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Listen to the words of Bobby Colomby, the drummer of the rock group “Blood, Sweat and Tears," in answer to the question, how important is radio to you? "Well, that is it-what you're doing isyou're advertising.'
That the revenue does flow to performing artists and record companies is self-evident. The amount of such revenue is not. A closer look reveals that additional revenues are not only unnecessary but unwarranted as well.
There are several distinct groups of people who are involved in bringing about recorded music. There is the composer of the music, there is the publisher, there is the artist who records the music, and there is the record company that produces and distributes the record. Revenue comes from two sources—record sales and airplay of the record. NAB retained Dr. Frederic Stuart of Hofstra University to estimate the relative amounts of money each of the four parties realized from the sale and airplay of recorded music; the results of his research are enlightening and, I think, somewhat surprising.
Under present arrangements, all four parties-namely, composers, publishers, artists, and record companies-receive money from the sale of records, but only composers and publishers receive payment for broadcast performances, that is, airplay of records. Dr. Stuart estimated the revenues generated by a random sample of records; he found that the income was distributed as follows: To the composers, $2,570,000; to the publishers, $2,910,000; to the performing artists, $2,860,000; and to the record companies, after variable manufacturing costs, $10,720,000.
But these figures don't reflect two important factors: (1) The artists and recording companies must bear the cost of unsuccessful records, so the amounts of money they receive should be reduced to take this into account; and (2) in many cases, the performing artists are also the composer and/or publisher of the songs they record, so that they also receive royalties from airplay of the records.
Refining his figures to take these factors into account, Dr. Stuart found that the distribution of money from this sample of records looked like this: Composers, $1,530,000; publishers, $1.200,000; performing artists, $4,200,000; and record companies, $10 million.
“The foregoing analysis shows the performing artist to be-well ahead of-composers and publishers in the distribution of income generated by the broadcasts and sales of records, but rather far behind the record companies, and none of these figures takes into account the substantial revenues generated by live concerts."
Mr. Chairman, I submit that the Performance Rights Amendment does not belong in this copyright bill. It is recommended neither by the constitutional guidelines nor the economic marketplace. It fails to “promote the progress of science,” it imposes an unreasonable burden on a symbiotic partner in the music industry, and promises windfall profits for those for whom no need can be demonstrated. For all of these reasons, we respect fully ask that you reject it.
1 Radio program "The Politics of Pop," June 5, 1975.
With me today, Mr. Chairman, as you have already indicated, is Mr. Krelstein, chairman of the Radio Board of Directors. He is Chairman of the Board of Blough Broadcasting Co. and operates six AM stations and six FM stations, and has been in the broadcasting profession for some 41 years. And also, Mr. Wayne Cornils, president and general manager of KFXD and KFXD-FM, Nampa, Idaho.
Mr. Krelstein does not have a prepared statement, but if it is within your time, he would like to make a few remarks.
Mr. KASTENMEIER. Mr. Krelstein.
Mr. KRELSTEIN. Thank you, Mr. Chairman. Without dwelling on other areas that have come up this morning, I would like to: (1) Present my own experience in the broadcasting business and hopefully get to the heart of the matter; and (2) I would like to read into the record a story that appeared in last night's Washington Star, which I think is germane to the problem, and touch on this issue of time for a moment, if I may.
But first, I have been in the business long enough to remember when Paul Whiteman and, I believe, Fred Waring sued to prohibit the playing of their music on radio stations, and they both lost. I was a full-grown adult, trying to make a living in the broadcasting business. When we talk about musicians, I was a full participant when the broadcasting industry struck ASCÁP because of the prohibitive fees they wanted to collect from broadcasters, which resulted in the creation of Broadcast Music, Inc., some 35 years ago. Interestingly enough, touching on one segment of the music industry, this story really gets to the heart of the matter, and I am not going to read it all, because it is too lengthy.
This writer for the Washington Star apparently attended a show last evening, called Stars of the Grand Old Opry, and he goes on
For decades, when country music was called "hillbilly music" and was relegated to the agricultural hours of radio programing, the "Grand Old Opry” was a significant institution. It was a radio program that was the center of a way of life, a show which was a place for musicians, singers, and songwriters to be heard.
At the same time, membership in the Opry was a valuable thing to an artist. It meant he or she could travel under the Opry banner and get bookings that were otherwise unavailable, be heard by people who were lured by the Opry name, be sought out by potential listeners to country music who could not hear it on the radio because only a handful of country stations existed.
Now, all this has changed. Country music has become a major industry, and an enviably lucrative one as well. There are more than a thousand radio stations, north and south, that specialize in country music, and country musicians have no difficulty in getting bookings in places like the Capital Centre or Wolf Trap. They no longer need the Opry because they are making it on their own. They still perform at the Opry, at scale fees, because Opry membership requires it, but the big names aren't happy about it and tend to avoid the place as much as they can; the money is elsewhere.
The big question here is we have a picture of Mr. Elton John on the cover of the current issue of Time, with a five-page editorial about him. Among other things, it says in here that Music Corporation of America, for whom he records, guaranteed him $8 million in royalties against the albums that he produces in the next 5 years. The company says it could recoup its entire investment by the end of 1976. Elton has sold 43 million albums and 18 million singles, worldwide-9 of his 12 albums are over the million mark in the United States alone.
Two questions. Should Time magazine have paid Elton John a royalty for writing five pages about him and putting his picture on the cover? Or, should Elton John have paid Time magazine for writing about him, because this, combined with the exposure given him by the broadcasting stations, made him the popular artist he is today.
In 1955, we changed the programing of our broadcasting in Memphis, Tenn., to a format of music and the music we played was determined by surveying the tastes and the desires of the consumer, who, after all, is the last judge and jury on the acceptability of a product or service. And in surveying the record retailers, the record distributors, and members of the public at large, we found a certain category of music that we felt would appeal to the listeners. Strangely enough, at the same time that we did this, the sale of recorded music skyrocketed in the city of Memphis. Why? Because we were advertising the wares of the record companies on our radio station with time, and time is money. It is the only commodity that a broadcaster has to sell. So, in an indirect way, we did pay for the use of that music by the time we devoted to it on our station.
In 1964, we surveyed the city of Chicago, because we wanted to change the programing of our station there. And we thought perhaps we would provide the rebirth of country music, which had somewhat fallen to the wayside in terms of exposure in the key markets of America, and certainly Chicago can't be considered otherwise. It is the No. 2 market in our country.
To our amazement, we found that in the city of Chicago, and we surveyed record dealers in every neighborhood, in every area of that city, the maximum sales of country music at that time in certain areas of the city of Chicago did not exceed 10 percent. In 1965, I went into New York City and visited with the recording companies who had country music and asked them how they felt about our programing in this station in Chicago with country inusic, and they welcomed me with open arms. They offered us—said no charge, more music than we could possibly handle, and interestingly enough, and I remember well, one of the tunes at the time was a recording by Johnny Cash of Columbia Records, and the sales were dismal. But, literally, within a short period of weeks, when we did go on the air with country, Columbia couldn't ship the albums into the market fast enough, and I say to you that we did provide a service not only to the recording companies, but to that artist.
For example, on this past July 4, the Rolling Stones gave a concert in Memphis, Tenn., and used the stadium which holds over 50,000 people, and they filled it and this 1-day stand resulted in the Rolling Stones taking over a half million dollars out of the city of Memphis in box-office receipts. And I say to you, were it not for the fact that the product of the Rolling Stones was exposed by radio in this country, nobody would have known and nobody would have known today who the Rolling Stones are.
There is no use talking about the Beatles, because they left this country with millions and millions of dollars because of the exposure that they got on broadcast stations around this country, which made them a household word.
Elvis Presley, who is reputed to have an income of royalties of over a million dollars a year from the music he recorded for RCA, started at our station in Vemphis, Tenn., as a result of which his exposure of his records made it possible for him to do, as we call it, 1-night stands within a 300-mile radius of the city of Memphis and made a veritable fortune at a very, very early age.
To this extent, I think that broadcasting has paid indirectly, as it may be, for the use of this music, by making the Sinatras and the Johnny Cashs and the Charlie Prides and the Ray Prices and the Lynn Andersons, and so on down the line.
Mr. Cornils. Mr. Chairman, my name is Wayne Cornils. I own approximately 20 percent of the Idaho Broadcasting Co. and serve as president and general manager of KFXD/AM and KFXD/FM, Nampa, Idaho.
I am also privileged to serve as chairman of the Small Market Radio Committee of the National Association of Broadcasters. The other members of the Small Market Radio Committee operate broadcast properties in Deming, N. Mex.; Indianola, Miss.; Valdese, V.C.; Brattleboro, Vt.; and Mankato, Minn. The Small Market Radio Committee represents radio broadcasters in markets of 100,000 population or less.
The small-market broadcaster, in order to survive must be a person totally involved, completely dedicated to, and an integral part of the community he serves.
Much of what is defined as entertainment programing on a smallmarket radio station is provided in the playing of recorded music.
In addition to the numerous other expenses of operation, the smallmarket broadcaster is required to pay monthly fees to several music licensing organizations, including BXII, ASCAP, and SESAC. The moneys thus paid are distributed by these organizations to the composers, lyricists, and publishers.
Now, Mr. Chairman, we are faced with the so-called performance rights amendment, which would require us, for the first time, to pay royalties to performing artists and record companies.
There can be no doubt in anyone's mind that the exposure given to recorded music by the broadcasting industry encourages and promotes the sale of records. In turn, the sale of records obviously encourages and promotes additional creative efforts by record companies and recording artists. Mr. Chairman, radio sells records.
In Boise, Idaho, a community of approximately 90,000, adjacent to the city of Nampa---Nampa is a town of about 20,000—in the two there are approximately 26 outlets where records may be purchased. All of these retailers would agree that exposure on radio provides the primary impetus for the purchase of records.
Last week, I spoke with a gentleman named Mr. Nelson Taylor, who is the manager of the Super Thrift Drug Stores in Nampa. Mr. Taylor told me, "If it were not for record exposure on radio, I would not have a record department."
And Bob Gordon, manager of the record departments of the Bon Marche Department Stores, told me that he has removed his record audition booths, as have most record stores, because the customers have already heard the records on radio.
Gary Pratt, the owner of Gary's Stereo, sells 8-track tapes and cassette recordings, a business by the way, which has developed as an outgrowth of the record industry. At Mr. Pratt's request, each week I send him the KFXD-AM record playlist. Mr. Pratt orders his tapes and cassettes directly on the basis of that list.
So, there can be no doubt in the minds of the managers in the 26 record outlets in the Nampa-Boise, Idaho area about the important role played by radio in the sale of records. Radio sells records.
Attesting to the recording artists' popularity due to radio exposure are the large fees which these artists are able to command for personal appearances. I have a colleague in Omaha who tells me that 15 to 20 recording artists or groups appear in that city during the course of a year. In Omaha, the minimum fee for a single appearance is approximately $5,000—this for artists such as Jim Stafford, the Righteous Brothers and Dr. John. Others, like Alice Cooper and John Denver, receive $20,000 to $30,000, while some, like Elvis Presley, receive in excess of $100,000.
In our own area in Idaho, the figures are very similar: $15,000 for the Carpenters: $25,000 for the Beach Boys: $18,000 for Chicago; and for Elton John, a rather staggering 80 percent of the gross, against a guarantee of $30,000. These fees are for a single performance or so-called one night stand in Boise, Idaho.
Radio not only sells records, but provides the audiences for recording artists.
In conclusion, Mr. Chairman, composers, publishers and lyricists receive compensation in the form of moneys paid by broadcast stations to the music licensing organizations. The record companies, artists and composers receive moneys from the sale of records—sales which are promoted by the exposure of their product on the radio.
In addition, the artists receive huge sums of money for personal appearances. As has been mentioned, the fees for personal appearances are determined by the artists' popularity and the artist's popularity is determined, to a large degree, by the exposure received on radio.
Mr. Chairman, to charge broadcasters an additional fee is unnecessary, unfair and unjust. It would place an extremely heavy burden on all broadcasters, and certainly including those of us in America's smaller markets.
I have just a couple of questions. I would observe a point made that radio sells records. I don't think it is challenged, but it doesn't necessarily go to the point of whether these so-called performances ought to have copyright protection, because many enterprises help sell what may be copyrighted material for which there are royalties due, but that has not much to do with whether or not the royalty should be paid. That is central to the question, it seems to me.
Also, from the preceding panel, it isn't a question so much of whether the Rolling Stones or Elton John or Elvis Presley or the Beatles are taken care of. They are. We know they are, however, they negotiate. It is, rather, at least the other panel made the proposition, that the other artists who may have creative input into these-into recordings, sound recordings, musicians, for example, largely anonymous and others perhaps not absolutely anonymous, but nonetheless, really