FROM THE RECORD:
The CRT rate hike
Editor's Note: The Copyright Royalty Tribunal's
decision to raise the compulsory jukebox royalty rate
appeared in the Federal Register January5,1981 (pages
884-891). /n that published decision, the CRT set forth its
reasons for raising the $8 per jukebox copyright royalty
rate to $25 in 1982, to $50 in 1984, and then euen higher
for "an inflationary adjustment" in 1987. The following
are excerpts and condensations from the text of that
decision as published.
Summary of positions
ASCAP (SESAC's case was presented also by
AS CAP) stated "they felt compelled to determine a com-
pulsory license fee similar to the fee which would be
reached on the open marketplace if performing rights
societies and jukebox operators were free to negotiate
for license absent a compulsory license.
"With that benchmark, they concluded that the most
useful approach in reading the marketplace value was to
use close [sic] marketplace analogies. These analogies
were used: (a) general establishments, such as bars,
grills, restaurants, and taverns using mechanical music
(i.e., music provided by non-live means); (b) background
music services; and (c) foreign jukebox operators."
On general establishments, such as bars, etc.-"The
lowest such fee for ASCAP alone is $70 . When the fees
for BMI and SESAC are added, the total minimum fee
paid by such establishments is $190 . Dr. Fagan
(ASCAP's chief economist and director of special pro-
grams) stressed there would be an administrative sav-
ings if all three repertories were licensed at once, estimat-
ing the resulting total minimum license fee at $140."
On background music seruices- "The annual rate
charged by AS CAP alone for locations similar to those in
which jukeboxes may be found is $27. This rate,
however, was described as an interim fee subject to
retroactive adjustment to 1971. Assuming that the rates
were adjusted only for inflation, Fagan said that it would
be $52 .08 in 1980."
On the foreign jukebox operator analogy- "The aver-
age fee paid by jukeboxes in the nineteen countries
ASCAP surveyed is $96.33 and the mean is $70.92. Dr.
Fagan further testified that the proposed $70 fee is one
that coin machine operators can afford, amounting to
only 19 cents per day."
BMI proposed a royalty rate that "follows directly from
the legislative history and the statutory mandate
requiring balancing of economic considerations There-
fore, BMI applies historical changes in the consumer
Price Index to the $19.70 base specifically recognized by
Congress as a reasonable fee. Application of the CPI
from 1975 to the $19.770 base results in a royalty rate of
approximately $30, adjusted annually."
The AMOA presented its case "through the testimony
of eleven witnesses and the submission of thirty exhibits,
the principal one being Exhibit #10, the Peat, Marwick,
PLAY METER, May 1, 1981
Mitchell and Company (PMM & Co.) survey of the
economic condition of the jukebox operators' business.
"AMOA contends that there has been a marked
increase in recent years in the numbers of amusement
games that are in operation, especially in contrast to the
decline in number of jukeboxes that are in operation and
that many operators do not segregate their operating
expenses for jukeboxes and games."
"The PMM & Co. survey indicates that for the
industry at large, 18% of the boxes in operation earned
for operators less than $300 per year, and that 47%
earned less than $700 per year. For smaller operators of
fewer than 40 machines, 23% of the boxes earned less
than $300 per year, and 57% earned less than $600 per
year."
"Jukebox operator witnesses offered testimony re-
flecting a continuing decline in the numbers of jukeboxes
that are in operation, citing two basic causes for the
decline: (1) the operators' inability to increase prices per
play so as to keep up with the rate of inflation, and (2) the
loss of jukebox locations due to socio-economic changes
such as urban redevelopment and replacement of
jukeboxes by other means of entertainment such as
background music, radio, television, discos, and live
entertainment.
"The AMOA, citing evidence of the decline in the
jukebox operating business, decreasing revenues and
margins of profit, and industrywide reduction in numbers
of locations and of jukeboxes in operation, argued
strongly that the $8 royalty fee should be left
unchanged."
Performing rights societies' financial data
"AMOA sought to bring into issue in this proceeding
the manner of how the performing rights organizations
distributed jukebox royalties to their affiliates and
members. AMOA argued that the Copyright Act called
for an investigation of the performing rights organiza-
tions' distribution methods."
"Finally AMOA argued that there is no logical way the
Tribunal can determine if a change should be made in the
compensation that is to be provided without calculation
of the specific compensation to individuals. Under
AMOA's approach, this was the only way that the "fair
return" standard of the Act could be met.
"In summary, AMOA's position in essence was asking
the Tribunal to establish the value of individual musical
works based on the time and expense incurred by the
songwriters for each one, together with a value inexpli-
cably derived from the placement of a work on a
popularity chart. It then asks the Tribunal to investigate
the internal distribution procedures of the performing
rights organizations to establish the exact payout for
each member or affiliate. A comparison of the two calcu-
lations-the costs and the payout-would, according to
AMOA, produce the "fair return" calculations supposed-
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