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Exhibit F -- Payments to Copyright Owners would Go Up $47 Million

The finding is explained on pages 56-60; the underlying data are to be found in Exhibits 6 and 7, which are discussed in this appendix. Suffice it to say here that the $47 million figure does not assume that all licenses would be paid at 3. It is based on the study finding that the existing rate structure, with standard discounts off the statutory rate, would prevail -- but at a higher plateau for all rates. This study finding is explained in Section 11. E. of the full statement.

Note that the increase in mechanical royalties paid would be more than the sixple 50$ achieved by raising the rate from 24 to 3¢ because of the effect of the proposed playing time provision in Sec. 115 of H.R. 2223. (See Exhibit 6.)

Exhibit G -- Annual Cost to Consumers Could Go Up_By_$100 Million

Calculation of the increase -- more precisely $97.6 million -- is shown in Exhibit 10, page 67. Note that the increase to Consumers is considerably sore than the $47 million increase to recording companies. The logic for this is explained in this Technical Appendix under Exhibit 9.

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These data come directly from Exhibit 13 of the main written report, p. The source of that exhibit, a study conducted by Cambridge Research Institute in 1972, is discussed later in this appendix under "Exhibit 13".

Exhibit I -- Rates Paid are Statutory Rate and Standard Variations

These percentages are computed directly from Exhibit 21, p. 118, which is discussed in full later in this Technical Appendix.

Exhibit J-- In 1974 as in 1963 Tunes Were

Licensed at 24 or Standard Variations

The right-hand side of this exhibit is computed from Exhibit 21, p. 118. There, .it will be seen that 21 of the 2,593 tunes studies which had paying

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This amounts to

licenses, were paid at rates other than standard variations. 0.8% of the tunes sampled.

The left-hand side of Exhibit J is taken from the 1965 Statement of John Desmond Glover on H.R. 4347 Section 113 (c) (2).

Exhibit K -- No Economic Justification for an increase

This exhibit restates the conclusions of Exhibit A.

This concludes the section of the Technical Appendix covering the Summary exhibits.

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FULL STATEMENT EXHIBITS

This section of the Technical Appendix documents in detail the sources and methodology for the exhibits in the full statement, pp. 33-118.

Exhibit 1 -- STATUTORY LICENSE ROYALTIES AND RECORD

COMPANY PRICES: 1909 vs. 1974 Sources for the price information cited in the exhibit are given in the footnotes to the exhibit. The financial survey cited in footnote "b" is explained in detail later in this appendix under "Exhibit 5".

Exhibits 2&3 -- INCOME TO COPYRIGHT ONVERS FROM

RECORDINGS, 1973 vs. 1963 The data relating to mechanical royalties are explained in the "Sources" section at the bottom of Exhibit 3. The two CRI surveys that provided raw data are briefly described in footnote "a" of Exhibit 3, and are more completely discussed later in this appendix under "Exhibit 5".

Copyright owners' performance fee income from recordings was estimated as follows:

• Of $37.5 million (FCC figures) in music license fees paid by

radio stations and networks to copyright owners in 1973, 90%
or $33.8 million was estimated to be attributable to commercially

produced sound recordings;
• Of $47.8 million (FCC figures) in music license fees paid by TV

stations and networks in 1923 to copyright owners, 10% or $4.8
million was conservatively estimated to be due to the use of

sound recordings;
• Of $19.4 million in ASCAP receipts in 1973 due to nonbroadcast

general and background music, live symphonic and concert music,
and royalties from foreign societies, 20% or $3.9 million was

estimated to be due to commercially produced recordings;
• Finally, it was estimated that BMI and SESAC together also were

accountable for about half of the ASCAP total for background
music in 1973, or about $1.9 million.

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These estimates sum to $44.4 million in copyright owners' income from performance fees attributable to sound recordings, an increase of 283% over the level of 1963, as reported in the 1965 Glover Statement.

In terms of the estimated mechanical royalties, it will be noted in footnotes "a" and "b" of Exhibit 3 that there are two estimates provided. The footnotes indicate that the two estimates are from different surveys, and it explains our rules for the use of each. The lower estimate ($77 million in 1973 and $79 million in 1974) is from a lengthy financial survey which was first conducted by CRI in 1973 and later updated in 1974 and 1975. It is discussed in detail below under the notes to Exhibit 5. The higher estimate is from a short, special 34-company survey which CRI conducted in 1975 in order to obtain the most recent information on mechanical royalties paid. It was conducted as follows:

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A two-question survey was sent to 96 record companies
in early 1975. The companies comprised all those member
firms of the Recording Industry Association of America
plus an approximately equal number of presumed prospective
members. Thirty-four companies responded. Those who did
not respond did so for a variety of reasons --
no longer in business, others had merged or had been
acquired, and many were inactive and had no sales during
the period. When compared with RIAA industry sales esti.
mates, it appeared that the 34 respondents represented
close to 98% of industry sales and hence, mechanical
royalties paid. Thus the figure of $83 million for
mechanical royalties paid in 1974 is a highly reliable
number

On the next four pages following, the memorandum introducing the short survey, the one-page questionnaire, the names of the respondent firms, and the raw survey results are provided.

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MEMORANDUM

December 2, 1974

TO

Record Companies
Cambridge Research Institute, Cambridge, Massachusetts
Telephone: (617, 492-3800

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Der sig recent Senate hearings on the Copyright Revision Bill, q***t.ant were talked about the total amount of mechanical fees paid by the record industry. In order to illustrate the severe impact on the record industry of raising mechanical lees from 2¢ (under existing €6987.ght law to } runder the copyright bill passed by the Senate in Segrem.ber 19°*', there is an urgent need to collect statistics on the Tree Manical feet paid by as many record compan.e. as possible. Could you, the relore, please fill in the attached questionnaire and

...Exeruary

The fellowing procedure has been established on your company's
faz si data will be handled in a confidential manner:
• After you have completed the enclosed lorm keep one cube

for your hles and send one copy to the CPA form of
3. * Lasse & Company. 6to Bulth Avenue, New York,
Me York 19019. (You may use the pread!:ossed envelope
that is enclosed. )
As you will nothie, your lorms have been pro.coded with
* Company number known only to { ambridge Resears
In otiute. The (PA firm of į K. Lasser un jarr will
Banow the marrie of your company. In this way, your
ompany's name will not be a 1stjated th your torantial
dala.
The financ a' data you send to the accantants w.!!!.
oned the data from other torr., **....1! prevent
4.66.66118 of 1036.vidaal company inlufmat.11. time!
**portung fu T..!! be destr yed.

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