NOTE: The year 1973 is used in this Exhibit, being the latest year for which data of performance fees and royalties from foreign record companies were available. The two figures given for 1973 copyright royalties paid by U.S. record companies are based on two different CRI surveys of record companies. The lower figure (577 million), which is estimated from statistics supplied by thirteen record companies with about 571 of the industry's sales, will be found in Exhibit S-C, line 9, page 17. The higher figure (582 million), which is estimated from statistics supplied by 34 record companies with about 98% of the industry's sales, is explained in the last section of Exhibit 5-D, page 18. The lower estimate is clearly too low, for the financial records of the 34 panies in the larger survey show that these companies alone paid $80.4 million in mechanical fees in 1973. Nevertheless, we shall use the lower figure whenever we are paring it to other data from the 13-company survey or when we are making trend analyses. We shall use the higher figure only when we make a single point estimate of the level of sechanical royalty payments. The explanation for the two different figures given for 1974 is the same as given in footnote "a" above. $1973 and 1963 performance fees were estimated. See Technical Appendix. coa The 1963 figures are from the 1965 Glover report before the Subcommittee on Patents, Trademarks, and ConvTights The 1973 figure on foreign sechanical rovaitles was estimated from Sillboard reports about sales abroad of recordings of The two 1973 figures in mechanical royalties paid by J.S. recording firms are from Exhibit 5 and votes thereto See The 1974 figure for mechanical royalties paid by J.S recording firms is from Exhibit 3 and is based on statistics 2. Mechanical Royalties from U.S. Record Makers Between 1963 and 1973, mechanical royalties paid by U.S. record companies more than doubled from $37.6 million to $77.1 million. That is an increase of something of the order of 113%. This is to be compared to the increase of 45% in the Cost of Living Index and the increase of 93% in Median Family Income. 3. Mechanical Royalties from Foreign Record Companies In addition to those domestic mechanical royalties, copyright owners also receive royalties from foreign record makers. A substantial fraction of those foreign royalties come from the use of master recordings made by U.S. recording companies in the United States and that are licensed for manufacture and distribution abroad by non-U.S. companies. Foreign royalties have grown even faster than U.S. royalties. Mechanical royalties received by U.S. copyright owners from record companies abroad rose from $6.9 million in 1963 to $35 million in 1974. That is an increase of 4078. Total Mechanical Royalties Total mechanical royalties paid to publishing companies rose, therefore, from $44.5 million to somewhere around $115 million, say by something like 158%. 5. Incomes to the Publishing Industry from Commercial Use of Recordings 40 It should be noted in passing that, unlike the music publishing industry, recording companies receive not one penny in the form of performance royalties from commercial uses of their products, as in broadcasting and "background" music. 6. Copyright Owners' Total Income from Records 7. Taking these several incomes together, publishing companies and others, in 1963, derived from records and their commercial use a total income amounting to $60.2 million. These kinds of incomes, in 1973, came to something like $159 million. The 1973 figure represented an increase of over 260%, as compared to the increase of 45% in the Cost of Living Index and of 92% in Median Family Income. These are the facts as to how music publishing companies and other copyright owners fared from recorded music in comparison to inflation. Increase in Royalties Per Tune Not only have royalties to copyright owners increased faster than inflation in the aggregate, royalties per tune have also increased faster. This has occurred because of two reasons: first, because of the expansion in recording media, a new tune is often released in numerous mechanical forms -- on a 45 RPM single, as a band on an LP, on an 8-channel tape or a tape-cassette. Royalties are paid on each unit of each of these forms, many times under several different licenses. Additional paying licenses will occur if the tune is later released through a record club, or if re-recorded on a budget album. Second, if a second or third or fourth artist also performs the tune, a separate license for each release will result in further royalties for the same, original tune. Accordingly, a reasonably popular tune can be the subject of dozens and dozens of separately licensed "releases" in a single year. This number of "releases" of a single performance has been tending to increase as the numbers and popularity of different recording media have been increasing, and with reissues, often on "budget" labels, of former favorites. One way of estimating the trend in royalties received per tune -if not the literal dollar amounts is simply to divide the total dollar value of mechanical royalties paid in one year by the number of releases in the year, and to compare that figure with the corresponding value in another year. That is done in Exhibit 4, which measures the trend in royalties per released tune as between 1963 and 1972. Royalties per released tune went from $656 to $1,399, an increase of 113%. That percentage increase is a reasonable measure of the percentage increase in mechanical royalties per tune, although the dollar income per average tune would be considerably higher because of multiple releases per tune. Accordingly, the dollars of royalties per tune were going up faster than the royalties per release of that tune, which, themselves, were going up faster than inflation. It should be noted and emphasized that these domestic mechanical royalties constituted only part of the income received by copyright owners from recorded music. They also received sizeable foreign mechanical royalties as Exhibits 2 and 3 make clear. In addition, their "incomes from performances were about as great as the mechanical royalties and were also accruing faster than inflation. We shall now turn to an examination of what has brought about the tremendous increases in incomes of copyright owners from recorded music. The largest share of mechanical royalties occurs on recently released 42 Note: For this Exhibit, the year 1972 was used because it was the latest year for which the numbers and releases were available. Statistics on releases are from 3illboard. The 11.25 tunes per LP was calculated is follows: In 1963, there were approximately 12 tunes per popular LP. CRI's survey of 13 leading record companies, with 61% of the industry's 1972 sales, indicated that, on the average in 1972, a mechanical royalty of 22.5¢ was paid for each popular LP. With a 2 rate, this would indicate that the average popular LP had 11.25 tunes in 1972. This overstates the number of times released, for one tune may be recorded on both a single and an LP, a practice that was more common in 1972 than in 1963. Also. a given tune may be recorded in several different versions on 12's or singles or coth. The number of tunes recorded is only some fraction of the number of releases. The above figures of releases do not include tapes. (The copyright no.jers earn mechanical royalties from the sales of their tunes on tape, as veil is on recoras. 1-or source of tata, see Exhibit CD. 43 |