persist, it could well deliver a debilitating blow to

the music community. That blow would be felt by Americans in every city and state in the nation

including the music publishers, songwriters, performing artists,

musicians, vocalists, retailers, distributors,

manufacturers, and suppliers who depend upon, and are an integral part of, the American music industry. Moreover, widespread home taping has a negative impact on one of the few industries with a favorable international balance of payments

-

an industry that,

in addition, has generated enormous goodwill around

the globe.

Finally, continued massive home taping will cause record companies to release fewer records and to experiment with fewer new artists, songwriters, and types of music. Music publishers, too -- whose royalties are based upon sales

will no longer be able to cater

to so broad a range of tastes as they do today. The result will be a significant decline in the number and

variety of records available to all consumers who buy, as well as those who tape.

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those

"If

The Audits & Surveys study calculated the volume of record and prerecorded tape sales displaced by home taping. With respect to each instance in which a respondent made a home tape, he or she was asked: you had not been able to record what you recorded from this (source), would you have bought a record or prerecorded tape of it instead?" Audits & Surveys aggregated their responses and found that home taping results in lost sales of records and pre-recorded tapes equivalent to nearly 325 million albums annually.15

(See chart on next page.)

16

This conclusion is consistent

with earlier studies, which also found that home taping

15 Audits & Surveys Report at 13.

16 For example, the WCI study calculated that the market value of music taped at home in 1980 exceeded $2.85 billion. WCI Survey at 24. A subsequent WCI study found that, for every 10 albums taped, the tapers would have purchased 4 albums if taping were not possible. Warner Communications, Inc., "1981 Estimate of Loss Due to Home Taping: Tapers' Reports of Replacement, at 8 (April 1982). (That study has previously been submitted to this Committee. See 1981-82 Senate Hearings at 938-55.) Similarly, the 1979 CBS study found that home tapers forego three purchases of recordings each year because of home taping. CBS Survey at 14-15.

These figures should come as no surprise, given that tapers admit that they engage in home taping primarily to avoid buying records. '' As Register of Copyrights David Ladd told Congress last year: "nearly

all audio taping from transmissions tends strongly to pre-empt the copyright owners' markets, or displace their products from those markets. "19

B. The Impact of Lost Sales

Based upon the survey data, financial statistics of the recording industry, and government and industry data on sales of blank tape and recording equipment,

Dr. Alan Greenspan has estimated that in 1982 the recording industry lost more than $1.4 billion in revenue as a direct result of home taping. 20

17 Those earlier studies elicited information as to foregone sales with respect to each taper, and thus those displacement figures were unweighted. By contrast, Audits & Surveys asked its displacement question with respect to each item of music taped; its displacement figure is therefore weighted to reflect each taper's respective amount of taping. This weighted displacement figure more accurately reflects the actual volume of sales lost.

18 WCI Survey at 16; CBS Survey at 11.

19 1981-82 Senate Hearings at 371.

20

Statement of Alan Greenspan Re: S. 31 (October 25, 1983), at 7 [hereinafter cited as "Greenspan Statement"; attached hereto as Appendix Three].

16

Dr. Greenspan makes the following observations

in his analysis:

Home taping has been rising at a very
substantial pace in recent years. Assuming
only a single use of a new blank tape, in
1972 home taping accounted for 20 percent
of the total hours of recorded music available
both from purchase and taping. (This excludes
music available from multiple uses of blank
tape, counterfeiting, and piracy.) By 1982,
home taping had risen to 43 percent of the
total.

This amount of home taping has had a
substantial impact in displacing sales of
sound recordings. As Audits & Surveys found
(and as other studies confirm), roughly half
of the taping from borrowed records or tapes
would have generated purchases had home taping
not been possible. And about two-fifths
of the taping off-the-air or made as duplicates
of previously purchased records would have
generated purchases of additional records.

Overall, this suggests that more than two-
fifths of all home taping last year was in
lieu of the purchase of prerecorded records
or tapes.

These data indicate that, in 1982, displaced
sales resulting from home taping were
equivalent to 32 percent of total record
sales. When that loss is combined with the
sales displaced by taping onto tapes that
were being re-used and with the effect of
taping on record prices, the estimated retail
dollar loss from home taping last year amounted
to more than $1.4 billion.

Dr. Greenspan has also considered the practical effect that these lost sales have had, and will continue to have, on the recording industry: