11. This is identical with the record industry's current predictions. In testimony before the House Committee, Professor Glover also warned with elaborate statistical "proof" that this increase of 20 in record prices -- an increase of 7% from $2.83 or 5% from $3.98 -- would cause a sharp decline in sales and threaten the survival of countless record manufacturers, wholesalers and retailers 18/ (again all predictions repeated this year). In the decade since those 1965 House Hearings, without any increase whatsoever in the 2 cent ceiling on payments to musical copyright holders, the record industry has increased its list price per song to consumers by more than 110% --not 5% or 7% but 110%: 1965 1975 Typical record sold: $3.98 for 12 songs Typical record sold: $6.98 for 10 songs Yet the RIAA has recently announced not a sharp decline in sales as a result of these constant price increases but an all-time high in record sales. There has been no discernible restriction in the variety of musical offerings, no deterioration in quality, no fewer opportunities for unknown composers, no lack of recordings of new, novel or lengthy compositions. There has been not a decline but a steady growth in the number, size and value of companies engaged in the record business and in the number and wages of their employees. Not one of Professor Glover's predictions about the disasters which would follow a 7% increase in prices came true after a 110% increase in prices. On the contrary, as sales boomed to new heights each year, as monos gave way to stereo, and as stereos now give way to still higherpriced and more highly profitable tapes and cassettes, the entire level of industry compensation rates has been upgraded for everyone involved -- except those who created the music. Compared with what they would have paid in 1964 for the same number of long-playing and single units, consumers last year paid an additional $1 billion (one billion dollars) 19/ for their recorded music -- but the creators of that music are still restricted to 24 or less per selection. As a result, our maximum share of the typical price per album has been cut by more than half: from 6% in 1965 to less than 3% in 1975. 12. The House in 1965 was willing to give us, in the form of a 2-1/2 ceiling, approximately 8% of that year's typical list price -- a share which today even a 5g ceiling would not wholly restore. We believe that we should be compensated, like our European counterparts, at 8% of list price. But if the percentage approach is to be denied us in favor of a fixed cents-per-song figure, that figure should at least give us a ceiling comparable in its ratio to current prices to the level which the House was willing to give us a decade ago. Yet even a 5 ceiling would not wholly restore that fair share. For record companies to pocket their price increase of 110% per song while complaining about our request for a ceiling increase amounting to 2% of today's typical price would be laughable were it not so tragic for so many songwriters and composers. One of the industry witnesses expressing alarm for the consumer in those earlier hearings was Mr. Clive Davis, then Vice President and General Manager of CBS Records, who warned that any increase in the $3.79 price of a monaural long-playing record surely would harm the consumer if it were passed along, and surely force record companies out of business if it were not. 20/ But in his 1974 autobiography, Mr. Davis proudly observed that on his own volition he had in 1967: "raised the list price of the monaural pop record All the other companies followed suit. No inflationary cost increase required this rise, which the entire industry adopted, no concern for the consumer deterred it, and no composer shared in it. The sympathy for the consumer professed by the record industry -- which virtually alone among all the industries affected refused to pass on to the consumer the savings made possible by the repeal of the excise tax in 1965 -- will surely not fool all of the Congress all of the time. Ability to Pay The record companies led by CBS, RCA, MCA and Warners continue in the debate over this ceiling to plead poverty (as though they would dare to urge their utilities or trucking 13. companies or musicians to charge them less because of the record industry's financial state). But in truth the record industry, thanks in large part to the songwriters' appeal to youthful tastes, is one of the fastest-growing, multibillion dollar industries in this country today. Its estimated retail sales have risen 190% (from $758 million a year in 1964 to $2.017 billion in 1973 and $2.2 billion in 1974), more than twice as much as our mechanical copyright royalty collections. Even on the basis of the RIAA's dubious of mechanical copyright royalty payments, they fell from 5.61% of retail sales receipts in 1964 to 3.82% in 1973; i.e. a 1/3 reduction in our share. 22/ survey" The record industry continues to prosper. A recent in-depth analysis of the industry estimates that its record and tape sales will reach $3.4 billion by 1982.23/ In 1974, a recession year for most of the economy, the record industry now larger than the motion picture industry and virtually as large as television broadcasting had a record year: $2.2 billion in sales, an increase of almost 10%. Increases of that proportion or greater have been occurring annually since the RIAA's last appearance before this Committee to plead poverty, regardless of the state of the national economy. "I don't see a recession in the record business," said the President of CBS Records at the height of the recession last winter. 24/ At the time he spoke, record prices were being increased again by another $1.00 per album while sales continued to climb at most stores.25/ It is staggering to note that a record company's profit on the typical recording sold is far greater than that of the composer and publisher combined. According to the courtroom testimony of the President of Warner Bros., confirmed by a 1974 National Academy of Recording Arts and Sciences chart, of the $6.97 or $6.98 list price on a typical 8-track tape, 20-24 is before-tax income to the copyright holders at 24 per song, 32-72¢ is before-tax income to the performing artists, and 45-85¢ (624 according to the Warner estimate) is before-tax profit to the record company (gross income less advertising, overhead, etc.).26/ The record industry has tried to make much of the fact that increased record sales have increased aggregate payments to all musical copyright holders combined. Those total payments have of course increased, although not by the same proportion or amount as record sales. But the ceiling rate of payment has remained at an inequitable 2¢; and it is the rate that needs adjustment. 14. Were there only one musical copyright holder in the country, the increase in total royalty payments would be relevant. But in fact the far greater increase in the number of composers, lyricists and songwriters sharing in that enlarged royalty pool has substantially reduced even before taking inflation into account -- the average benefits per writer. It is thus the individual creator who suffers under a system that allows record companies and other music industry participants to increase their prices or rates at will while the rates paid to composers and publishers are frozen under an obsolescent ceiling. Congress, after all, would not reject a Social Security cost-of-living increase merely because the aggregate paid to all Social Security beneficiaries had increased. A government employee GS-12 (first step), who was paid $10,250 in 1965, has since then received 10 inflation adjustments with the approval of Congress and since October of last year has earned an annual salary of $18,463. Clearly the fact that the aggregate of government employee salaries had been increasing did not blind Congress to the need to increase the individual employee's rate of earnings in order to keep up with inflation. - We have no doubt that inflation has posed a problem for the record industry as well. But that industry has been free to adjust its rate of return to cope with inflation and has done so, as noted, by raising the typical record list price some 110% while composers and authors have not. If a 2-1/2 ceiling was deemed reasonable by the House Judiciary Committee in 1966, on the basis of its examination of all the comparative ingenuity and contributions made by music creators and recorders, then 2-1/2 now worth less than 1-1/2 clearly cannot be reasonable today. Since then a rate of inflation unprecedented in this country, except in major wartime mobilization, has helped bring about two devaluations of the dollar, a series of economic stabilization measures and a host of adjusted prices and other rates of return both by statute and collective bargaining. Congress cannot fail to take this phenomenon into account. CONCLUSION That is why we plead with Congress to restore the level approved in 1965-67. To defend themselves against the ravages of inflation in the intervening years, the record companies, while enjoying large increases in aggregate income, have increased their rates (prices); record performers, producers and musicians have increased their rates (wages); 15. and those lending money to the record and publishing industries have increased their rates (interest). Only the composers, songwriters, lyricists and music publishers of America have been forced to operate under the same ceiling rate which is steadily declining in purchasing power. Treating the creators of American music more fairly can only encourage the writing, recording and consumption of still more songs to the benefit of all concerned. Respectfully but urgently, therefore, we petition Congress to rectify this inequity, to let us at least ask for a fair royalty, by increasing the ceiling over negotiations to no less than 4 per selection. |