Exhibit 12 Exhibit 13 Exhibit 14. Record Companies Consolidated Income Income to Selected Groups From Record Companies Financial Trends Exhibit 15 - Record Companies Consolidated Income Statement: Larger, Medium-Size, and Smaller Companies, 1963-1964, Percentages Exhibit 18 Effects of Increase in Copyright Fees VI. RECORD COMPANIES AS A Record Releases, Disk Sales, and VII. IMPACT ON MARKETERS AND CONSUMERS Inability of Marketers to Absorb a One Cent Increase in Copyright Fee Exhibit 19 - Result of One Cent Copyright Fee Increase On Consumer Price I. SUMMARY AND INTRODUCTION For data supporting statements made in the Summary and Introduction, see appropriate sections of the Statement of John Desmond Glover and of this Technical Appendix. II. ANATOMY OF THE RECORD INDUSTRY (self-explanatory) Phonograph Record Sector of the Music Industry: Its Components and the Flows of Products and Payments Total Industry Copyright License Fees The procedure used to estimate total industry copyright license fees is described in Note 2 to Exhibit 17. Harry Fox Collections The difference of $0.5 million between the copyright license fees paid by domestic record companies ($37.6 million) and the amount received by publishers ($37.1 million) represents an estimation of the collection fees withheld by the Harry Fox Collection Agency, a licensing agent established by an association of leading publishers known as the Music Publishers Protective Association. Harry Fox receives between 3.5% and 5% of the fees handled [14, p. 125]. During 1961 Harry Fox is known to have collected $13.2 million, and during 1962, $15.6 million [7]. Based on this information, 1963 Harry Fox collection fees were estimated to be, conservatively, at least $0.5 million. Division of Publishers Copyright The copyright license fees flowing from publishers to authors and composers ($22.0 million) is half of the total copyright license fees flowing to publishers from domestic and foreign record companies ($44.0 million). The equal split of copyright license fees between publishers and songwriters is based upon industry practice [14, p. 127]. Copyright License Fees Received by Publishers from Foreign Record Companies The copyright license fees received by American publishers from foreign record companies were estimated, as follows. Typically, the foreign copyright license fees received by American publishers are based on the retail sales value of the foreign recordings. In Europe, copyright license fees range from 6 to 8 per cent of the retail list price of records. If a European subpublisher is used, a collection charge ranging from 15 to 50 per cent is deducted from the American publisher's share of the fees before remittance to the U. S. A. [14, p. 106]. Initially, these fees are collected for the Harry Fox Office by the major international copyright license right society known as Bureau International de l'Edition Mecanique (BIEM). The fees charged by British and Scandinavian societies tend to approximate about 15 per cent, The citations in the text of this Appendix are to the numbered items listed as "References" at the end of the Appendix. to which the Harry Fox fee of 3-1/2 per cent to 5 per cent is added. In other areas, the over-all charge is likely to run to about 30 to 30-1/2 per cent [14, p. 128]. Working with the low and high estimates, and assuming an even split in fees between Great Britain and Scandinavia, and other countries, American publishers receive between 3.6 and 5.9, or an average of 4.7 per cent, of the retail value of records sold, after a returns allowance of 10 per cent. Next, the total retail value of American copyrighted music released by overseas record companies was estimated. Previously, it was estimated American record companies received about $11.2 million in license royalties from foreign record companies for the use of American masters. These license payments are also based on the retail sales value of the American copyrighted material contained therein. Foreign licensees of American recordings pay American licensors from 8 to 10 per cent of the retail list price in the country of manufacture or sale (less excise and purchase taxes and the cost or price of packaging, based on 90 per cent of the records sold)[14, p. 19]. This means the effective range of fees received by American licensors is between 6.7 per cent and 8.4 per cent of the retail sales, or an average of 7.6 per cent. Thus, if 7.6 per cent of retail sales equals $11.2 million, 4.7 per cent must be about $6.9 million. In the absence of better data, this latter figure was used as the estimate of copyright license fees paid by foreign record manufacturers to American publishers. Performing Rights Societies Fee Collections The 1963 Performance Fees collected by the Performing Rights Societies ($52.7 million) is the sum of the ASCAP and BMI 1963 collections, $37.31 million and $15. 39 million, respectively. During 1963, these two groups distributed $30. 55 million [1] and $9.98 million [3, p.6] to their members, respectively. Because of the unavailability of reliable data, the collections of SESAC, Inc. were not included. Sidney Shemel and M. William Krasilovsky estimated SESAC's 1963 collections totaled about $1 million [14, p. 89]. Foreign Performance Rights The 1963 fees from foreign performance rights societies flowing to American publishers and songwriters ($4.5 million) is the sum of the foreign fee distributions made in May and December, 1963 by ASCAP to its members [5]. Division of Performance Fees Between Publishers and Composers The flow of performance fee income to publishers ($22. 5 million) and to authors and composers ($22.5 million) is based upon the industry practice of splitting performance fee income equally between publishers and songwriters [14, p. 84]. Sheet Music Sales At the request of the researchers, the American Music Conference, Chicago, Illinois, estimated the total retail sales of sheet music was about $50 million during 1963. Trade sources estimated the 1963 sales of sheet music by publishers to sheet music distributors were about 50% of the retail sales dollar figure (i. e., 50% x $50 million). Negotiated Sales by Composers The negotiated sales figure of $18.0 million flowing to authors and composers from advertising companies was obtained from a business publication [4]. In the absence of other evidence, this 1962 figure was used for Exhibit 2. License Royalties for Use of Record License royalties paid by foreign label companies to American label companies for use of American-produced masters was estimated as follows: It was assumed all of the 1963 "other income" shown on Exhibit 12 ($6.6 million) came from the use of American manufactured masters overseas. This figure was then multiplied by a factor (1.692) equal to the proportion of 1963 total industry excise taxes to the 19 sample companies' reported excise taxes. Receipts by Vocalists and Musicians from The estimate of Artists, Musicians and Vocalists payments was estimated by multiplying the 19 sample companies' 1963 total Artist, Musicians and Vocalists payments ($28, 160) (see Notes to Section V) by the proportion total 1963 industry excise taxes bear to the 19 sample companies' 1963 excise tax payments (1.692). |