SUMMARY

My name is John D. Glover. I am a Director of the tridge Research Institute, a management consulting firm xated in Cambridge, Massachusetts. Our firm and its princi24s have made economic studies of many industries, including, nerous others, banking, retailing, footwear, paper, unications, coal, and hotels. We have also studied health care field for hospitals and government agencies. On behalf of the Recording Industry Association of

we have made an extensive study of the economics of rding industry. A particular focus of that study has The effects of a possible increase in the statutory

al myalty for the licensed use of copyright music, wd secifically the issues raised by Section 115 of H.R.

We appeared on behalf of the recording industry just 10 vins ago, when an canibus Copyright Bill was being considered, preparation for these hearings, we have collected a mass new data that bear on the economics of the recording indus**ver the past decade.

It is our hope to lay before this Committee the economic bare essential for an understanding of the economics tried music and for an equitable judgment on Section 115 I pyright Bill now before you.

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In addition to this summary, we should like to have included in the record the appended detailed analysis of the recording industry and of the impacts of the proposed changes in the Copyright Act that relate to royalty payments for the use of copyright music.

To summarize, as shown in Exhibit A, our study leads to two major conclusus thoroughly documented by firm statistical data:

FIRST, there is no economic justification for increasing the
statutory royalty rate.

The music publishing industry has argued that a higher rate
is justified by virtue of inflation. We shall show that, in fact,
income going to music publishing companies and other owners of
copyright music has risen much faster than inflation, as measured
either by (a) the Consumer Price Index, or (b) Median Family Income.
In fact, publisher income from mechanical royalties has more than
doubled in the past 10 years.

higher rate would have serious impacts on all other

There would be considerable pressure for a rise in record prices -of perhaps as much as $100 million to consumers and other buyers of recordings, including the jukebox industry.

Profits of record makers, especially smaller ones, would be

under grave, not minor, pressures.

The incentive to record and release new and experimental,

and hence unknown and riskier music and performances

by umanowm artists both popular and "serious" -- would be
Lapaired

Eng.ayment in the recording industry would tend to fall

would affect artists, working musicians, sound technicians,
and production workers

THERE IS NO ECONOMIC JUSTIFICATION FOR RAISING THE ROYALTY RATE

Let us respond first to the arguments of the publishing industry that a higher statutory rate is justified simply by the passage of time and by inflation. As to those arguments, we would like to place before you several facts.

Price Per Tune Is Down; Copyright Owners' Share Is Up

When the statutory rate was set at 24, the price
received by a record maker was 40 for a typical
record, which then had a single tune on one side.
The royalty then represented 5% of the recording
company's price.

- Since then, because of technological progress, the

price per tune has fallen. A record maker now typically
receives something like 27¢ per tune, in current, cheaper
dollars, for a two-sided "single" and for each of the 10
to 12 tunes included on a 12-inch LP record.

At the same time, the share going to music publishing com-
panies and other copyright owners for royalty payments has
increased by half and now represents 7.4% of the producer's price.
And it must be noted most especially that this greater

share going to publishing companies per record now applies

to the enormously increased volume of records and tapes now
being sold.