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tainly no bargaining here. If the originally licensed rate was 2$,
the club version will be paid at 1.5¢, purely and simply. This is
standard, widespread industry practice.

Likewise, "budget discounts" are granted routinely by most publishers
for those albums selling for around a $3 list price. Although the
extent of the discount offered may vary from publisher to publisher,
the practice is a routine and common one for every publisher to follow.

You will note that the left-hand column of numbers in Exhibit I is
in bold-faced type. This is to reflect the fact that the sales
volume of regular price records is very large in comparison with the
volume of budget and club records sold. So, even though there are
many rates paid below 2¢ for records sold at other than regular prices,
RIAA data suggest that these club and budget records represent only
about a third of all records sold.

Licensing Under A Higher Statutory Rate

If the sta

cory rate is increased, licensing will be handled just as now, because of the following persistent, compelling reasons.

More than 50,000 licenses a year will continue to be issued on behalf of scores of publishing companies to scores of recording companies. Licenses will continue to be issued in a routine, near-automatic fashion through licensing and collecting agents, and with the vast majority of licenses being issued at the statutory rate or standard variations therefrom.

Only rarely will there be significant individual bargaining between a particular publishing company and a particular recording company for licensing under unusual terms and conditions. It is neither practical nor necessary for publishing and recording companies to spend much time or effort bargaining over royalty rates on thousands of individual tunes in advance of release of recordings and albums, because no one knows whether a tune will be successful or not.

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The foregoing facts explain why it is that over 99% of all licenses
are issued routinely at the statutory rate or standard variations
therefrom. As Exhibit J shows, this was the case ten years ago
and it is the case today.

For the same reasons, under a higher statutory rate, the vast majority of licenses would also be issued routinely and in nearautomatic fashion at the new statutory rate or at standard vari. ation therefron.

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J

In 1974 as in 1963 tunes
were licensed at 2¢
or standard variations

[graphic]
[graphic]

0.6% other

0.8%
y other

99.4%
2¢ or
standard
variation

99.2%
24 or
standard
variation

Sample of
1351 licenses

Sample of
2593 licenses

1963

1974

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Conclusion

Let me now sum up the conclusions of our study. An objective analysis of the recording industry must reach the conclusions shown in Exhibit K.

No increase in the statutory royalty rate is justified.

Copyright owners are getting a larger share of the
proceeds of recorded music.
Copyright owners are also far ahead of inflation; their
incomes have increased much faster than both the cost of
Living and Median Family Income.

An increase in the statutory rate 'would have impacts quite con-
trary to the public interest. These would include:

Pressures toward higher record prices.
Reduction in riskier, experimental, innovative musical

offerings,
- Reduction of exposure of newer and lesser-known artists

and groups.

Reduced employment of musicians, studio engineers and
technicians.

What I have just presented is a summary of the extensive, heavily doc:imented study that has been placed before you.

I would be glad to ar.swer any questions you may have.

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K No economic

justification for
an increase

Copyright owners' income has
outpaced inflation

Increased statutory rate could
hurt:

consumers
• recording artists and musicians
• record makers

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