Page:Copyright Law Revision (Senate Report No. 94-473).djvu/91

 and distributed" is more compatible with the general practice with respect to negotiated licenses.

The addition of the words “aid distributed” is not intended to disturb existing judicial interpretation of the 1909 Law and its application to licenses issued under that Law, including the joint and several liability of pressers along with record companies.

Rate of royalty.—A large preponderance of the extensive testimony presented to the committee on section 115 was devoted to the question of whether the statutory royalty rate should be left at 2 cents per composition per phonorecord or whether it should be increased. The bill provides that with respect to each work embodied in the phonorecord, the royalty shall be either 2½ cents, or ½ cents per minute of playing time or fraction thereof, whichever amount is larger. During the hearings and subsequently considerable economic data was submitted concerning the establishment of the royalty rate. An analysis of this data was prepared by Edward Knight of the Congressional Reference Service of the Library of Congress.

The following is a summary of the economic arguments presented during and after the hearings, and of the committee’s analysis of them, showing the basis for the royalty rate finally adopted.

1. The need for an increase by copyright holders.—Although 2 cents in 1909 had the purchasing power of 12 cents in today’s economy, the songwriters and publishers acknowledged the invalidity of comparing the modern music industry with its 1909 counterpart and focused instead on the economic trends of the past decade. They maintain that 2 cents at the time of the 1965 House hearings was 6.1 percent of the list price per song on a typical album whereas today it is only 2.8 percent; and that, despite an aggregate increase in mechanical royalty payments, they represented almost 6 percent of industry sales in 1965 and less than 4 percent in 1975. They point out that the 2.5 cents approved by the House represents today less than 1.5 cents in 1965 dollars and only 3.6 percent of today’s price per song on a typical album (compared with 7.6 percent in 1965).

In contradiction, the record manufacturers presented statistics aimed at showing that an increase in the statutory fee above 2¢ would be unjustified and inequitable. They argued that inflationary trends since 1909 are only one factor to be considered in setting the rate, and that the adverse effects of inflation have been offset by the tremendous increase in the volume of records sold, the great decrease in record prices, and the introduction of long—playing records, tapes, cartridges and cassettes containing ten to twelve selections (with a statutory royalty for each). They asserted that copyright owners are amply compensated at the present rate; that in the last decade alone, their income from mechanical royalties in the aggregate, and per released tune, have more than doubled; and that income going to copyright owners from mechanical royalties has risen much faster than inflation. Moreover, the record manufacturers contend, copyright owners receive substantially greater financial gains from the phonorecord industry than the record companies themselves, and that the 1909 statute was designed to give copyright owners about five percent of the manufacturers’ wholesale selling price. while their share today is around 7.4 percent. They further argued that copyright owners earn very