PREFACE Economic Analysis of the Proposal to Increase Copyright License Fee for Phonograph Records The text and exhibits that follow set forth an economic analysis of the proposal contained in H. R. 4347 to increase the statutory copyright license fee on phonograph records. The present copyright law provides that a record manu – facturer pay to the owner of a copyright a fee of 2¢ per "part, i. e., record for each selection on the record. Thus, the typical long playing record with 12 selections commands a 24¢ license fee per record. This fee is typically paid to the publisher, who divides it with the composer. The proposed bill provides that the license fee per part be increased from 2¢ to 3¢. In addition, the bill introduces a new license fee concept based on playing time, 2 As a kind of short-hand, people generally talk about the proposed increase in the statutory copyright license fee as contemplating simply a move up from 2¢ to 3¢ per selection. Actually, H. R. 4347 calls for payment of 3¢ per selection or 1¢ per minute of playing time (or per fraction thereof) of each selection, whichever is greater so that a 2 minute piece would incur a fee of 3¢, whereas a 3-1/2 minute piece would call for 4¢. Thus, the new license fee for the typical long playing record with 12 selections would move from 24¢ to at least 36¢. The new total license fee per long playing record could be greater than 36¢, depending on the particular mix of running times of its 12 selections. - This economic analysis examines only the proposal to increase the statutory copyright license fee from 2¢ to 34. If the full license fee schedule proposed in H. R. 4347 was actually adopted, the over-all economic impact would be far greater, and 3 accordingly more drastic, than shown in this analysis. 1 See 17 U. S. C. Sec. 1(e), which provides for a copyright license fee of 2¢ per "part. " See H. R. 4347 Sec. 113(c) (2) which proposes that the statutory license fee "... shall be either three cents, or one cent per minute of playing time or fraction thereof, whichever amount is larger. " 3For example, analysis of a small sample of 22 long playing Admittedly, increasing the price - or the fee - of anything "from 2¢ to 3¢" does not sound like very much. And perhaps many may have thought that such an increase would scarcely be felt by anyone. However, the proposed increase would have a drastic impact on all elements of the industry from composers, publishers, and performing artists, phonograph record companies, and record marketers, all the way to the consumer. Last year, payments by phonograph record companies for copyright license fees, under present law and practice, were about six times the amount of their profits. Increasing the copyright license fee from about 2¢ to 3¢ per selection per record would call for additional payments of many millions of dollars in fact, for added payments which, alone, would be about three times the total profits of the record companies during 1964. This analysis does not go into the economic effects of modification or elimination of the "compulsory" or open-licensing provisions of the existing Act (and of the proposed bill) under which hundreds -- even thousands of firms have come into being to produce and market a multiplicity of offerings for all kinds of musical tastes. Some idea of the impact of a change in this aspect of the statute, however, can be inferred from the data contained herein. In the pages that follow are reproduced the text and data shown on large charts used in the presentation of this analysis to the Subcommittee of Patents, Trademarks and Copyrights of the Committee on the Judiciary, United States House of Representatives. To facilitate analysis, these charts are grouped into nine subject areas. Additional comments are also given that summarize the oral statements made in introducing each subject area and in explaining the charts and data to the Subcommittee. (continued from previous page) records produced by 7 different record companies showed that only 5 produced by the same company would not have been affected by the 1¢ per minute of playing time provision of H. R. 4347, i. e., each of these five records would have called for statutory copyright license fee payments of 364. The remaining 17 long playing records, however, would have called for fees in excess of 36¢; 7 would have required 44¢ and more up to 51¢. - |