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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.

1.

Inflation in the Decade 1963 and 1973

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 oi figures is explained in Exhibit 3, Notes a and b.

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Estimated total income

$1$6.4 to

2606 to 2685 received by u.s. copyright

»lol.4 holders tros mechanical royal

ties and performance fres 1 froe records NOTE: The year :973 is used in this exhibit, Seing the latest year for which sau of performance fees and royalties frou foreign

reord companies were available. The two figures given for 1973 copyright royaldies paid by U.S. record companies are based on two different CRI surveys of record companies. The lover figure (577 million), which is estimated from statistics supplied by thirteen record companies with about 571 of the industry's sales, will be found in Exhibit 5-C, line 9, page 17. The higher figure (582 million), which is estimated frou statistics supplied by 34 record companies with about 98% of the industry's sales, is explained in the last section of Exhibit 5-D,

The lover estinate is clearly too low, for the financial records of the 34 cospanies in the larger survey show that these companies alone paid $80.4 aillion in rechanical fees in . Nevertheless, we shall use the lover figure whenever we are conparing it to other data fron the 13-company survey or when we are wking trend analyses. We shall use the higher figure only when we sake a single point estinate of the level of sechanical royalty payments. The explanation for the two different figures given for 1974 is the same as given in footnote "q" above. 1973 and 1963 performance fees vero estimated. See Technical Appendix.

page 18.

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The :953 figures are !ros the 1905 Glover report before the Subcomittee on Pateny, trademarks and Constights of the Comiscue ya the udiciary, 1.5. House of Representatives, 39th Congress, First Session.' The :973 !! gure on foreign sechanical rovalt:es as stated iron Billboard repor:s about sales abroad of recordings of 3.3. Music. The two 1973 figures on mechanical royalties paid by 'J.S. ''cording fins are from Exhisi: 5 and Yotes thereto. See tootnote **above. me :974 !! gure for sechanical cova.ties pu:d sy 'J.S. recording tires is from Exhibit S and is based on statistics supplied yy 34 record wers.

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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 u.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%. 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 performance royalties. In 1963, publishing companies and ochers 300 izom broadcasters and sthers, some thing like $15.i nillion for the ise of recorded music. In 1973, they obtained at least $44.4 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 jukebox operators who piay sound recordings. This is estinated to provide an additional $t million 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 "edian 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 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 túne, a separate license for each release will result in further royalties for the same, original tune.

Accordingly, a reasonably popular time can be the subject of dozens and dozens of separately licensed "releases' in a single year. This zumber of "releases" of a single performance has been ten to increase as the numbers and popularity of different recording media have been increasing, and with reissues, often on ''budget" !abels, of former favorites.

One way oi estimating the trend in coyalties received per tune -is not the literii dollar amount is simply to divide che iota: doilar

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