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Statistics of phonograph record sales in the United States have been compiled back to 1921.• Sales had reached approximately $105,600,000 at retail value in 1921. But thereafter the trend was reversed and sales hit a low of $5,500,000 in 1933. Since that time, there has been almost a constant increase and sales for 1962 (the most recent figures available) show the substantial total of $570,250,000. Since most recorded music is subject to copyright protection, the amounts paid by record manufacturers for copyright royalties have increased in approximately the same proportion as sales of records. Copyright royalty payments by United States record manạfacturers to one collecting agent who represents an estimated 70% of all music publishing interests rose from $4,400,000 in 1955 to $13,194,000 in 1961. Such royalties represent a substantial part of the record company's costs of doing business; the most recent survey conducted by RIAA covered the years 1956 and 1957 and showed copyright royalties at 9.1% of net sales in each of those years.
American manufacturers also export phonograph records to numerous foreign countries, and export sales (not included in the U. S. sales figures given above) in round numbers have averaged about $10,000,000 (factory value) per annum in recent years.
Estimates of the number of companies in the phonograph record business vary widely. One reason for this is that new companies constantly are being formed, while others become inactive, merge or go out of business. Recording facilities and manufacturing services are readily available on a fee basis so that entry into the record industry is simple and inexpensive. In 1962, the trade paper Billboard Music Week published a list of record companies that it considered active at the time; over 650 companies appear on that list, although some of them may have released only one record.' It seems safe to say that, at any given time during the past few years, there have been several hundred phonograph record companies in active operation in the United States. It is evident that this industry provides employment to a substantial number of persons, including not only those on its
• See Appendix E. ** See Appendix F for import and export statistics.
regular payrolls, but also the musicians and vocalists who either are engaged under term contract or (more often) assembled as needed for recording purposes.
The average person today hears music in the form of phonograph records more often than in any other way. The quality of sound recording has been increased consistently over the years and high fidelity reproduction equipment is now a commonplace possession. A trade paper survey shows that there were phonographs in 76% of the homes in the United States in 1961, as compared with 44% in 1950.8 Records also are performed constantly on coin-operated machines (“juke boxes”). In addition, numerous radio stations depend almost entirely on records for their program material and the number of commercial radio broadcasting stations in the United States reached a total of 4,517 in 1961, · more than twice the number that were on the air in 1948.' An industry survey reports that record programming occupied 46.9% of total air time for all AM radio stations broadcasting in 1953, a figure that had increased to 79.7% for a much larger number of stations by the spring of 1963.10 It is common knowledge that FM radio programming relies even more heavily on records than AM, so that complete statistics would show an overwhelming majority of air time devoted to the playing of phonograph records.
It has been estimated that United States manufacture accounts for 53% of the world record market." However, this figure gives only a scant impression of the world-wide influence of the American record industry. The popularity of American music and American artists is enormous throughout the world, and their records frequently will be found on best-seller lists simultaneously in the United States and a dozen or more foreign countries.12 Phonograph records produced from performances by American artists represent by far the majority of all record sales throughout the entire world.
The foregoing summary is intended to give some idea of the economic and social importance of the industry whose existence is threatened by the Register's recommendation for the repeal of the statutory license system for recordings.
3. The Development of the Compulsory License Provisions.
One of the most important facts to bear in mind about the compulsory license system is that there was no recording right in musical compositions at all prior to the Copyright Act of 1909. Until Congress specifically granted the right to make mechanical reproductions, no infringement of copyright was involved in the production of phonograph records, piano rolls and similar devices. For these purposes, all music was in the public domain, even though it was protected by copyright against unauthorized performance and other uses. Manufacturers of mechanical devices had the full legal right to use copyrighted music just as they did music on which the copyright had expired, without the need for a license and without the obligation to pay royalties to anyone. Neither the music publisher who owned the copyright nor the writer of the music collected any income from the exploitation of the mechanical right. It simply was not within the scope of the monopoly granted to the copyright proprietor by the statute then in effect, just as the public performance of music for non-profit purposes does not constitute an infringement of copyright under the present statute.
This interpretation of the 1891 Copyright Act was announced definitively by the United States Supreme Court, which concluded, after a careful review of the circumstances, that Congress deliberately had intended to permit the manufacture of mechanical musicreproducing devices to continue without any obligation by the manufacturer to the copyright proprietor.13 The International Convention for the Protection of Literary Property (“Berne Convention”) of 1886 contained a section providing specifically that mechanical devices such as piano rolls and phonograph records were not to be considered infringements of musical copyright.14 Although the United States never adhered to the Berne Convention, this section demonstrates clearly the general attitude prevailing throughout the world at the time. Furthermore, the Supreme Court pointed out that Congress was aware both of the Berne Convention and of the existence of various types of mechanical music-reproducing devices when it enacted the 1891 statute, and held, therefore, that it was not the intention of Congress to treat them as infringements.16
When Congress saw fit to grant the mechanical reproduction right
The statutory license system for recordings accordingly does not
The key to understanding the statutory license system lies in the
The fear of monopoly grew largely out of the revelations during
At the time, the most popular mechanical device for the reproduc-
In 1906, while the test case was pending on appeal,20 Congressional
The Committees on Patents of both the Senate and the House,
Committee hearings were postponed pending a ruling in the test
• A set of the contracts is reproduced in Appendix G.