Page:Copyright Law Revision (Senate Report No. 94-473).djvu/92

 substantial revenues from other sources, such as performance royalties from the broadcast of records. By contrast, the record manufacturers derive profits solely from their sale of records, the value and creative character of which are largely the result of their efforts and expenditures rather than those of the music publisher.

2. Potential Impact Of Increase On Record Industry.—Much of the statistical data presented by the record companies at the hearings was in support of the argument that an increase in the rate would have a grave impact on the entire record industry, including manufacturers, artists, performing talent, distributors, retailers, jukebox operators, and even copyright holders. They asserted that, if the statutory rate were 3¢, the total increase in annual dollar payments to copyright owners would approximate $50 million, or 39 percent of the pre-tax profits of the entire U.S. recording industry in 1974, the second-best year the recording industry ever had. They argued that, unless record prices were to be raised considerably, the higher royalty would generate irresistible pressures tending to force out many companies, especially smaller ones, and that similar pressures would operate on wholesalers and retailers. They maintained that some 80 percent of all releases lose money (although copyright owners still receive their royalties on them), and that increasing the mechanical rate would raise the percentage of failures still higher. Ultimately, they argued, the level of activity in the industry and the number of new recordings would be seriously depressed, and strong forces would be unleased to restructure the industry, impairing competition and leading to concentration of control.

In reply, the songwriters and publishers maintain that four giant record companies dominate the record industry which is largely controlled by entertainment conglomerates whose consolidated reports and intra-company transactions it is claimed conceal the true profit figures of particular divisions. They cite testimony by a top record industry executive in support of the fact that a record company’s profit on the typical recording sold is far greater than that claimed in industry presentations to the Congress and far greater than that of the composer and publisher combined. Noting that record company sales continue to mount to new highs each year—increasing from 1964–1974 more than twice as much as royalty collections, despite steep price increases and a faltering economy—they see no reason why an industry which has more than doubled the price per recorded selection over the last decade should be excused from paying fair compensation to those who created the music.

3. Potential Impact of Increase On Consuming Public.—If the statutory rate were raised to 3¢, the record manufacturers predicted an increased price to consumers of 35¢ per $6.98 long-playing record, or a total of nearly $100 million per year. This prediction assumed that the record manufacturer could not absorb the increase in mechanical royalties, and that record marketers, in turn, would have to pass the increase on down the line to the consumer, with each distributor adding an increment to his price because of his added costs and risks. The record manufacturers also forecast that the variety of musical offerings would be restricted; that the quality of musical offerings would deteriorate; that composers, especially unknowns, would find fewer