It should come as no surprise that people engage in home taping primarily to avoid buying records. (CBS Survey, 11; WCI Survey, 16.) Likewise, the data confirm that tapers make most of their copies from records and pre-recorded tapes which they do not own. (WCI Survey, 22.) Based on all of the survey data to date, financial statistics of the recording industry, and government data on sales of blank tape and recording equipment, Dr. Alan Greenspan has estimated that the amount of revenue that the recording industry lost in 1981 as a direct result of home taping was approximately $900 million.2/ In this connection, Dr. Greenspan has made the following points: Home taping has been rising at a very substantial pace in recent years. 9/ Dr. Greenspan's conclusions are reprinted in full in Appendix Six. This amount of home taping has Overall, this suggests that almost These data indicate that 28 percent Dr. Greenspan has also considered the practical effect that these lost sales have had and will continue to have on the recording industry: Record company profit margins dropped sharply in 1979 with the industry as a whole probably operating at a loss. The recovery since then appears to have been minimal. The volume of sales lost through It is obvious that, as home taping continues to grow, the sale of records produced by the record industry will decline further. There will be fewer and fewer original performances on records for purchasers to enjoy and for tapers to copy. If taping continues to erode record sales and profits, the recording industry might be forced to attempt to raise prices in an endeavor to recoup losses. That, however, would only further reduce the sales of pre-recorded music and probably further increase the shift toward lower cost home taping. -1 Alternatively, the record companies might be pressured competitively to cut prices to narrow the gap between home taping costs and retail record prices. That, of course, would accelerate the profit deterioration in the industry and decrease its capability to take the types of risks which the nature of the record business requires. Thus, there is very little that the record industry can do to sustain its profitability in the face of the continued expansion of home taping. For economic incentives to work appropriately, property rights must protect rights of capital assets whether in physical or intangible form. Home taping has resulted in severe economic damage to the owners of copyrights in sound recordings and musical compositions. 19 Apart from Dr. Greenspan's analysis, studies in the United States and all over the world10/ have confirmed that home taping is responsible for very significant lost sales. Indeed, the figures are staggering. For example, as previously indicated, the WCI study recently found that the actual market value of music taped at home in 1980 exceeded $2.85 billion. (WCI Survey, 24.) This is almost as large as the dollar value of legitimate consumer purchases of records and pre-recorded tapes for the entire industry, which amounted to between $3.3 to $3.68 billion for 1980. An even more recent WCI research survey (to be published in the near future) indicates that for every 10 records taped, consumers would have purchased 4 records if taping were not possible. In other words, 10/ See, e.g., Reark Research Pty. Ltd., Taping Survey: A Draft Report Prepared for Australian Record Industry Association (March 1982); British Phonographic Industry Ltd., A Levy on Blank Video and Audio Tapes and Associated Hardware (July 1981); British Market Research Bureau Ltd., Home Taping: Report on a Quantitative Survey (January 1980); The Finnish Group of IFPI, et al., Gallup Survey Concerning the Music Recording Habits in Finland, Sweden, Norway and Denmark (1980); Netherlands Association for the Phonographic Industry (NVPI), Home Taping: Investigation Into the Making of Sound Copies on Tape and Cassettes by Individuals in the Netherlands in 1979 (September 1980). approximately 40 percent of taped records displace legitimate sales. If the 40 percent displacement figure is applied to the $2.85 billion market value of taped records, then the industry lost more than $1 billion in legitimate sales in 1980 from home taping. This figure, derived from WCI's two recent research studies, closely parallels the recent estimate in The Wall Street Journal that taping has caused a loss of $1 billion in record sales. (Feb. 18, 1982, at 31.) Another approach to this question was used in That survey revealed the 1979 study by CBS, which inquired specifically about the sales lost to home taping. that, by reason of taping, home tapers forego the purchase of three pre-recorded albums or tapes each year. (CBS Survey, 14.) Based on that fact, CBS concluded that home taping deprived the music industry of up to 100 million unit sales in 1979, the equivalent of $700 to $800 million in lost sales. (CBS Survey, 15.) This three-year-old figure has grown larger, as shown by more recent surveys, with the continued explosive growth of home taping. Thus, by any measure, the damage to the record and music communities is of staggering proportions. |