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Exhibit 4 -- STATUTORY MECHANICAL ROYALTIES PAID PER RELEASE
OF RECORD TUNES: 1963 vs. 1972.
Exhibit 4 represents an attempt to estimate the mechanical royalties which one release of a typical tune will gather in a year's time. It takes the total sum of mechanical payments in each of the comparison years and divides the sum by total tunes released as reported by Billboard. Such an estimate ignores royalties paid on tunes released in previous years. However, RIAA studies show that the vast majority of record sales are of records which have been on the market for 90 days or less; consequently, the vast majority of mechanical royalties are paid on recent releases. Furtiermore, the Billboard release data, as mentioned in footnote "c" in the Exhibit, by counting all releases issued, even if the same tune is on more than one release overstate the number of unique tunes released. These two errors of estimation should roughly cancel one another.
Data presented in Exhibits SA, 5B, 5C and 5D are based on a lengthy financial survey of recording companies which CRI conducted in 1973 and then updated in 1974 and 1975. The survey represents an important source of statistical information on the recording industry used in the full statement, and was conducted as described below,
Design of the Sample
The survey was distributed among all 55 member firms of the Recording Industry Association of America in 1973. It was determined in advance that limiting the survey to these firms was the most appropriate and convenient way of assuring cooperation of the respondent firms within the constraints of time and funds available.
CRI encouraged as many of these member firms as possible to respond to the lengthy questionnaire, under the assurance that individual company responses would be strictly confidential. Indeed, CRI itself was not privy to individual questionnaires; the results were tabulated by the CPA firm
of J.K. Lasser and Co. In this manner, full responses were received from
The questionnaire itself was designed with great care, in consultation
Reprcsentativeness of the Sample
For years 1967 to 1974, inclusive, financial survey data was provided, as follows:
13 companies 1973
13 companies 1972
13 companies 1971
13 companies 1970
12 companies 1969
10 companies 1968
8 companies 1967
7 companies All 13 companies reporting for years 1971-74 were unable to report for the full period 1967-74 because some were not in business for the full period; some did not maintain the requisite historical data; and still others were participants in mergers and acquisitions rendering historical data nisleading or unavailable.
The survey encompasses firms which account for a low of 43.0% of industry sales in 1968 and a high of 63.8% in 1974. Such large sample size works to make sample results representative of the universe even when the sample is not known to be randon in a scientific sense, as is the case here. Moreover, the data presented are as representative as it was possible to obtain.
Thoroughness of the Survey
The survey, as conducted, is the most thorough and comprehensive study of the financial condition of the recording industry that has ever been undertaken (with the exception of the earlier survey we conducted for the 1965 hearings) or that is available from any source.
The naterials associated with this lengthy financial survey are provided in the following pages in four parts:
PART I: Instructions to Companies Responding to the
Cambridge Research Institute, Cambridge, Massachusetts
SUBJECT: Instructions for Completing Financial Reporting Forms
The purpose of gathering financial data from your firm and others is to develop a detailed financial picture of the record and tape manufacturing industry as a basis for analyzing the economic effects of proposed changes in the copyright law. This analysis will be presented during Congressional hearings concerning the copyright law. In order to prepare properly for hearings in mid-March, we need these forms to be completed and returned by February 9th. Many companies participated in a similar survey in 1965, preparatory to Congressional hearings at that time.
The following procedure has been established so your company financial data will be handled in a confidential manner:
After you have completed the enclosed forms, keep one
As you will notice, your forms have been pre-coded
The financial data you send to the accountants will be
Exhibit 5, cont.
January 15, 1973
In filling out the forms, please follow these two basic requests:
If you believe something will not be clear,
If, where detailed information is requested and
As you will note, there are six (6) reporting forms:
(1) Summary Report
Information should be provided on a calendar year basis, if possible. If information is available only on a fiscal year basis, please indicate on what date your fiscal year ends. Also, indicate any changes in fiscal years that occurred during the 1965-1972 period.
If you were not in business for any year between 1965 and 1972, please note this fact under the appropriate year(s). If for any other reason it is not possible to report data for a year--even on a best estimate basis. (Please try, of course)--write in the reason under the appropriate year(s).
Our goal is to develop a consistent financial picture of record and tape manufacturing operations in the United States. For this purpose, record and tape manufacturing is defined as the production and manufacturing of recordings, whether on records or tapes, and their sale to distributive organizations. To anticipate some of your questions, general comments are included for each account on the financial reporting forms which are attached.
If you have any questions, please contact Walter J. Campbell at Cambridge Research Institute, telephone (617) 864-1350.