Apart from Dr. Greenspan's analysis, studies in the United States and all over the world10/ have confirmed that home taping is responsible for very significant lost sales. Indeed, the figures are staggering. For example, as previously indicated, the WCI study recently found that the actual market value of music taped at home in 1980 exceeded $2.85 billion. (WCI Survey, 24.) This is almost as large as the dollar value of legitimate consumer purchases of records and pre-recorded tapes for the entire industry, which amounted to between $3.3 to $3.68 billion for 1980.

An even more recent WCI research survey (to be published in the near future) indicates that for every 10 records taped, consumers would have purchased 4 records if taping were not possible. In other words,

10/ See, e.g., Reark Research Pty. Ltd., Taping Survey: A Draft Report Prepared for Australian Record Industry Association (March 1982); British Phonographic Industry Ltd., A Levy on Blank Video and Audio Tapes and Associated Hardware (July 1981); British Market Research Bureau Ltd., Home Taping: Report on a Quantitative Survey (January 1980); The Finnish Group of IFPI, et al., Gallup Survey Concerning the Music Recording Habits in Finland, Sweden, Norway and Denmark (1980); Netherlands Association for the Phonographic Industry (NVPI), Home Taping: Investigation Into the Making of Sound Copies on Tape and Cassettes by Individuals in the Netherlands in 1979 (September 1980).

approximately 40 percent of taped records displace

legitimate sales. If the 40 percent displacement figure is applied to the $2.85 billion market value of taped records, then the industry lost more than $1 billion in legitimate sales in 1980 from home taping. This figure, derived from WCI's two recent research studies, closely parallels the recent estimate in The Wall Street Journal that taping has caused a loss of $1 billion in record sales. (Feb. 18, 1982, at 31.)

Another approach to this question was used in

That survey revealed

the 1979 study by CBS, which inquired specifically about the sales lost to home taping. that, by reason of taping, home tapers forego the purchase of three pre-recorded albums or tapes each year. (CBS Survey, 14.) Based on that fact, CBS concluded that home taping deprived the music industry of up to 100 million unit sales in 1979, the equivalent of $700 to $800 million in lost sales. (CBS Survey, 15.) This three-year-old figure has grown larger, as shown by more recent surveys, with the continued

explosive growth of home taping. Thus, by any measure, the damage to the record and music communities is of staggering proportions.

It is important to bear in mind that the economic

impact of home taping is ultimately also borne by the

consumer.

Because home taping reduces sales volume,

there are fewer albums over which the costs of production can be spread. This can force up the price of the records that are sold. Thus, in effect, those who buy records pay more so that those who tape off-the-air or from borrowed records can pay nothing.

Additionally, widespread home taping has a

While

negative impact on the Nation's balance of trade. most taping equipment and blank tapes bought in the United States are imported (principally from Japan) or produced by foreign-controlled interests, American music has long had a positive effect on our trade balance. We have traditionally exported about three times more phonograph records and other sound recordings

than we have imported.11/ And our performance royalty

receipts from foreign countries are more than three

times the payments we make to copyright owners abroad.12/

11/ See, e.g., "U.S. Trade Shifts In Selected Commodity Areas," U.S. International Trade Commission Publication No. 1187, September, 1981.

12/ Based on ASCAP Financial Statement sent to ASCAP Members for the year ended December 31, 1980.

This is because American music sets the standard for

the world. But as home taping dries up the amount of capital needed to produce new recordings for sale abroad, the American music industry will contribute less to

the U.S. balance of trade.

Finally, widespread taping reduces the record companies' ability to release a large number and wide variety of new records to the public. Already, largely as a result of home taping, record companies are releasing fewer albums. In 1981, the industry released 32% fewer new albums than in 1978.13/ Singles and LPs combined were down 24%.- 14/ Moreover, companies are signing fewer new artists and experimenting less with new music, which have traditionally been the lifeblood of the industry. Record-makers simply can no longer afford the risks of experimentation.

A decline in new releases means that all American consumers (including the majority who do not tape) will no longer have access to the broad diversity of music that today meets varied consumer tastes and interests.

13/

RIAA 1981 Release Survey, April 1982. 14/ Id.

23

B.

The Economic State of the Recording Industry

The explosive growth of home taping could not have come at a worse time from the standpoint of the recording industry. The loss of $1 billion of revenues each year as a result of home taping, combined with other factors such as burgeoning record piracy and counterfeiting, has left the recording industry in

fragile condition.

After decades of consistent growth, the recording industry has suffered major setbacks in recent years. In 1979, for example, the industry had a loss of more

than $200 million on its domestic sales. 15/ The impact

of that year on the health of the industry was the subject of an article in New York Magazine:

15/

"After four years of spectacular sales
and profit growth, the $4-billion United
States recorded-music business is going
through a significant shakeout.

"Record-company earnings have

been falling, despite rising sales
revenues. Albums that last year would
have been expected to sell 2 million

Economic Study of the Recording Industry, prepared by the Cambridge Research Institute (April 7, 1980). Comparable data do not exist for the years 1980 or 1981.