE CHANCE OF MONOPOLY

A. THE 1909 COMMITTEE REPORT

The right of the copyright owner to control the mechanical reproduction (recording) of music was first provided for in the Copyright Act of 1909, and this new right was made subject to the compulsory license. From the 1909 House committee report it is clear that the committee, in its recommendation to include the compulsory license provision, was chiefly concerned with the possibility that one recording company might obtain a monopoly of the recording rights in popular music. In part the committee said:

This danger (the establishment of a mechanical-music trust) lies in the possibility that some one (recording) company might secure, by purchase or otherwise, a large number of copyrights of the most popular music, and by controlling these copyrights monopolize the business of manufacturing, otherwise free to the world ***. The main object *** has been *** to so frame an act that it would accomplish the double purpose of securing to the composer an adequate return for all use made of his composition and at the same time prevent the formation of oppressive monopolies, which might be founded on the very rights granted to the composer for the purpose of protecting his interests.

Henn, Harry G. "The Compulsory License Provisions of the United States Copyright Law." pp. 27 and 28, Study No. 5 in the present committee print. 62 Ibid., p. 33.

The report cites the fact that—

contracts were made by one of the leading mechanical reproducing establishments of the country with more than 80 of the leading music publishing houses in this country;

these contracts provided that

the reproducing company acquired the rights for mechanical reproduction in all the copyrighted music which the publishing house controlled or might acquire and that they covered a period of at least 35 years, with the possibility of almost indefinite extension.

These contracts never came into effect because they were contingent upon a favorable decision in pending court cases seeking to sustain the right of copyright owners to control the mechanical reproduction of music under the law prior to 1909, and the U.S. Supreme Court ruled adversely in White-Smith Music Publishing Co. v. Apollo Co. (209 U.S. 1 (1908)). However, to the committee the fact that such contracts had been made meant the strong probability of a monopoly in the music recording business if the mechanical recording right was provided for without some restriction such as the compulsory license.

Since that time, the author and music publisher groups have sought to eliminate the compulsory license provision, while the recording companies have exerted every effort to maintain it.53

B. THE PRESENT SITUATION

The retention of the compulsory license provision since 1909 against all adverse attacks has been accompanied by a number of major changes in the music business. The motion pictures have grown to a major industry using music on sound tracks since 1929 as a basic ingredient of their product, and more recently becoming a source of new musical material. They have also adjusted to new competition, as well as a new potential market for motion pictures, in the form of television. The compulsory license has not been applicable to the recording of music in theatrical or television motion pictures, and there has been no sign of a monopoly developing in the use of music in these areas.

It may also be noted that the recording of entire dramatico-musical works (musical plays) is not subject to the compulsory license, and even though the supply is limited there is no indication that any one recording company could acquire a monopoly of such works.

Recording of music for home use has been moved from the era of primitive cylinders, disks, and paper rolls to the era of high fidelity records and tapes at a retail price level which has made the home use of phonographs a commonplace and the distribution of records a $400 million annual retail business. Radio broadcasting has opened up a new market for recorded music and has been a factor in the development of high fidelity recording in that the 3,500 radio stations have demanded more and better records for program purposes. Radio has multiplied the demand for recorded music and the high quality performance of music far beyond anything that was imagined in 1909. The advent of television has multiplied each of these aspects of the music business still further. Over 400 operating television stations,

3 Cf. Henn, op. cit., ch. II, passim.

and their joint programing through three major networks, have again acted to multiply the demand for recorded music, not only on recordings of sound alone but also through the use of music in both theatrical and television motion pictures used for broadcasts.

The number of recording companies has grown greatly since 1909 with the great increase in the market for records, and there are now some 10 or more companies strongly entrenched in a competitive position.

On the other hand, the creators and publishers of musical materials have organized themselves in order to protect their interests. It has been stated that the MPPA includes the leading music publishers who control approximately 80 percent of the copyrighted popular music in the United States.54 Trade sources dispute this figure, pointing out that a large part of the currently popular songs are published by firms which do not belong to MPPA, nor do they subscribe to the SPA Minimum Basic Agreement. However, regardless of the extent to which the MPPA publishers own the copyrights of currently produced musical materials, it is unquestioned that the existence of MPPA and SPA has done much to regularize the relationships between music publishers and songwriters.

In 1931 the songwriters also organized and through their uniform contract for the sale of musical properties they have obtained a position vis-a-vis the music publishers far different from that of 1909. They now get not less than 50 percent of all royalties collected by the music publishers who own the copyrights on their musical properties and are in a position to prevent a monopoly in the use of their music if it should be detrimental to their interests.

Some analogy may be drawn between the use of music and the use of "talent" (performing artists) in the production of records. The leading performers are generally signed up to make records exclusively for some one company, but there has been no indication that any one company might develop a monopoly of "talent." By the same token, the supply of new popular music is so great, and the popularity of any particular composition is so uncertain, that it is difficult to see how any one record company could, in the absence of the compulsory license, secure a monopoly of popular music.

C. THE BALANCE OF FORCES

Although not much is known concerning the details of the organization of the music-recording business in the pre-1909 era, the changes which have taken place since then are clear. On the demand side, certain large record producers are now closely allied with broadcasting interests which are in turn large users of recorded music. These producers, through their control of artists by exclusive contract, are much stronger than their counterparts in the earlier era because they can now offer radio and television appearances on which the artists depend largely for public "exposure" as a foundation for their lucrative personal appearances in hotels, nightclubs, theaters, auditoriums, etc.

Warner, Harry B., "Radio and Television Rights," p. 436 (1953).