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I.

THE HIGH INCOME ENJOYED BY COPYRIGHT OWNERS (Cont'd.)

B. THE INCOME PROVIDED TO THE MUSIC PUBLISHING INDUSTRY FROM RECORDINGS

HAS GROWN MUCH FASTER THAN INFLATION

The income provided to the music publishing industry by recordings --
measured in the dollar aggregate, and per recorded time has grown
very rapidly. It has grown faster than inflation. It has even grown
faster than "Median Family Income." Music copyright owners' income from
recordings comes not only from mechanical royalties paid by U.S. record
makers. They also get incomes from payments of mechanical royalties by
foreign record makers, including foreign companies that make, and sell,
records abroad from American-made master recordings. Copyright owners
also receive large and growing incomes from records used in radio and
television broadcasting, and in providing "background" music that is a
widely sold service.

Not only is the share of revenues from the sale of recordings that goes to publishing companies and other copyright owners much greater than originally visualized by Congress, but their dollar incomes from recordings have, in fact, increased very much faster than inflation.

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Between 1963 and 1973, the average annual Consumer Price Index,
based on the year 1967, rose from 91.7 to 133.1, an increase of 45%. *
In those years, Median Family Income, that level of income where 50%
of American Families have more and 50% have less, and which takes into
account both dollar inflation and increases in real income besides,
rose from $6,265 in 1963 to $12,051 in 1973, an increase of 92%.

How did the 'merican music publishing industry fare in compari. son, as between those years? Let us examine what happened to each of the several kinds of income that copyright owners derive from recordings. The following facts are set forth in Exhibits 2 and 3. **

* See 1974 Statistical Abstract oi the United States.
** the year 1975 was used in his conneceion, being -he latest year for

nich certain important iaca vere avai.able. See CTS to Exh:31: 3.

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Derivation of figures is explained in Exhibit 3, Notes a and 5.

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NOTE: The year 1973 is used in this Exhibit, being the latest year for which data of performance fees and royalties frou foreign

record companies were available. The two figures given for 1973 copyright royalties paid by U.S. record companies are based on two different CRI surveys of record companies. The lower figure (377 zillion), which is estimated from statistics supplied by thirteen record companies with about 571 of the industry's sales, all be found in Exhibit 5-C, line 9, page 17. The higher !igure (582 million), which is estimated from statistics supplied by 34 record companies with about 98% of the industry's sales, is explained in the last section of Exhibit 5-D, page 18. The lower ostinste is clearly too low, for the financial records of the 34 cogpanies in the larger survey show that these companies alone paid $80.4 million in aechanical fees in 1973. Nevertheless, we shall use the lover Figure whenever we are con pariag it to other data Cron the 13- company survey or when we are making trend analyses. We shall use the higher figure only when we sake a single point estiate of the level of sechanical royalty payments. bithe explanation for the two different figures given for 1974 is the same as given in footnoto "q" above. €1973 and :963 portörzance fees were estimated. See Technical Appendix.

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The 963 tipures are fron the 1965 Glover report before the subcommittee on Parents, trademarks, and copyrights of the Comistee yn the Judiciary, 1.3. House of Representatives, 39th Congress, First Session.' The :973 tl pure on foreign sechanical rovalties as astiates iron 9111board repor:s about sales abroad of -ecordings of 1.3. music. The two 1973 figures on sechanicai royalties paid by U.S. ocording 91.3 are from Exhibit 5 and votes thereto. Jee foot

above. 20 974 ?gurfor sechanical royalties paid sy 'J.S. ecording firms is from Isidit S and is based on statistics supplied by 34 record waxers.

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2. Mechanical Royalties from U.S. Record Makers

Between 1963 and 1973, mechanical royalties paid by U.S. record companies more than doubled from $37.6 million to $77.1 million. That is an increase of something of the order of 113%. This is to be compared to the increase of 45% in the Cost of Living Index and

the increase of 93% in Median Family Income. 3. Mechanical Royalties from Foreign Record Companies

In addition to those domestic mechanical royalties, copyright owners also receive royalties from foreign record nakers. A substantial fraction of those foreign royalties come from the use of master recordings nade by U.S. recording companies in the United States and that are licensed for manufacture and distribution abroad by non-U.S. companies. Foreign royalties have grown even faster than y.s. royalties. Mechanical royalties received by U.S. copyright owners fron record companies abroad rose from $6.9 million in 1963 to $35

million in 1974. That is an increase of 407%. 4. Total Mechanical Royalties

Total mechanical royalties paid to publishing companies rose, therefore, from $44.5 million to somewhere around $115 million, say

by something like 158%. 5. Incomes to the Publishing Industry from Commercial Use of Recordings

In addition to mechanical royalties from record makers, copyright owners get large and growing incomes from the use of recordings in radio and television broadcasting and in commercially supplied "background" music. These are known as perfornance royalties. In 1963, publishing companies and oche:s zot iron broadcasters and thers, something like $15.: nillion for the use of recorded music. In 1973, they obtained at least $44.1 aillion from those sources. This represents an increase of 293%. In addition, this bi!! provides that pubiishers and composers will, for the first time, receive performance income from jukebox operators who piay sound recordings. This is estimated to provide an additional St Jillion income each year.

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It should be noted in passing that, unlike the music publishing industry, recording companies receive not one penny in the form of performance royalties from commercial uses of their products, as in

broadcasting and "background" music. 6. Copyright Owners! Total Income from Records

Taking these several incomes together, publishing companies and others, in 1963, derived from records and their commercial use a total income amounting to $60.2 million. These kinds of incomes, in 1973, came to something like $159 million. The 1973 figure represented an increase of over 260%, as compared to the increase of 45% in the Cost of Living Index and of 92% in Median Family Income. These are the facts as to how music publishing companies and other copy

right owners fared from recorded music in comparison to inflation. 7. Increase in Royalties Per Tune

Not only have royaities to copyright owners increased faster than inflation in the aggregate, royalties per tune have also increased faster. This has occurred because of two reasons: first, because of the expansion in recording media, a new tune is often released in numerous mechanical forns -- on a 45 RPM single, as a band on an LP, on an 8-channel tape or a tape-cassette. Royalties are paid on each unit of each of these forms, many times under several different licenses. Additional paying licenses will occur if the time is later released through a record club, or if re-recorded on a budget album. Second, if a second or third or fourth artist also performs the túne, a separate license for each release will result in further royalties for the same, original tune.

Accordingly, a reasonably popular tune can be the subject of dozens and dozens of separateiy licensed "releases in a single year. This zumber of "releases" of a single performance has been tending to increase as the numbers and popularity of different recording nedia have been increasing, and with reissues, often on "budget" labels, of former favorites.

Che way oi estimating the crend in royalties received per tune -is not the literii doilar amounts -- is simply to divide the coca: dollar

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