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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 34. 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 II.E. of the full statement.

Note that the increase in mechanical royalties paid would be more than the simple 50% achieved by raising the rate from 2 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 more than the $47 million increase to recording companies. The logic for this is explained in this Technical Appendix under Exhibit 9.

Exhibit H Breakeven Point Higher Than Ever

These data come directly from Exhibit 13 of the main written report, p. 74. 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

licenses, were paid at rates other than standard variations. This amounts to 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

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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.

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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 OWNERS 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 1973 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.

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:

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
-- some were
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

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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:

FROM:

SUBJECT:

Record Companies

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

1973 and 1974 Statistics on Mechanical Fees Paid by the
U.S. Record Industry

During recent Senate hearings on the Copyright Revision Bill, questions were raised 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 fees from 2¢ (under existing copyright law) to 34 (under the copyright bill passed by the Senate in September 1974), there is an urgent need to collect statistics on the mechanical fees paid by as many record companies as possible. Could you, therefore, please fill in the attached questionnaire and return it by January 15.

The following procedure has been established so your company's financial data will be handled in a confidential manner:

After you have completed the enclosed form keep one copy
for your files and send one copy to the CPA firm of

J. K. Lasser & Company, 666 Fifth Avenue, New York,
New York 10019. (You may use the preaddressed envelope
that is enclosed.)

As you will notice, your forms have been pre-coded with
a company number known only to Cambridge Research
Institute. The CPA firm of J. K. Lasser & Company will
not know the name of your company. In this way, your
company's name will not be associated with your financial
data.

The financial data you send to the accountants will be
combined with data from other firms, which will prevent
disclosure of individual company information. Your
reporting forms will be destroyed.

57-786 - 76 pt. 3 10

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