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FOOTNOTES

1 .

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.

2.

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.

3.

For the source of these and other figures, see the
Summary Table and accompanying footnotes.

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5.

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 2¢ 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 1940'8"
type of album heavily advertised on TV. Royalties on
these selections average less than 1¢ per record
manufactured.

ii.

6.

Register of Copyrights, Report to the House of Repre-
sentatives, May 1958, Part 6, p. 58.

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9.

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.)

10.

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.

11.

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.

12.

13.

See Note 6.

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15.

For a single, of course, the maximum increase would be
3& 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.

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18.

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.

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Total:

$998. 4M

*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 1108
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.

20.

21.

22.

See Note 3.

iv.

23.

Billboard, March 9, 1974, p. 4.

24.

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
millions.'

25.

26.

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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