of the population purchasing records and pre-recorded tapes.8/

And, contrary to a popular misconception, home

tapers are not, by and large, teenagers.

Rather, 88

percent of all album taping and 78 percent of the taping of individual selections is done by persons over the age of 20. (WCI Survey, 26.)

Home taping is a substantial and growing phenomenon in America. And it has had a profoundly destructive effect on the recording industry and on the rest of the musical arts community, as we shall now demonstrate.

II. THE SERIOUS ECONOMIC AND CULTURAL IMPLICATIONS
OF HOME TAPING

Home taping has had a debilitating impact on

a high-risk American industry that is already reeling from the combined effects of burgeoning record piracy and counterfeiting, increasing competition from new entertainment forms and a sluggish economy. If

8/

"A Study On Tape Recording Practices Among the General Public," June, 1979 (hereinafter referred to as the "Roper Survey"). The principal conclusions of the Roper Survey are set forth in Appendix Five.

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uncompensated home taping continues to persist at present levels, it could well deliver a knock-out blow to the record and music communities. That blow will be felt by Americans in each and every state and city in the

country including the music publishers, songwriters, performing artists, musicians, vocalists, retailers, distributors, manufacturers and suppliers who depend on and are an integral part of the American music industry. In addition, widespread home taping will

have a negative impact on one of the few American industries that has a positive effect on the Nation's balance of payments and that has generated enormous goodwill around the globe.

Finally, continued massive home taping will cause American record companies to release fewer records and experiment with fewer new artists, songwriters and musical forms. The record industry will no longer be able to cater to as broad a range of tastes as it does today. As a result, there will be a significant decline in the number and variety of records available to all including the vast majority of Americans

consumers -

who do not tape.

It should come as no surprise that people engage

in home taping primarily to avoid buying records. (CBS Survey, 11; WCI Survey, 16.)

Likewise, the data confirm

that tapers make most of their copies from records and pre-recorded tapes which they do not own. (WCI Survey,

22.)

Based on all of the survey data to date, financial statistics of the recording industry, and government data on sales of blank tape and recording equipment, Dr. Alan Greenspan has estimated that the amount of revenue that the recording industry lost in 1981 as a direct result of home taping was approximately $900 million.2/ In this connection, Dr. Greenspan has

made the following points:

-

Home taping has been rising at

a very substantial pace in recent years.
Assuming only a single use of a blank
tape, in 1972 home taping accounted
for 20 percent of the total hours of
recorded music available both from
purchase and taping. (This excludes
music available from counterfeiting
and piracy.) By 1981 home taping had
risen to 42 percent of the total.

9/ Dr. Greenspan's conclusions are reprinted in full in Appendix Six.

This amount of home taping has
had a substantial impact in displacing
sales of sound recordings. Roughly
55 percent of the borrowed records
used for home taping likely would have
been purchased, had home taping not
been possible. And about a third of
the recordings taped off-the-air or
made as duplicates of previously
purchased records would have been bought
in normal retail channels.

Overall, this suggests that almost
two-fifths of all home taping was in
lieu of the purchase of prerecorded
records or tapes last year.

These data indicate that 28 percent
of total record sales was displaced
by home taping. That is comparable
to lost record sales in 1981 of
approximately $900 million.

Dr. Greenspan has also considered the practical effect that these lost sales have had and will continue

to have on the recording industry:

-

Record company profit margins dropped sharply in 1979 with the industry as a whole probably operating at a loss. The recovery since then appears to have been minimal.

-

The volume of sales lost through home taping has disturbing implications for the recording industry and ultimately for those who purchase records. Already, employment in the industry has fallen off from its high in the late 1970s and total releases are down in the last three years by almost a third.

It is obvious that, as home taping continues to grow, the sale of records produced by the record industry will decline further. There will be fewer and fewer original performances on records for purchasers to enjoy and for tapers to copy.

-

If taping continues to erode record sales and profits, the recording industry might be forced to attempt to raise prices in an endeavor to recoup losses. That, however, would only further reduce the sales of pre-recorded music and probably further increase the shift toward lower cost home taping.

Alternatively, the record companies might be pressured competitively to cut prices to narrow the gap between home taping costs and retail record prices. That, of course, would accelerate the profit deterioration in the industry and decrease its capability to take the types of risks which the nature of the record business requires.

Thus, there is very little that the record industry can do to sustain its profitability in the face of the continued expansion of home taping.

For economic incentives to work appropriately, property rights must protect rights of capital assets whether in physical or intangible form. Home taping has resulted in severe economic damage to the owners of copyrights in sound recordings and musical compositions.