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Estimated Sales of Al] V.S.
Recording Firas (Smillions)
Retail Sales at List Prices
*Includes depreciation. Foreign fee income and other aiscellaneous income are not included in net sales. Foreign fee incone is from the licensing of U.S. record masters for pressing overseas, and is estimated to be roughly one-hall of the total figure shown. The resainder is from domestic fees from record and tape clubs, inventory adjustments, other one-time iteas, interest, and rent. They are expressed as a percentage of net sales to show how much they contribute to the profits recording firms nake on their recording salos.
Recording firas sales are estimated to be about half of retail sales at list prices. This assumption is supported by the prices
the surveyed record fires reported charging for their various types of recordings.
these days, actual retail sales are about 20-251 lower than the Figures given.
companies appear in the Technical Appendix. The figures supplied by these companies are for their U.S. operations only.
ESTIMATED FINANCIAL STATISTICS FOR THin RFONANING INISTRY, 1967-1974
Percentages of Net Sales
"Includes depreciation. foreign fee income and other aiscellaneous income are not included in net sales. Foreign fee income is from the licensing of U.S. record usters for pressing overseas, and is est ineed to be roughly one-half of the total figure shown. The reminder is from domestic fees from record and cape clubs, inventory adjustments, other one-time items, Interest, and rent. They are espressed as a percentage of net sales to show how much they contribute to the profits recording firas make on their recordlag sales. Recording company sales are estimated to be half of retail sales at list prices. This estimate is supported by the prices
the surveyed record companies reported charging for their various types of recordings. 'Retail sales figures are from Rim. They are based on sales at 11st prices. Since sales ori usually made at • strable
discount, actual retail sales are about 20-256 lover than the figures given.
figures og tape sales are available before 1967.
veyed companies appear in the Technical Appendix. The figures supplied by the companies are for their U.S. operations
57-786 0 - 76 - pt.3 - 5
S. Total Artist and Recording Expenses (126.96.36.199)
(5.6.7) 10. Total Costs (8.9)
Net Profits on Recording Sales Before Taxes & Foreign
Fees, etc. 12. Net Sales (1011) 13. Foreign Fee Incone, etc. 14. Net Profit Before Income Taxes (11.13) is, Income Taxes 16. Net Profit After Income Taxes
Estintes Based on Statistics from This Number of
by Reporting Companies
the 1973 figure is based on statistics supplied by 13 companies with about 571 of the industry's sales; as for the 1974 figure, the same
13 companies had 641 of the industry's sales in that year. Statistics supplied in response to an additional questionnaire by 4 companies with 981 of the industry's 1973 sales indicate that 1973 mechanical royalties paid bere closer to $82. 1 million, and, for 1974, closer to 45.5 million. These figures do not include mechanical royalties paid to U.S. copyright holders by foreign record companies or by foreign subsidiaries of U.S. record companies. Foreign mechanical royalties grew rapidly. In 1973, they were approximately $35 million, or nearly 50% of the rechanical royalties paid by U.S. recording companies. This est inate of the 1973 foreign mechanical royalties eamed by U.S. publishing companies and other copyright owners is sore than five times the royalties estimated to have been paid in 1963. The 1973 estlaste is based on Billboard reports about sales abroad of recordings of U.S. music. foreig fee incons and other iscellaneous incone are not included in net sales. Foreign fee income is from the licensing of u.s. • record masters for pressing overseas, and is estimated to be roughly one-half of the total figure shown. The remainder is from domestic
fees fron record and tape clubs, inventory adjustments, other one-tize iteas, interest, and rent. They are expressed as a percentage of net sales to show how much they contribute to the profits recording fins nake on their recording sales. Income taxes include state as well as federal taxes. Estimates of the I of industry sales represented by the surveyed companies are based on the assumption that industry sales are about half retail sales at list prices as reported by Billboard. This assumption is supported by the prices the surveyed companies reported charging for their various types of recordings. These figures almost surely overstate.the profits of the recording industry, for they are based on statistics supplied by larger companies whose profit levels are generally far higher than those of the multitude of small companies not encompassed in the CRI survey. These profit figures are only for the U.S. operations of record companies; they do not include the profits of foreign subsidiaries. NOTE: Totais do not always add precisely because of rounding. The figures here are only for the U.S. operations of the record
companies. Figures for their foreign subsidiaries are not included.
SOURCE: CRI'S 1973, 1974 and 1975 surveys of leading record companies. For details of survey sce Technical Appendix. The
statistics here are the sun of the actual figures reported by the companies surveyed divided by the estimated percentage
Sources for This Exhibit
Cest and profit data contained in Exhibit 5 (and several other exhibits) are based upon 1973 survey conducted by the Cambridge Research Institute, and updated in 1974 and 1975. The survey obtained data from ten companies for 1969, increasing to 13 companies for 1971-1974. In 1969, these ten companies accounted for about 5 of the total industry sales; the 13 companies reporting data for 1971-1974 accounted for between 57*. and 0.9 of the total industry sales during those years. The ten companies reporting data in 1969 are included in the sample companies through 1974. A few companies also reported data for 1965-1968, however, too low companies reported 1965 and 1900 data for any meaningful analysis to be made. Because of the somewhat larger mmbers of companies and because of the somewhat larger percentages of the whole industry represented by then, the figures for the years 1960-1964 and 1970-1974 justify somewhat greater statistical confidence than the data for 1955-1957 and 1967-1968. The 13 companies which provided the 1971-1974 financial data shown in this section of the presentation are listed below.
These 13 companies represent 16 companies surveyed by John D. Glover in 1965 for his report before The Subcommittee on Patents, Tradenatas, and copyrights of the Committee on the Judiciary, V.S. House of Representatives, 89th Congress, First Session. MCA is how the group name for Decca, Capp, and Uni; ABC/Dunhill is a consolidation of those two companies.
the questions asted in the 1973, 1974, and 1975 surveys were siailar to those used in the 1965 Glover survey. The data were collected and put on a computer by J.K. Lasser & Co., CPA's. The estimates of the percentage of industry sales represented by the reporting companies were based on the conaonly accepted estimating convention that industry sales were about half of retail sales of recordings at list prices as reported by RIAA.
The Technical Appendix contains • copy of the 1973 questionnaire, the instructions for filling out this questionnaire, and • copy of the 1975 questionnaire. The 1974 questionnaire is not included since it was virtually identical with that of 1975. The instructises for filling out the income statements in the 1973, 1974, and 1975 surveys were identical in order to insure comparability of the data.
Additional Data Based on Sample of 34 Companies
la the interest of obtaining as accurate information as possible concerning mechanical royalties paid to the publishing industry by the recording industry, Cambridge Research Institute solicited the cooperation of a larger number of companies than had responded to its earlier, more extensive questionnaire. Statutory License Royalsies Paid by U.S. Record Makers in 1973 and 1974.
The 4 companies that responded to the questionnaire accounted for about 981 of industry sales in 1973 and probably more than that is 1974. On the basis of this data, further estimates of mechanical royalties paid in 1973 and 1974 were obtained as follows:
These estimates of mechanical royalties paid by the industry resulting from this survey are higher than the estimates from the 13-company financial survey conducted by CRI and reported elsewhere in this report, ... Exhibit 5-C. The estimates above are probably sore accurate because the sample is larger. See the Technical appendix for a description of the 54-company survey.
The wechanical royalty paynents of the s4 report ing companies vero used to estimate industry totals by relating the reported sales of the 34 companies to industry total sales as provided by RIM annually.
ever, actual retail dollar sales are probably about 75% to 80% of those "list" figures.
Increase in Record Prices and Relationship to Profit. Although the suggested list price for regular price albums has been raised several times in the last decade, these increases are heavily discounted at retail. The increases in the prices which consumers actually pay have not offset the effects of inflation, nor have they resulted in high profits for the recording industry. BLS figures for actual prices paid by the consumer for a typical LP were $4.25 in 1964 and $4.74 in 1974, an increase of only 11.5%. (The CPI rose 59% during these years.) Recording industry pre-tax domestic profit margins from these sales rose from 2.1% in 1964 to 1,5% in 1974, still well below 'the norm for American industry.
Growth in Recording Company Sales and profits. Sales of record makers rose from something like $138 million in 1955 to something like $1.1 billion in 1974. Profits of recording companies from all sources, including rentals and interest, rose from something like $21 million in 1955, to something like $121 million in 1974.
Growth in Incomes to Copyright owners. In this same period of 1955 to 1974, mechanical royalties paid to publishing companies and other copyright owners rose from something like $22.1 million in 1955 to $79.3 million in 1974. The additional rise in, and the impressive amounts of income derived by copyright owners from performance fees have already been brought
A Growth Industry. Clearly, the recording industry has been a growth industry over the past 20 years.