The record industry statement in favor of a "performance right" royalty asserts that a popular tape recoups its costs when sales reach 24,000 units.
The Recording Industry Association of America (RIAA) has long attempted unsuccessfully to divide us writer from publisher -- by suggesting that the Congress require by law that writer-publisher contracts provide the lion's share to the writer. But as AGAC President Ervin Drake recently said: "we view publishers as our partners in a sense that is best expressed by the word 'symbiosis'. It is true that a publisher's work may not begin till our work is complete; but, in the large sense, our work is not complete until they exercise their functions properly as publishers." Through guarantees, advances, guidance and workshops the pub- lisher encourages and assists the writer; and through demonstration records, samples, catalogues and a host of promotion activities, he keeps the writer's name before the public and industry all over the world. Today some writers are publishers, record producers and performers rolled into one, others have varying degrees of bargaining leverage, and no statute could possibly decide better than the parties how their mechanical copyright royalties should be divided.
For the source of these and other figures, see the Summary Table and accompanying footnotes.
Id. A recent study by Robert R. Nathan Associates, Inc. (RRNA), details of which are in the attached tables, indicates that mechanical royalty payments during the last quarter of 1974 were below 24 for 54% of all selections, and 67.6% of all licenses. For some 23% of the licenses, a fee of less than 1.5 was paid. Obviously that will vary from song to song and record company to record company with no clearly predictable pattern. During the fourth quarter of fiscal 1974, for example, one record company paid a royalty of more than one cent per selection 98.3% of the time to one pub- lisher but only 26.6% of the time to another publisher. The 1969 Knight Report to the Senate Judiciary Subcom- mittee on Copyright by the Library of Congress Legisla- tive Reference Service also concluded that "rate variations ... do exist below the statutory maximum and do affect a sizeable portion of the copyrighted selections being recorded." One example of low-royalty recordings can be seen in the "Top 50 Hits of the 1940's" type of album heavily advertised on TV. Royalties on these selections average less than 1 per record
Register of Copyrights, Report to the House of Repre- sentatives, May 1958, Part 6, p. 58.
See Note 3. In terms of real (1965) dollars, this has been a 43% decline. (Beginning songwriters, requiring little capital investment to pursue that line of
work are like the small farmer of an earlier genera- tion --apparently undeterred at least in the initial stages by an inequitably low return for their efforts.)
CBS Records president Goddard Lieberson in a May 1974 address in London, and RCA Records executive Chet Atkins in April 1965 both emphasized that "the song's the thing" without which the best artists, musicians and recording equipment and technicians cannot be successful.
Congress feared that the Aeolian piano roll company was seeking a monopoly by making exclusive contracts with most of the important proprietors of musical copyrights. It thus provided in the Copyright Act of 1909 that, once the copyright owner of a nondramatic musical work had exercised his exclusive right to license the mechanical reproduction of that work to one recording or piano roll company (or record it himself), any or all other companies had the right to purchase a license to make similar use of that work. Without some statutory ceiling on the royalty to be charged, Congress then decided, such a right was unworkable; and after consi- derable deliberation that ceiling was fixed by law at 2¢ per selection for each record or piano roll manu- factured. Talking machines were new, and record prices varied widely in a range far below their present level.
1969 Report on Mechanical Royalty Rate on Sound Record- ings by Mr. Edward Knight of the Library of Congress Legislative Reference Service.
For a single, of course, the maximum increase would be 34 per record (one selection on each side) over the level noted by the House a decade ago. Juke-box com- panies, which in the last year alone paid an increase of 25% in the cost of singles purchased wholesale from the record industry (Statement of Fred Collins, Jr., President, Music Operators of America, Billboard, July 19, 1975, p. 3), are thus unlikely to feel any noticeable economic impact from even this maximum three penny increase.
See Prof. Glover's testimony, for example, on pp. 819, 824, 889, 901, 822, 816, 777, 810 and 773 of the June 1965 Hearings before the House Judiciary Subcommittee on Copyright. Prof. Glover also warned that increas- ing the mechanical rate ceiling might require a reduction in the number of songs per album. The ceil- ing has not been raised but the reduction (from 12 to 10) occurred anyway, thereby increasing the record company's price per song and decreasing the composer's royalty per album.
*Billboard 1967-68 International Record Survey, pp. 10-11 **Record World, June 7, 1975, p. 3.
While much of the analysis contained in this statement relies necessarily on published list prices, the age-old prevalence of discounts at the retail level does not alter the conclusions drawn therefrom, inasmuch as it is the relative change in prices over the last 10 years that matters and there is no evidence that the ratio of realized actual retail prices to list prices has declined. On the contrary, there is reason to believe that they have risen in the last ten years, thus signifying an even larger effective price per selection increase than the 110% cited in the text.
See Mr. Davis's testimony, pp. 515-516, March 21, 1967 Senate Judiciary Subcommittee Hearings.
CLIVE, INSIDE THE RECORD BUSINESS by Clive Davis with James Willwerth, William Morrow & Company, Inc., 1974. The $3.79 and $4.79 price references differ from the $3.98 and $4.98 figures noted above by virtue of the then applicable excise tax. When this tax was repealed, however, the industry kept the price at the same level and pocketed the 19 per record instead of passing this savings on to the consumer.
Billboard, March 9, 1974, p. 4.
Billboard, February 1, 1975, p. 3; See also Billboard, August 17, 1974, p. 8: the record tape Industry is recession-proof." See also New York Times, July 23, 1975: "even in a recession, there are huge profits to be made in recorded music..." 'There's nothing like the record business, said Marshall Blonstein, a vice president of Ode Records:
'People talk about big hits in the movies... You know how much it costs to produce a record? - about $40,000, and you can make
Billboard, April 5, 1975, p. 4.
Billboard, July 6, 1974, p. 4. See Transcript of testimony of Joseph B. Smith in U.S. v. Taxe et al.
In truth even this understates the record company's
profit and overstates the music composers' and publishers' income because the current prevailing tape price is $7.98, not $6.98, and, as shown above, the royalty rate of the majority of selections is below the 2 ceiling. The New York Times also estimates a much higher gross profit margin. Op. cit. supra, Note 24.
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