shown by more recent surveys, with the continued

explosive growth of home taping. Thus, by any measure, the damage to the record and music communities is of

staggering proportions.

It is important to bear in mind that the economic impact of home taping is ultimately also borne by the consumer. Because home taping reduces sales volume, there are fewer albums over which the costs of production can be spread. This can force up the price of the records that are sold. Thus, in effect, those who buy records pay more so that those who tape off-the-air or from borrowed records can pay nothing.

Additionally, widespread home taping will also

have a negative impact on the nation's balance of trade. While most taping equipment and blank tapes bought in the United States are imported (principally from Japan) or produced by foreign-controlled interests, American music has long had a positive effect on our trade balance. We have traditionally exported about three times more phonograph records and other sound recordings

than we have imported.10/ And our performance royalty

10/ See, e.g., "U.S. Trade Shifts In Selected Commodity Areas," U.S. International Trade Commission Publication No. 1187, September, 1981.

receipts from foreign countries are more than three times the payments we make to copyright owners abroad.11/

This is because American music sets the standard for

the world. But as home taping dries up the amount of capital needed to produce new recordings for sale abroad, the American music industry will contribute less to

the U.S. balance of trade.

Finally, widespread taping reduces the record companies' ability to release a large number and wide variety of new records to the public. Already, largely as a result of home taping, record companies are releasing fewer albums. In 1981, the industry released 32% fewer new albums than in 1978.12/ combined were down 24%.13/ Moreover, companies are

Singles and LPS

signing fewer new artists and experimenting less with new music, which have traditionally been the lifeblood of the industry. Recordmakers simply can no longer afford the risks of experimentation.

11/ Based on ASCAP Financial Statement sent to ASCAP Members for the year ended December 31, 1980.

12/ RIAA 1981 Release Survey, April 1982.

13/ Id.

A decline in new releases means that all American

consumers (including the majority who do not tape) will no longer have access to the broad diversity of music

that today meets varied consumer tastes and interests.

B.

The Economic State of the Recording Industry

The explosive growth of home taping could not have come at a worse time from the standpoint of the recording industry. The loss of $1 billion of revenues each year as a result of home taping, combined with other factors such as burgeoning record piracy and counterfeiting, has left the recording industry in

fragile condition.

After decades of consistent growth, the recording industry has suffered major setbacks in recent years. In 1979, for example, the industry had a loss of more

than $200 million on its domestic sales.14/ The impact

of that year on the health of the industry was the subject of an article in New York Magazine:

14/

"After four years of spectacular sales
and profit growth, the $4-billion United

Economic Study of the Recording Industry, prepared by the Cambridge Research Institute (April 7, 1980). Comparable data do not exist for the years 1980 or 1981.

State recorded-music business is going
through a significant shakeout.

"Record-company earnings have

been falling, despite rising sales
revenues. Albums that last year would
have been expected to sell 2 million
copies are doing half that much this
year. Retailers have been hitting
the manufacturers with waves of returned
records at 100 cents on the dollar.
Nearly 1,000 employees have been laid
off in the industry, with CBS Records
the largest U.S. company
leading
the way. Promotion budgets . . . have
been cut severely. The panic factor
has also set in, and the rumor mills

-

-

The downward trend since 1979 has not been

reversed. While unit sales of premium blank tapes have been increasing, unit sales of records and pre-recorded tapes have been declining since that time at an alarming rate. Thus, the latest industry figures just released place total 1981 shipments of records and pre-recorded tapes at 594 million units. That figure represents

Factories," New York, Aug. 13-20, 1979, at 10.

and

*

132 million units

or 18%

from 1978

In dollar terms, manufacturers' net shipments in 1981 amounted to $3.6 billion, down substantially from the 1978 figure of $4.13 billion.16/

Needless to say, those declining figures are not based on any single factor. But no matter what explanations are offered, the extraordinary impact of home taping cannot be denied. In siphoning off nearly $1 billion in recording industry revenues, home taping undoubtedly has contributed to:

the facts that those still in business have
had to lay off thousands of employees, close
down labels, reduce facilities, consolidate
operations, slash their artist rosters,
sharply limit their signing and promoting
of new talent, and release fewer albums;
and

increases in the price of the records that are sold, thus making it more and more attractive each day to forego the purchase of a record and tape it instead.

In short, widespread home taping has recently created a genuine crisis for the recording industry. But beyond that, the harmful effects of home taping

16/ Wall Street Journal, Feb. 18, 1972, at 31.