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1.

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

has grown

The income provided to the music publishing industry by recordings
measured in the dollar aggregate, and per recorded time --
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 nechanical rovalties 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 "backgrouna" music that is a
widely sold service.

Not only is the share of revenues from the sale of recoriings 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 lmerican music publishing indus:r, 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 !974 Statistical Abstract oi the United States.
** The year 1975 was used in his connection, being the latest year for

nich certain important iata were available. Ses VCTE to Exh:31: 3.

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

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Estimated total ircos

received by U.S. copyright
holders froa nechanical royal.
ties and performance fees
froe records

NOTE: The year :975 is used in this Exhibit, Seing the latest year for which data of performance fees and royalties froa foreign

record coepanies were available. The two figures given for 1973 copyright royalties paid by U.S. record cospanies are based on two different CRI surveys of record companies. The lover Sigure (577 allion), which is estinated from statistics supplied by thirteen record coepanies with about 571 of the industry's sales, will be found in Exhibit 5-C, line 9, page 17. The higher figure (582 zillion), which is estiated froa statistics supplied by 54 record companies with about 981 of the industry's sales, is explained in the last section of Exhibit 5-0, page 18.

The lover ostiaate is clearly too low, for the financiil records of the 34 companies in the laser survey show that these companies alone paid $80.1 aillion in nechanical fees in 1975. Nevertheless, we shall use the Tower figure whenever we are conparing it to other data roa the 13-company survey or when we are making trend analyses. We shall use the higher figure only when e sake a single point estimate of the level of sechanical royalty payments. Sthe explanation for the two different figures given for 1974 is eno samo us given in footnoto "q" above. 1973 and :963 pertarunce fees were estimated. Seo Technical Appendix.

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The 1963 figures are proa che !965 Slover report before the Subcomittee on Pacenes 1-10eurks, and constights
of the Comi:toe on the wudiciary, 1.5. House of Representatives, 19th Congress, First Session.'
The !973 sure on foreign sechanical rovalties as astinaces from 9111board reports about salos abroad of recordings of
3. 3. rusie.
1973 ?igures on sechanical royalties paid by V.S. *cording are from Echisit 5 ac Vos

See
footnote "1" above.
7e :974 Higure for sechanical sova!:es 2:0 y 'J.S. recording tires :s ?ror Exione S and is used on statistics
supplied by 34 record Yakers.

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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 makers. A substantial fraction of those foreign royalties come from the use of master recordings made 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 !.s. royalties. Mechanical royalties received by u.s. copyright owners from 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 ochers joc icom broadcasters and ithers, sometring like 315.: nillion for the use of recorded music. In 1973, they obtained at least $14.4 million 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 juicebox operators who piay sound recordings. This is estimated to provide an 3dditional $t aillion income each year.

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7.

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 Pedian Family Income. These are the facts as to how music publishing companies and other copyright owners fared from recorded music in comparison to inflation. 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 forms -- 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 tune 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 tune, 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 number of "releases" of a single performance has been tending to increase as the numbers and popularity of different recording media have been increasing, and with reissues, often on "budget" 'abels, of former favorites.

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Une way oi estinating the trend in royalties received per tune i: 100 the licerii doila: amounts is simply to diviie che uoca: 101!ar

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