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that all royalty licenses would increase at all, or that even those royalties now at the 2 cent ceiling would all increase by any given amount. By Dr. Glover's logic, an increase of 10 cents in the ceiling rate would increase royalties by $470 million, an increase of $1.00 in the rate would up total royalties by $4.7 billion, etc.
As documented in detail in our statement and confirmed in Dr. Glover's own report on "standard variations,” a large proportion of selections is not licensed at the ceiling now. There is no reason to believe that the relative bargaining power of the copyright holders versus the record companies will suddenly change sufficiently to alter this picture, no reason to believe that the record companies will sit by and acquiesce in a rise of all rates to a new ceiling.
B. Dr. Glover then proceeds to allege that this supposed $47 million increase in royalty payments could cost consumers $100 million." This assumes totally without substantiation that every record company, distributor, and retailer would seize on an increase in royalty costs as an opportunity to further fatten their profit margins, that they would succeed in this profiteering, and that their gain from a ceiling increase would thus be substantially greater than ours.
C. Dr. Glover argues that a higher royalty ceiling would reduce the quality as well as the quantity of recorded music, including the number of classical releases. There is no basis for such an assumption. Almost all classical music is in the public domain, and thus not subject to mechanical royalties; and by allowing composers and music publishers the chance to earn a decent income, a higher royalty ceiling will inspire a greater quantity and quality of music available for recording. 4. The use of incomplete data
Dr. Glover attempts to argue that total mechanical royalties have increased faster than the cost of living and median family income. Even if his figure for total royalties were correct (it is not, see item 2 above and item 5 below):
A. He has carefully selected base years to yield this conclusion-he might instead examine the last 3 years, during which the Consumer Price Index has risen by 30 percent, median family income by 25 percent, record sales and prices by 26 percent, record companies' profits before taxes by 42 percent, but mechanical royalties by only 2.6 percent,* causing a 16 percent decline in their purchasing power:
B. He has chosen to ignore the size of the pool of songwriters and composers among whom these royalties are divided-in truth an increase of more than 100 percent in this pool over the last decade has, combined with inflation, caused a decrease of more than 40 percent in real royalties per writer ; 15 and
C. He has likewise chosen to omit the key yardstick of net record sales, relative to which royalties (according to his own figures) have fallen from 11 percent in 1964 to 9 percent in 1971 and 7 percent in 1974.16 5. The use of inconsistent data and assumptions
A. Dr. Glover argues that the present 2 cent ceiling is not a ceiling but a uniform rate, at the very same time acknowledging the existence of substantial numbers of licenses for less than 2 cents. He dismisses these as simple "standard variations" but requires nearly 40 pages to explain them.
B. Dr. Glover argues that a higher ceiling would decimate record company profits,17 at the very same time that he assumes they would not use their bargaining position to negotiate for rates below a new ceiling level (see 3A above) ; he also argues that any increased royalty costs will be not only passed on to the consumer but used as an excuse for increased profit margins (see 3B above), hardly a profit decimating position.
C. Dr. Glover argues that the impoverished record companies made profits in 1973 from recording sales, before taxes, and excluding foreign fees and other income, of only $16.5 million ; 18 but in sworn courtroom testimony, the president
11 Pp. 4. 18-19, 63-67.
14 Consumer Price Index: as reported by the Bureau of Labor Statistics : median family income: as reported by the Census Bureau ; record sales : as renorted by Billboard, based on RIAA data, and given at table 16 of our statement; mechanical royalties; on p. 54 of Dr. Glover's statement ; profits, p. 157 of Dr. Glover's statement. 15 As shown in cols. 13 and 14 of the summary table of our statement.
16 Pp. 47–49. Net record sales are valued at the prices charged by record companies to distributors. As a percentage of retail sales, royalties fell from 5.5 percent in 1964 to 4.5 percent in 1971 and 3.5 percent in 1974.
17 Pp. 4, 5, 17, 22, 30, 31, et seq. 18 P. 53.
of Warner Brothers indicated that these profits on an industry-wide basis were 34 cents per LP or tape, which would amount to total profits of more than $100 million from this source alone."
For years record industry spokesmen in Billboard and elsewhere have proudly pointed to everincreasing levels of volume and profit. (For the most recent example, see Exhibit A attached.) Even by Dr. Glover's own analysis, record company profits before taxes over the last 3 years have risen 42 percent." The fact is that the major record companies are integral parts of huge entertainment conglomerates whose ability to shift profits and costs from one division ot another in a consolidated balance sheet is legendary; and the constantly reiterated claim that the record industry is the only party to this dispute which has “revealed” to the Congress its true profit picture is a complete myth.
D. One final indication of the invalidity of this data : Dr. Glover asserts that the financial break-even point for a popular long-playing (LP) record is much higher than it is for a regular tape; but for years the record industry has claimed that higher prices for tapes over LP's were justified on the ground that the tapes were more expensive to produce.
Conclusion.—Dr. Glover's mass of irrelevant, unreliable, unsubstantiated, incomplete and inconsistent data and assumptions cannot alter or conceal one basic ct: his employers are asking Congress to hold down the ceiling on mechanical royalty negotiations, thereby continuing to permit authors and publishers only a steadily lower rate of return in real dollars and a steadily lower share of record prices and receipts, simply because they do not want to dip into their enormous profits on a hit song to pay the writer of that song.
(From the Wall Street Journal, Thursday, Oct. 30, 1975–p. 1]
Hot PLATTERS The recording industry is busy setting records.
After being "brushed by the recession" earlier this year, business is booming, says a spokesman for CBS Inc.'s records division. “This has been the fastest turnaround in the history of the business," he says. The division's sales in the third quarter were a record and 19% above the previous year. Warner Communications Inc.'s recorded music division also had a record third quarter. “We haven't been able to press records fast enough," says a spokesman. RCA Records' third quarter sales were "the best for that period in our history," says Kenneth Glancy, president of the RCA division. MCA Inc. reports its domestic record sales are up 13% so far this year.
Warner cites several reasons for the recent surge. Among them are “a lot of new, good product” being offered on albums in preparation for the big Christmas season, a pickup in the economy and "a lot of buying" by college students this fall.
Industry executives expect the boom to last a while. Says Walter Yetnikoff, president of CBS Records, “All indications are that this pattern of success will continue well into next year.
Mr. DANIELSON. Our next scheduled witness is Ralph Peer II, vice president of Peer Southern Organization, music pubìishers.
I might say so that we do get through here, Mr. Peer is recognized for 5 minutes.
TESTIMONY OF RALPH PEER, VICE PRESIDENT, PEER-SOUTHERN
ORGANIZATION; DIRECTOR AND OFFICER, NATIONAL MUSIC PUBLISHERS ASSOCIATION
Mr. PEER. Thank you, sir.
I am very pleased to be here today with two excellent composers who will speak following me. I am Ralph Peer. I am vice president of the
19 Billboard, July 6, 1974, p. 4.
10 The price of an LP at that time was given as $5.98, the price of a tape as $6.97. With 3 LP's for every 2 tapes, the average price per LP or tape would be $6.38. Å unit profit of 34 cents would be 5.3 percent of $6.38. Applying this profit percentage to 1973 industry sales of $2.017 million yields a total profit of $107 million.
2 P. 157.
Peer-Southern Organization which is an independent music publishing firm. It was founded by my father some 50 years ago and is now headed by my widowed mother. We were pioneers in American country music. We helped bring Latin music to this country and we are now working in popular and symphonic music as well.
I take great pride in our work, in discovering, encouraging, and nurturing composers, promoting their works around the world, obtaining multiple recordings of their works, safeguarding their copyrights, representing them in negotiations with record companies and with others. I feel that we are making a real contribution to the enrichment of American culture. As a young man, I look forward to a lifetime in this business, fulfilling our responsibility to American music and keeping our company independent of the large conglomerates.
Frankly my future depends upon what you gentlemen decide. The bill you are considering will probably govern music copyrights for the rest of my life. Although record company opposition has apparently ruled out the concept of the percentage or royalty ceilinglike those adopted in most of the other countries in which my company is active at least the concept of the copyright tribunal in the pending bill gives me some hope that the ceiling on our earnings will not be frozen for another 66 years.
But the starting place for that tribunal will be the ceiling you place on the bill. If you fail to adjust it for these last 10 years of inflation I doubt that the tribunal will do so. If you fail to provide for a fair ceiling for my negotiations with record companies, then no amount of determination or bargaining skill on my part can obtain for our composers the level of incentive they need and deserve if they are to continue their creative activities.
Put yourself in my shoes. As publishers go, we are relatively large, but compared to the market power of the four or five record giants, we are minuscule. When they make me an offer which is below the statutory ceiling, frankly, I can rarely refuse it. They simply tell me that the package they are putting together will exclude our company and our composers entirely unless we accept their terms.
If they are anxious to get a particular song or composer, I can at least make a counterproposal but I can never ask for more than the statutory ceiling, no matter how good the song is, because a record company can always get it for 2 cents. Frankly, we are sometimes passed by altogether because I will not accept an unjustly low rate for our composers. But usually we end up agreeing to a rate below the ceiling in order to have our music included.
Do you understand the position I am in? On the lower end of the scale, I am faced with a buyer's market in which the thousands and thousands of songwriters and publishers compete to provide the lowest bid for a handful of powerful record companies. The statute imposes no floor, no minimum, only a maximum.
But in those instances where we might have some bargaining power, where we might have a song or a writer that is very much in demand, there Congress has cut off the law of supply and demand and inter
vened on the side of the record companies to say that we cannot ask for more than 2 cents per song.
This is not fair. If there must be a ceiling, it at least ought to be high enough to let us do a little bargaining when we have a great song. How else am I to meet my responsibilities to American music? How am I to encourage our writers to keep on writing and improving if the royalty per record, regardless of whether the song is trash or treasure, can be no more than 2 cents or 3 cents. When I represent these writers and their works in Europe, the royalty ceilings are generally 8 percent of the list price, which would be about 5.5 cents if it were in effect here. Why should they receive worse treatment at the hands of their own Government?
In conclusion, I ask you to remember that you are setting a ceiling on our negotiations, the upper limit, not a minimum or a fixed rate. We seek the right only to bargain on behalf of our composers when the song or situation warrant it. The higher the rate that you set, the closer we will be to a free market where actual payments will reflect true market values.
Remember, finally, that a good song is the key to a successful record and to the success of the record industry. If we are to encourage real quality and variety and creativity in American music, do not trample over our songwriters. Turning them off in the long run will be bad for everyone connected with music, including the record companies.
I hope you will set a new ceiling that recognizes these facts. If you do, the composers and music publishers and music lovers throughout the country will be most grateful. Everyone will benefit.
We will now move on to Mr. Marvin Hamlisch of the American Guild of Authors and Composers who is recognized for 21/2 minutes. The time is 14 minutes before 12.
Mr. HAMLISCH. Good morning.
TESTIMONY OF MARVIN HAMLISCH, AMERICAN GUILD OF
UTHORS AND COMPOSERS
Mr. HAMLISCH. I speak as a composer. I hope that I am the fellow that Mr. Pattison referred to when he said we need someone who is able to do something about the mechanical rate.
I waited a long time in my life to get a hit song. Every songwriter writes many songs and they always hope that there will be something at the end of the rainbow—the big smash hit. Two years ago I was very lucky and received three Oscar awards: two for the music for the motion picture, "The Way We Were.” Naturally, after the song "The Way We Were” sold over $1 million of single records, I waited expectantly for the big check; I just knew that this was going to put me on easy street. I knew I was finally going to buy that wonderful Beverly Hills house. My parents were going to be proud and I was going to be fulfilled. When the "big" day came and the check arrived, it was for all of $5,000.
So my song actually sold over 1 million records and I received $5,000, based upon the mechanical rate as it is now computed. Of the
2-cent rate, the publisher gets one penny, I get one-half of the other penny because I only write the music, and the lyricist gets one-half penny.
A couple of things that I heard today bothered me. For instance, this idea that "By the Time I Get to Phoenix” has been recorded 91 different times on what we call "cover records" and that therefore this is a spectacular and profitable event.
Let me explain why this is not representative of most songwriters' experiences. First of all, most records come out and are not recorded after that first record. What about all these songs that come out and are not smashes? Since Barbra Streisand is a very unique performer, "The Way We Were” gave me about 15 cover records, but nowhere near 91. It may be because the record people do not want to get into competition with Barbra Streisand; I do not blame them. But certainly, I do not want you to think that every time a record is released, even a small hit, it immediately proliferates into 91 other releases.
It bothers me and turns me off to the songwriting and record industries to know that the mechanical rate is so low. Also, I think that it is wrong to suggest that there should be no mechanical rate at allleaving the writers, publishers, and record companies free to negotiate for a price. Composers give birth to a little child called a song and it is very hard to go to the record people and say that this child is worth so much or that this song is more commercial, so that I should get more money. Composers are very creative, sensitive people; I do not want to go into an office and start negotiating for what I think my song is worth.
I think that the best thing to do would be to introduce a floor and ceiling for the mechanical rate so that a composer can get a reasonable rate. Then, we would not have to always "bargain down” to a lower rate as we often do now. I, as a successful writer, can tell you that many times I have not gotten the statutory rate; less successful writers may rarely get the full 2-cent rate.
In conclusion, let me just say that, Eubie Blake, from whom you will hear next, wrote a fantastic song years ago in 1921, called "I'm Just Wild About Harry.” And the wonderful but sad thing that I told Eubie that we have in common is that he got paid exactly the same mechanical rate in 1921 as I got for “The Way We Were.” Šomething is very wrong if album prices and record sales are going to continue to go up and the poor composer gets so little for his efforts.
"The Way We Were” sold over a million records and the "big" check was only $5,000. I think we have to do something about that because we are putting a lot of composers out of business. Thankfully Mr. Blake and I also happen to be able to perform. Otherwise we could not live.
Mr. DANIELSON. Thank you, Mr. Hamlisch. And our concluding witness on this side of the debate is Mr. Eubie Blake of the American Guild of Authors and Composers and I am going to take the liberty of saying that for a man of 92 years you sure look good.