The system embodied in Section 19, subsection (2) of the Act is to give anyone the right, upon payment of a royalty and complying generally with the provisions of the Act, to make records, perforated rolls or other contrivances by which any particular musical work may be mechanically performed, provided that such contrivances have previously been made by, or with the consent or acquiescence of, the owner of the copyright in the work. This right extends to any words so closely associated with a musical work as to form part of the same work, but does not apply to the case of the record itself.

The amount of the royalty payable is to be calculated, in the case of contrivances sold after the 1st July, 1914, at 5 per cent. on the ordinary retail selling price of the contrivance calculated in the prescribed manner but so that the minimum payable in respect of a contrivance shall be one halfpenny for each separate musical work in which copyright subsists reproduced on the contrivance, and that a fraction of a farthing is to be reckoned as a farthing. By subsection (7) of Section 19, in the case of musical works published before the 1st July, 1912, the rate of 2 per cent. is substituted for the rate of 5 per cent. as the prescribed royalty.

The Board of Trade regulations made under subsection (6) of Section 19* prescribe that "the ordinary retail selling price' of any contrivance shall be calculated at the market or catalogued selling price of single copies to the public, or at the highest price at which single copies are sold to the public.

After fixing the rate at which the royalties are to be calculated, Section 19 (3) of the Copyright Act, 1911, continues with this proviso" Provided that if at any time after the expiration of seven years from the commencement of this Act, it appears to the Board of Trade that such rate as aforesaid is no longer equitable, the Board of Trade may, after holding a public inquiry, make an order either decreasing or increasing that rate to such extent as under the circumstances may seem just, but any order so made shall be provisional only, and shall not have any effect. unless and until confirmed by Parliament; but, where an order revising the rate has been so made and confirmed, no further revision shall be made before the expiration of fourteen years. from the date of the last revision."

It was under this proviso that the undersigned were appointed by the Board of Trade to hold a Public Inquiry as to whether an Order should be made either decreasing or increasing the rate of royalties to such extent as under the circumstances might seem just.

The Meetings of the Inquiry, which were held at the Board of Trade Offices, London, commenced on the 28th March, 1928, and terminated on the 26th April, 1928. There were 12 Meetings in all.

S.R. & O. 1912 (No. 533).

At the Hearings Sir J. H. Cunliffe, K.C., M.P. and Mr. E. J. Macgillivray (instructed by Messrs. Syrett & Sons) appeared on behalf of the applicants, the Musical Copyrights Defence. Association, and Mr. R. Moritz, K.C. and the Hon. S. O. HennCollins (instructed by Messrs. Broad & Son) appeared on behalf of the opponents, representing the Mechanical Music Industry. During the early part of the Inquiry Mr. Kilham Roberts (instructed by Mr. G. Herbert Thring) appeared on behalf of The Incorporated Society of Authors, Playwrights & Composers, but subsequently left his case in the hands of The Musical Copyrights Defence Association.

Evidence was called by both parties at great length. There appeared to be considerable reluctance on the part of witnesses to make a full disclosure of their financial results. This was

due no doubt to the fact that this was a public inquiry.

The applicants through their Counsel asked for an increase of at least 100 per cent. in the prescribed rates of royalty. The opponents objected to any increase.

The following documents are attached hereto :

The applicants' case-Appendix A.

The opponents' case-Appendix B.

The Incorporated Society of Authors, Playwrights and Composers' case-Appendix C.

As the result of the Inquiry we have formed the following conclusions:

1. It is a matter of extreme difficulty to lay down any test as a guide to the question whether or not the present statutory rate remains just."

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2. The mechanical music industry has flourished remarkably since the passing of the Copyright Act, 1911. It was then in its youth. It has now attained vigorous manhood. The industry as a whole shows large profits. It has been particularly prosperous during the last three years, and so far as the Tribunal are able to judge, its prosperity does not appear to have reached its peak.

3. The invention of the disc gramophone coupled with the royalties granted for the time in this country by the Copyright Act of 1911, has provided a new source of income for composers and authors and publishers of musical works. According to the evidence submitted to us five of the English gramophone companies paid by way of mechanical royalties to copyright owners in 1927 in respect of sales in Great Britain and the British Dominions nearly £200,000. This sum is not entirely a matter of new income to composers and authors, but represents a far greater user of their work by the public than before the gramophone was invented.

4. On the one hand it is argued that composers and authors have no serious ground for complaint if their incomes remain

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as large as they were before the days of mechanical recording. On the other hand it is urged that in view of the greater user of their works, their emoluments should be correspondingly greater. We incline to the latter view, and we are of opinion that the public who wish to enjoy the work of a composer or author, in whatever form it may be reproduced, should pay a reasonable royalty in respect of such enjoyment.

5. Evidence as to the effect of mechanical reproductions upon the income of any individual composer or of any class of composers is necessarily uncertain and unreliable. Public taste in .music changes. The true position cannot be gauged by the experience of any one class of composer.

6. For the purposes of this Inquiry music may be ranged under three classes:

(1) Classic (both old and new) and Educational.

(2) The Ballad and Victorian.

(3) The Jazz dance or American type.

7. Evidence was given that the demand for Classic and Educational Music shows some increase, or, at any rate, is well maintained. On the other hand, it was generally accepted that the Ballad and what may be termed shortly Victorian Music has largely gone out of fashion. There is for the time being a remarkable demand for "Jazz" music. Composers of these several types of music fare accordingly.

8. Music of the "Jazz" type has a short life. It would appear from statements made to us that a tune of this nature retains its popularity for four to six months only. Music of other types enjoys a far longer life.

9. It was not disputed that the sale of records had latterly tended to diminish, though perhaps not to a very marked extent, the sale of sheet music. Further, the sale of cheap records in particular tends to shorten the life of a piece of music, by making it "hackneyed."

10. On the sale of sheet music the composer receives by way of royalty from the publisher as a rule 12 or 10 per cent. on the selling price of the music. The ordinary retail selling price of sheet music is two shillings, although it was suggested to us that in consequence of the sale of cheap records it has been necessary to produce a large amount of music in sixpenny editions.

11. The royalty on sheet music goes wholly to the composer or to the composer and author, as the case may be.

12. The Royalty paid by the manufacturer of records is commonly divided as follows:-The publisher or some Society takes as a fee for collection 10 per cent., and the balance is divided as to 40 per cent. to the composer, 30 per cent. to the author and 30 per cent. to the publisher. Although no very satisfactory evidence was given on the point, it appeared that

in a large proportion of records, the royalty averages less than one penny per work.

13. It was complained on the part of the manufacturers that the publishers obtained an undue and an inequitable share of the royalties. No composer, author or copyright owner was called to substantiate this allegation, and the only evidence upon the point was to the contrary. In many cases the publisher performs an important role in bringing out and popularising a work. The manufacturers seldom if ever bring out a new work or procure its initial popularity. They often extend its popularity when once it has been initiated by a publisher or created by production on the stage, or by reason of publication in another country.

14. The present prices of records are not higher than those prevailing in 1912, when the statutory rate of Royalties came into force. On the contrary, the introduction of cheap priced records has come about in recent years and is rapidly extending. Practically all the records now sold are two-sided; that is to say have a separate musical work on each side. In 1912 many records were one-sided. The alteration has had the effect of reducing the royalties per record paid to a composer for his work, since the royalty payable on the record is divided between the two works generally reproduced thereon.

15. For the purposes of this Inquiry records may be divided, according to price, into three categories :

(a) Records sold at three shillings and over.

(b) Records sold at half a crown, one shilling and sixpence, and one shilling and threepence.

(c) Records sold at sixpence.

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(a) consists of what may be termed luxury records. Their price depends to a considerable and varying extent upon the artistes who render the music.

(b) consists, in the main, of music rendered by competent but not by outstanding artistes.

(c) consists of what may be termed "toy" records, made principally, if not exclusively, for sale in certain "sixpenny

stores.

15. There is no great competition between records of category (a) and category (b) on the one hand, nor between those of category (b) and category (c) on the other.

17. There is, however, considerable competition between records falling within category (b).

18. We were informed that the records sold at one shilling and three pence were introduced on to the market about June, 1927. These records have met with remarkable success and are a feature of the present day trade. The makers claim to have discovered a new market, and that these records, save as

to competing somewhat with the half-crown, and possibly three shilling, records, leave the other classes of records untouched. In the main this claim appears to be correct.

19. There was no evidence to satisfy us that manufacturers make a practice of evading the payment of royalties either by creating a copyright in non-copyright works, or by retaining royalties in their own hands on the ground that they cannot discover the coypright owner.

20. Under the existing rate of royalties-assuming that a record has a copyright work on each side-any record sold for one shilling and eight pence or less, pays the minimum of one halfpenny on each work.

21. Composers and authors complain that there is a tendency for records to become cheaper and cheaper, and consequently for their royalty to be reduced to the minimum. There is in fact a tendency in this direction. They further point out that when once they have authorised the recording of their work in a form which would bring them a royalty on the percentage basis. they are at the mercy of manufacturers who can reproduce it, however inadequately, in a cheap form on payment of what they regard as the insufficient royalty of one halfpenny.

22. The manufacturers of the one shilling and threepenny records alleged that the raising of the minimum would jeopardise the whole of their trade, and might leave composers worse off than before.

The manufacturers of the sixpenny records alleged that as matters now stand they can only place one copyright work on a record, and that the halfpenny which they pay as royalty is the most that the record will bear.

23. Upon the evidence placed before us we are of opinion that the raising of the rate in the manner hereinafter advised would not jeopardise the sale either of the one shilling and threepenny or of the sixpenny records.

With regard to the latter in particular, it should not be forgotten that it is always open to manufacturers to bargain with copyright owners for a reduction on the statutory rates.

This has already been done in some instances. The raising of the rate would tend to protect the copyright owner from having his work reproduced in an excessively cheap and perhaps inadequate manner, against his wish.

24. The value of money has fallen severely since the Copyright Act, 1911, was passed, and the sale price of records has not risen to compensate for this drop in money value.

25. We consequently recommend that a provisional order be made by the Board of Trade raising the statutory rate from 5 to 6 per cent. on the ordinary retail selling price of the contrivance, and that the minimum royalty should be raised from one halfpenny to three farthings.