A HIGHER STATUTORY RATE WOULD NOT BE "MERELY A CEILING," AS ARGUED BY MUSIC
PUBLISHERS; ALONG WITH STANDARD VARIATIONS, IT WOULD BE THE RATE AT WHICH
ROYALTIES ARE PAID

The music publishing industry argues that a higher rate would
merely be permissive; just "more room for bargaining" between
the parties on the basis of their "relative strengths." The
higher rate, it is argued, would merely be a ceiling to the out-
come of bargaining.

The argument suggests, by way of conclusion, that since the out-
come of bargaining cannot be foretold, the effects of raising
the statutory rate are uncertain, and may be not very
significant.

The notions and conclusion are fallacious. They disregard basic
facts as to how the licensing and royalty collection process works,
why it works as it does, and must work under any new higher rate.
Any new higher rate would, together with standard variations,
inevitably become the rate, just as the statutory rate is now,
and for the same compelling reasons.

The Licensing And Collection Process

The licensing of copyrights and the collection of mechanical roy-
alties is a massive process. Organizations and procedures have
been established that make it practical to handle the mass of
detail economically and routinely.

- Scores of publishing companies hold copyrights to thou-
sands of tunes. Recording companies release more than
50,000 tunes a year -- over 200 per working day.
Royalties must be paid and collected on these and on

thousands of other active licenses issued in previous

years.

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In sum, there are three main kinds of possible impacts of higher

Reduction of riskier recordings, innovative, ethnic and jazz musical offerings, and the works and performances of less well-known

and younger composers and performers.

The actual impacts of higher royalties would be a mixture of these kinds of results. No one can say for sure in what proportions they would come to pass. But each and all of them are undesirable to everyone, except to music publishing companies and other parties to copyrights. would operate to reduce employment in the recording industry.

All of them

None of these effects is called for on the grounds of compensating for the effects of inflation for copyright owners. Payments to them have been far outstripping inflation.

The proposed increase would result in a large windfall to the publishing industry not offset by any increased contribution by it to recorded music' its production, distribution or its enjoyment.

The music publishing industry uses agents to issue the many
licenses to the many record makers and to collect royalties
on outstanding licenses from many licensees. One single
agency, owned by publishing companies jointly, for years
has handled a very large fraction of all licensing and
collection.

As regards the issuance of licenses for mechanical repro-
duction of copyrighted music, there are two avenues to
obtaining a license either through the route of "negoti-
ation" or through the "compulsory" route. According to

the theory of the copyright law, a person wanting to use a
tune in mechanical reproduction of music can try to "negotiate"
• i-ense from the copyright owner. Then, if a copyright
owner is uncooperative or intractable, any party wanting to
record a tɗe that has once been recorded may simply go
ahead and do so and pay royalties at the compulsory statutory
rate of is under conditions and procedures prescribed by the
Register of Copyrights. In fact, the administrative and pro-
cedural mechanics of the compulsery route are cumbersome for
ail parties, and are only very rarely used Instead, publish-
ing companies have set up routine procedures for going the
route of "negotiation". By definition and usage in the trade,
any license that is issued under any procedure other than the
"compulsory" provision is said to be negotiate", even if --
and this is crucial to understanding how the industry works -
The vulense is actually issued under the sost routine, the
mst autmatu: procedure. But this practice of seldom invoking
the compulsory licensing procedures should not be confused with
292-ng the statutory rate, which, in fact, occurs in the vast
ma state of cases

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RAISING THE ROYALTY RATE WOULD HAVE SERIOUS IMPACTS

We now move on to consider the impacts of the proposed increase in the royalty rate on the recording industry and others. To understand these impacts, please consider Exhibit F.

Under The Proposed Rate, Payments To Copyright Owners Would Go Up $47 Million

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F Payments to copyright
owners would go up
$47,000,000

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