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premium records, or albums on which the artist had an interest or the publisher granted a block or medley discount. In other words, 99.2% of all the tunes licensed were at 2¢ or regular, stereotyped variations below the standards of 2¢. The basic position of the record manufacturers was that a one-cent increase would simply establish a higher prevailing rate rather than providing more room for negotiation. The great majority of licenses would be issued at 3¢, and budget, club and other such albums would be licensed slightly below 3¢.
Committee Conclusion
While upon initial review it might be assumed that the rate established in 1909 would not be reasonable at the present time, the committee believes that an increase in the mechanical royalty rate must be justified on the basis of existing economic conditions and not on the mere passage of 66 years.
The economic evidence presented by the record manufacturers shows that, at the two-cent rate, publisher and composer income from mechanical royalty payments—in the aggregate, and on a per tune basis—has more than doubled over the last ten years. Their statistics also show that a three-cent rate would increase mechanical royalty payments by nearly $50 million, which could add nearly $100 million a year to consumer record costs. The effects of such an increase would be felt not only by consumers, but also by working musicians, retailers, wholesalers, and juke box operators, all of whom oppose an increase.
The committee has concluded, therefore, that the advocates of a rate increase have failed to prove the justification for an increase in the rate above 2½ cents, or one-half cent per minute of playing time, whichever is greater. This represents an increase of more than 25 percent. In any event, the publishers and composers will have the opportunity to present their case to the Copyright Royalty Tribunal, an expert body qualified to review the economic evidence in detail.
Accounting and payment of royalties; effect of default
Clause 3 of Section 115(c) provides that statements of account and royalty payments are to be made on a monthly basis. Each payment shall be accompanied by a detailed statement of account which shall be certified by a Certified Public Accountant and comply with requirements that the Register of Copyrights shall prescribe by regulation. In order to increase the protection of copyright proprietors against economic harm from companies which might refuse or fail to pay their just obligations, compulsory licensees will be required to make a monthly accounting certified by a Certified Public Accountant.
A source of criticism with respect to the compulsory licensing provisions of the present statute has been the rather ineffective sanctions against default by compulsory licensees. Clause (4) of section 115(c) corrects this defect by permitting the copyright owner to serve written notice on a defaulting licensee, and by providing for termination of the compulsory license if the default is not remedied within 30 days after notice is given. Termination under this clause “renders the making and distribution of all phonorecords, for which the royalty had not been paid, actionable as acts of infringement under section 501 and fully subject to the remedies provided by sections 502 through 506.”
