Distribution of 2004, 2005, 2006, 2007, 2008, and 2009 Cable Royalty Funds; Distribution of 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, and 2009 Satellite Royalty Funds
| Published date | 17 April 2019 |
| Citation | 84 FR 16038 |
| Record Number | 2019-07695 |
| Section | Notices |
| Court | Copyright Royalty Board,Library Of Congress |
Federal Register, Volume 84 Issue 74 (Wednesday, April 17, 2019)
[Federal Register Volume 84, Number 74 (Wednesday, April 17, 2019)]
[Notices]
[Pages 16038-16048]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07695]
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LIBRARY OF CONGRESS
Copyright Royalty Board
[Docket Nos. 2012-6 CRB CD 2004-09 (Phase II) and 2012-7 CRB SD 1999-
2009 (Phase II)]
Distribution of 2004, 2005, 2006, 2007, 2008, and 2009 Cable
Royalty Funds; Distribution of 1999, 2000, 2001, 2002, 2003, 2004,
2005, 2006, 2007, 2008, and 2009 Satellite Royalty Funds
AGENCY: Copyright Royalty Board (CRB), Library of Congress.
ACTION: Final distribution determination.
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SUMMARY: The Copyright Royalty Judges announce their final
determination of the distribution percentages of cable and satellite
royalties in the program suppliers funds and the devotional funds for
numerous years.
DATES: Applicable date: April 17, 2019.
ADDRESSES: The final distribution order is also published in eCRB at
https://app.crb.gov/.
Docket: For access to the docket to read background documents, go
to eCRB, the Copyright Royalty Board's electronic filing and case
management system, at https://app.crb.gov/ and search for docket number
2012-6 CRB CD 2004-09.
FOR FURTHER INFORMATION CONTACT: Anita Blaine, CRB Program Specialist,
by phone at (202) 707-7658 or by email at [email protected].
SUPPLEMENTARY INFORMATION:
Final Determination of Royalty Distribution
I. Introduction
[[Page 16039]]
The Copyright Royalty Judges (Judges) initiated the captioned
proceedings to determine proper distribution of royalties deposited
with the Library of Congress for retransmission of broadcast signals by
cable and satellite during the years 2004-2009 and 1999-2009,
respectively.\1\ See 78 FR 50113 (Aug. 16, 2013) (cable
retransmissions); and 78 FR 50114 (Aug. 16, 2013) (satellite
retransmissions). In the Program Suppliers category, controversies
exist between MPAA-represented Program Suppliers (MPAA) and Worldwide
Subsidy Group LLC d/b/a Independent Producers Group (IPG). In the
Devotional category, controversies exist between the Settling
Devotional Claimants (SDC) \2\ and IPG. The Judges determine the funds
shall be distributed as follows:
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\1\ On December 22, 2015, the Judges concluded that there was no
remaining controversy with respect to the 2008 satellite fund in the
Devotional category and, therefore, ordered distribution of those
uncontroverted funds. See Order Granting Final Distribution of 2008
Satellite Royalties for the Devotional Category (Jan. 13, 2016). The
Judges had already determined and distributed 1999 satellite funds
allocated to the Program Suppliers category when they commenced this
proceeding. See 78 FR 50114, 50115 (Aug. 16, 2013).
\2\ The SDC are comprised of Amazing Facts, Inc., American
Religious Town Hall, Inc., Billy Graham Evangelistic Association,
Catholic Communications Corporation, Christian Television Network,
Inc., The Christian Broadcasting Network, Inc., Coral Ridge
Ministries Media, Inc., Cottonwood Christian Center, Crenshaw
Christian Center, Crystal Cathedral Ministries, Inc., Evangelical
Lutheran Church in America, Faith for Today, Inc., Family Worship
Center Church, Inc. (d.b.a. Jimmy Swaggart Ministries),
International Fellowship of Christians & Jews, Inc. (cable only), In
Touch Ministries, Inc., It is Written, John Hagee Ministries, Inc.
(a.k.a. Global Evangelism Television), Joyce Meyer Ministries, Inc.
(f.k.a. Life in the Word, Inc.), Kerry Shook Ministries (a.k.a.
Fellowship of the Woodlands), Lakewood Church (a.k.a. Joel Osteen
Ministries), Liberty Broadcasting Network, Inc., Messianic Vision,
Inc., New Psalmist Baptist Church, and Oral Roberts Evangelistic
Association, Inc.
Table 1--Distribution of Program Suppliers Funds
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Cable Satellite
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Year MPAA (percent) IPG (percent) MPAA IPG (percent)
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2000.................................... ................ ................ 99.54 0.46
2001.................................... ................ ................ 99.75 0.25
2002.................................... ................ ................ 99.74 0.26
2003.................................... ................ ................ 99.65 0.35
2004.................................... 99.60 0.40 99.87 0.13
2005.................................... 99.60 0.40 99.73 0.27
2006.................................... 99.34 0.66 99.65 0.35
2007.................................... 99.44 0.56 99.77 0.23
2008.................................... 99.28 0.72 99.78 0.22
2009.................................... 99.44 0.56 99.57 0.43
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Table 2--Distribution of Devotional Funds
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Cable Satellite
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Year SDC (percent) IPG (percent) SDC (percent) IPG (percent)
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1999.................................... ................ ................ 100.0 0.0
2000.................................... ................ ................ 100.0 0.0
2001.................................... ................ ................ 98.8 1.2
2002.................................... ................ ................ 98.5 1.5
2003.................................... ................ ................ 97.2 2.8
2004.................................... 89.1 10.9 98.8 1.2
2005.................................... 89.2 10.8 98.4 1.6
2006.................................... 87.5 12.5 91.2 8.8
2007.................................... 92.4 7.6 97.1 2.9
2008.................................... 90.2 9.8 ................ ................
2009.................................... 90.0 10.0 97.9 2.1
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After accounting for administrative fees, the Copyright Office
Licensing Division shall distribute remaining funds, together with
interest accrued on each fund balance, in such a way as to effect these
distribution percentages as if they had been determined on the day
following each royalty deposit and continuing until the date of each
partial distribution.
The Judges make this determination for the following reasons.
II. Background
A. Posture of the Proceeding
The Judges initiated this Phase II proceeding \3\ on August 16,
2013, and held a preliminary hearing to resolve disputes over the
validity and categorization of claims on December 8-16, 2014. The
Judges issued an order resolving claims disputes on March 13, 2015. See
Memorandum Opinion and Ruling on Validity and Categorization of Claims
(Mar. 13, 2015) (Claims Ruling).\4\ The Judges held a hearing from
April
[[Page 16040]]
13-17, 2015, in which they received evidence and expert testimony
concerning the proper distribution of royalties in the categories at
issue in this proceeding. In accordance with 37 CFR 351.12, at the
conclusion of the hearing and after closing arguments of counsel, the
Chief Judge announced the end of presentation of evidence and closed
the record, apart from allowing an exception for parties to file
corrected and redacted exhibits in accordance with the Judges' rulings
during the hearing and after the hearing based on filed and pending
evidentiary motions. See 4/17/15 Tr. at 285.
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\3\ The Judges determined the Phase I allocation of cable
royalties among the claimant categories for 2004 and 2005 after an
evidentiary hearing. See Distribution of the 2004 and 2005 Cable
Royalty Funds, 75 FR 57063 (Sept. 17, 2010). Representatives of the
claimant categories negotiated a confidential settlement of Phase I
allocation of cable royalties for the remaining years in the
proceeding and of satellite royalties for all years in the
proceeding.
\4\ IPG filed four separate motions seeking modifications to the
Claims Ruling. The Judges granted relief in response to two of them.
The Judges modified the Claims Ruling on April 9, 2015, to reinstate
IPG's claims on behalf of a claimant it represents in the Devotional
category for 2001-02 and 2004-09 and modified the Claims Ruling
again on October 27, 2016, to credit IPG with one claimant the
Judges had previously dismissed for the 2008 satellite royalty year.
See Order on IPG Motions for Modification, at 5 (Apr. 9, 2015)
(April 9 Order); Order Granting IPG Fourth Motion for Modification
of March 13, 2015 Order, at 1-2 (Oct. 27, 2016). The Judges
considered and denied the other two IPG motions to modify the Claims
Ruling. See April 9 Order, at 2-5; Order Denying IPG Third Motion
for Modification of March 13, 2015 Order (June 1, 2016). In its
proposed findings, IPG claimed that MPAA's expert, Dr. Gray,
``automatically awarded'' programs to MPAA in computing royalty
shares when there were competing claims between MPAA and IPG. IPG
PFF ] 24. IPG's criticism is misplaced. Dr. Gray testified that he
incorporated the Claims Ruling (as subsequently modified) into his
analysis. 4/10/18 Tr. 414-16 (Gray). IPG's complaint is with the
Claims Ruling, not with Dr. Gray's methodology.
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After considering the entire record in the proceeding, the Judges
found that no party had ``presented a methodology and data that,
together, are sufficient to support a final distribution in the
contested categories.'' Order Reopening Record and Scheduling Further
Proceedings, at 1 (May 4, 2016) (Order Reopening Record). The Judges
set aside the participants' evidence, reopened the record, and directed
the parties to present additional evidence and expert opinion.\5\ Id.
at 2. The Judges permitted the participants to reintroduce any
previously-introduced evidence and to designate prior testimony in
accordance with 37 CFR 351.4(b)(2). Id. at 8.
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\5\ After the parties filed corrected and redacted exhibits,
MPAA and the SDC filed a motion asking the Judges to disregard two
of IPG's hearing exhibits because IPG allegedly failed to redact
them properly. See Settling Devotional Claimants' and MPAA-
Represented Program Suppliers' Objections to Consideration of
Exhibits Submitted by IPG that were not Properly Redacted (Sept. 15,
2015). In light of the Judges' decision to set aside all of the
participants' evidence, the Judges DENY this motion as moot.
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The participants filed Written Direct Statements (WDSs) in the
reopened proceeding on August 22, 2016. Shortly thereafter, the SDC
filed a notice consenting to distribution of satellite royalties in the
Devotional category in accordance with IPG's proposed royalty shares.
See Notice of Consent to 1999-2009 Satellite Shares Proposed By
Independent Producers Group and Motion for Entry of Distribution Order
(Aug. 26, 2016) (Notice and Motion). IPG responded by opposing the
Notice and Motion and filing an Amended WDS (AWDS) in which its
economic expert, Dr. Charles Cowan, revised his written report and
changed his proposed royalty shares. In response to motions by the SDC
and MPAA, the Judges struck IPG's AWDS for failing to comply with the
Judges' procedural rules. See Order Granting MPAA and SDC Motions to
Strike IPG Amended Written Direct Statement and Denying SDC Motion for
Entry of Distribution Order (Oct. 7, 2016) (Oct. 7 Order).\6\
Specifically, the Judges determined that IPG could not file its AWDS as
of right, had failed to file a motion requesting leave to file an AWDS,
and failed to explain how its AWDS differed from its WDS. See id. at 3-
4. IPG subsequently sought leave to file an AWDS, renewing the
arguments it had made in opposition to the SDC's and MPAA's motions to
strike. The SDC and MPAA opposed IPG's motion. The Judges accepted
IPG's AWDS and granted the SDC and MPAA an additional opportunity to
conduct discovery related to the AWDS. See Order on IPG Motion for
Leave to File Amended Written Direct Statement (Jan. 10, 2017) (Jan. 10
Order).\7\
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\6\ In the filings concerning IPG's AWDS, Dr. Cowan explained,
``after preparation of the August 22nd report, IPG's counsel
immediately inquired about the produced results, and during the
course of the next week [Dr. Cowan] discovered errors in the earlier
processing of the data.'' IPG's counsel stated that he ``did not
review or consider'' his expert's report prior to submitting it to
the Judges purportedly to avoid allegations that IPG had
``straightjacketed'' its witness. IPG Opposition to MPAA Motion to
Strike IPG's Amended Direct Statement, at 3 n.4. (Sept. 12, 2016);
See Oct. 7 Order, at 4 & n.5.
\7\ Based on the totality of IPG's conduct in relation to Dr.
Cowan's report, and the apparent prejudice to the SDC and MPAA, the
Judges permitted the SDC and MPAA to file ``individual motions or a
joint motion with authoritative legal analysis addressing the
Judges' authority, if any, to impose financial or other sanctions in
this circumstance in which a party has disregarded (or negligently
or purposely misinterpreted) the Judges' procedural rules without
explanation or plausible justification.'' Jan. 10 Order, at 7. MPAA
and the SDC filed separate sanctions motions. The Judges
subsequently denied these motions. Order Denying MPAA and SDC
Motions for Sanctions (March 12, 2019).
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The SDC and MPAA filed Written Rebuttal Statements (WRSs) on
December 15, 2017, in accordance with the Judges' procedural schedule.
IPG elected not to file a WRS, filing a ``notice'' instead. IPG had
initiated a collateral attack on the Judges' interlocutory Claims
Ruling in U.S. District Court on December 8, 2017, and was seeking a
temporary restraining order to stay this proceeding.\8\ In addition,
IPG had filed a motion on December 11, 2017, with the Judges seeking a
stay of their proceeding. Neither of those motions had been resolved as
of the due date for WRSs.\9\ IPG thus did not submit or seek admission
of any rebuttal testimony in the reopened proceeding.
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\8\ Worldwide Subsidy Group v. Hayden, 17-cv-02643 (D. D.C.
filed Dec. 8, 2017).
\9\ The Judges denied IPG's motion for a stay of proceedings on
January 4, 2018. See Order Denying Independent Producers Group's
Emergency Motion for Stay of Proceedings (Jan. 4, 2018). IPG
voluntarily dismissed its complaint in the collateral action in
federal district court on January 11, 2017.
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Shortly before the scheduled rehearing in the reopened proceeding,
MPAA and the SDC filed a joint Motion in Limine and Motion for Summary
Disposition seeking to exclude all exhibits proposed by IPG and to
conclude the proceeding summarily. See Order Granting in Part Joint
Motion in Limine and Denying Joint Motion for Summary Judgment, at 1
(Apr. 6, 2018) (Order on Motion in Limine). The moving parties sought
to exclude the written direct testimony \10\ of Dr. Cowan, IPG's expert
(and sole) witness, because he would not be available to testify in
person, and would not, therefore, be subject to cross-examination by
opposing counsel.\11\ The moving parties sought to exclude the
remaining IPG exhibits, which consisted entirely of designated prior
testimony of witnesses in past distribution proceedings, because IPG
failed to comply with the Judges' procedural rule governing submission
of designated prior testimony.\12\ Id. at 2. The Judges excluded Dr.
Cowan's written testimony and all of IPG's proffered exhibits, except
to the extent that IPG might use the testimony and exhibits in cross-
examining MPAA's and the SDC's witnesses. Id. at 2-3, 5; 4/9/18 Tr.
146-47 (Barnett, C.J.).
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\10\ IPG did not file a timely Written Rebuttal Statement, and
thus did not seek admission of any rebuttal testimony.
\11\ The moving parties alleged (and IPG did not dispute) that
IPG informed them of Dr. Cowan's unavailability on April 2, 2018,
seven days before the scheduled hearing. IPG did not apprise the
Judges of the reason for Dr. Cowan's failure to appear, ascribing it
to ``his own reasons.'' Order on Motion in Limine, at 1.
\12\ 37 CFR 351.4(b)(2).
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The Judges construed the moving parties' request for summary
disposition as a request to conduct a paper proceeding in accordance
with 17 U.S.C. 803(b)(5)(B). The Judges denied the request, concluding
that, in light of the failure of proofs by all parties that
necessitated the reopened proceeding, it would be appropriate for the
Judges to take live testimony, and allow IPG to cross-examine
witnesses, in order to determine whether the moving parties' respective
second attempts at constructing distribution methodologies were
adequate. Order on Motion in Limine, at 4.
The Judges held a hearing in the reopened proceeding on April 9-10,
2018, and heard closing arguments on May 24, 2018. The record now
before the Judges consists of the oral testimony of the witnesses
presented by MPAA and the SDC at that hearing, together with all
exhibits admitted at the hearing (including any properly designated
testimony from the earlier hearing or prior proceedings). IPG did not
present any witnesses, and, pursuant to the
[[Page 16041]]
Order on Motion in Limine, the Judges admitted no IPG exhibits.
The Judges issued an Initial Determination on January 22, 2019. No
participant filed a timely petition for rehearing. Consequently, this
Final Determination is identical in substance to the Initial
Determination.
B. Legal Standard for Distribution
The Copyright Act does not contain a statutory standard for
apportioning cable and satellite royalty funds among claimants. The
Judges and their predecessors, however, have long held that royalties
should be awarded in accordance with the relative marketplace value of
the programming. See Distribution of the 2000, 2001, 2002 and 2003
Cable Royalty Funds: Final Distribution Order, 78 FR 64984, 64986 (Oct.
30, 2013) (2000-03 Cable Determination).\13\ Pursuant to 17 U.S.C.
803(a)(1), the Judges act ``in accordance with'' these prior decisions.
The Judges look to ``hypothetical, simulated, or analogous markets'' to
assess relative marketplace value, since there is no actual,
unregulated marketplace for retransmission of broadcast signals by
cable and satellite. 2000-03 Cable Determination, 78 FR at 64986.
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\13\ IPG appealed certain portions of the 2000-03 Cable
Determination. The U.S. Circuit Court for the D.C. Circuit remanded
for further consideration the Judges' determination relating to
distribution of devotional programming royalties. The remand did not
have any impact on the determination relating to distribution of
Program Suppliers' royalties.
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Under applicable precedent, the Judges are not required to identify
a methodology that would allow them to distribute cable and satellite
royalties with ``mathematical precision.'' Id. (citing National Ass'n
of Broadcasters v. Librarian of Congress, 146 F.3d 907, 929 (D.C. Cir.
1998)). The Judges' distribution determinations must instead lie within
a ``zone of reasonableness.'' See National Ass'n of Broadcasters, 146
F.3d at 929; see also Asociacion de Compositores y Editores de Musica
Latino Americana v. Copyright Royalty Tribunal, 854 F.2d 10, 12 (2d
Cir. 1988) (recognizing ``zone of reasonableness'' standard in Phase II
royalty distribution proceedings); Christian Broadcasting Network, Inc.
v. Copyright Royalty Tribunal, 720 F.2d 1295, 1304 (D.C. Cir. 1983).
III. Use of Evidence of Viewership To Determine Relative Marketplace
Value
IPG vigorously attacked the use of viewership evidence for
determining relative market value of programming. Since both MPAA and
the SDC utilize methodologies based on viewership evidence, the Judges
consider these arguments together, before considering the methodologies
individually.
Expert witnesses for MPAA and the SDC testified that relative
viewership is an appropriate metric for determining relative
marketplace value in this proceeding. See Written Direct Testimony of
Erkan Erdem, Trial Ex. 7000, at 8-9, 12 (Erdem WDT); Written Direct
Testimony of Jeffrey S. Gray, Trial Ex. 8002, ]] 17-18 (Gray WDT); and
Written Direct Testimony of John S. Sanders, Trial Ex. 7001, at 21
(Sanders WDT). MPAA and the SDC both argue that the Judges have
previously relied on viewership evidence to apportion royalties among
copyright owners in Phase II distribution proceedings. See SDC PFF ] 24
(citing 2000-03 Cable Determination and Distribution of 1998 and 1999
Cable Royalty Funds, 80 FR 13423 (Mar. 13, 2015) (1998-99 Phase II
Cable Determination)); MPAA PCOL ] 15 (citing 2000-03 Cable
Determination).
IPG, on the other hand, argues that the Judges are barred by
precedent from determining relative marketplace value based on
viewership evidence. See, e.g., IPG PFF ] 132. IPG bases its argument
on the rejection of viewing evidence by a Copyright Arbitration Royalty
Panel (CARP) in the 1998-99 Phase I cable royalty distribution
proceeding, and the Librarian of Congress' statement in his opinion
adopting the panel decision that ``[t]he Nielsen study was not useful
because it measured the wrong thing.'' Final Order, Docket No. 2001-8
CARP CD 98-99, 69 FR 3606, 3613 (Jan. 26, 2004) (1998-99 Librarian
Order). IPG has made the same argument in past Phase II proceedings.
See, e.g., IPG PFF, Docket No. 2008-1 CRB CD 98-99 (Phase II), at 32
(Sept. 23, 2014); and IPG PFF in connection with Program Suppliers
Category, Docket No. 2008-2 CRB CD 2000-2003 (Phase II), at 32 (June
14, 2013). The Judges have rejected IPG's argument on each occasion,
see, e.g., Distribution of 1998 and 1999 Cable Royalty Funds, 80 FR
13423, 13433 (Mar. 13, 2015) (1998-99 Phase II Cable Determination);
2000-03 Cable Determination, 78 FR at 64995, and do so again in this
proceeding.
The Copyright Act requires the Judges to act ``on the basis of
prior determinations and interpretations of the Copyright Royalty
Tribunal, Librarian of Congress, the Register of Copyrights, copyright
arbitration royalty panels . . ., and the Copyright Royalty Judges . .
. .'' 17 U.S.C. 803(a)(1). As the Judges have recently had occasion to
confirm, the 1998-99 Librarian Order and the CARP report that it
adopted are in the nature of `` `precedent' that the Judges must
consider . . . .'' Initial Determination of Royalty Allocation, Docket
No. 14-CRB-0010-CD (2010-13), at 96 (Oct. 18, 2018) (2010-13 Cable
Allocation Determination) (footnote omitted).\14\ However, the Judges
conclude, consistent with 1998-99 Phase II Cable Determination and the
2000-03 Cable Determination, that those prior decisions in no way
preclude the Judges from accepting a distribution methodology founded
on Nielsen viewing data.
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\14\ The Judges also noted that ``[t]he decision whether or not
to accept a methodology for determining relative market value is
factually-dependent, so it is a misnomer to describe a previous
decision declining to rely on viewership as `precedent'--i.e.,
controlling under the principle of stare decisis. Nevertheless, it
is a `prior determination' `on the basis of' which Congress has
directed the Judges to act (along with the written record and other
items enumerated in the statute).'' Id. at 96 n.165.
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The Judges have ruled in more recent proceedings that measurements
of viewership are relevant to determining relative market value. See
2010-13 Cable Allocation Determination at 97; 1998-99 Phase II Cable
Determination, 80 FR at 13433; and 2000-03 Cable Determination, 78 FR
at 64995. ``[V]iewership can be a reasonable and directly measurable
metric for calculating relative market value in cable distribution
proceedings. Indeed . . . viewership is the initial and predominant
heuristic that a hypothetical CSO would consider in determining whether
to acquire a bundle of programs for distant retransmission . . ..''
2000-03 Cable Determination, 78 FR at 64995. Put another way, a CSO's
demand for programming derives from consumers' desire to view the
programming.
Consumers subscribe to cable in order to watch the programming
carried on the various channels provided by the cable operator.
Cable operators acquire broadcast and cable channels that carry
programming their subscribers want to view. Broadcasters acquire
programs that will attract viewers. Viewing is the engine that
drives the entire industry. It is an example of the economic concept
of derived demand. The demand for programming at each step in the
chain is derived from demand further along the chain, all the way to
the television viewer.
2010-13 Cable Allocation Determination, at 97 (footnote omitted);
see also Erdem WDT at 8-9; 4/9/18 Tr. 90-91, 94 (Erdem).
The cases that IPG cites stand for the proposition that the Judges
decline to apportion royalties among program categories solely based on
viewership studies. As the Judges clarified recently, they do so, not
because those studies ``measure[] the wrong thing,'' but because,
standing alone, they are
[[Page 16042]]
``inadequate'' measures of relative value when comparing heterogeneous
program categories. 2010-13 Cable Allocation Determination, at 118. In
the 2010-13 proceeding, the parties presented evidence that ``cable
operators will pay substantially more for certain types of programming
than for other programming with equal or higher viewership.'' Id.
Evidence of viewership alone fails adequately to ``explain the premium
that certain types of programming can demand in the marketplace.'' Id.
Consequently, the Judges have looked to other evidence, such as CSO
surveys and fee-based regression analyses, to inform their allocation
of funds among categories.
As the D.C. Circuit has acknowledged, however, ``different
considerations apply in Phase I and Phase II proceedings.'' Indep.
Producers Grp. v. Librarian of Congress, 792 F.3d 132, 142 (D.C. Cir.
2015) (IPG v. Librarian); see also Distribution of 1993, 1994, 1995,
1996 and 1997 Cable Royalty Funds, 66 FR 66433, 66453 (Dec. 6, 2001)
(allocation methodology used in Phase I proceeding ``does not translate
well to a Phase II proceeding dealing with one program category'') (93-
97 Librarian Order). In a Phase II (or distribution phase) proceeding,
the Judges must apportion royalties among relatively homogenous
programs within a program category. The ``premium'' that some
categories of programming can demand, irrespective of their levels of
viewership, does not enter into the picture when all of the programs
are in the same category. Thus, in distribution phase proceedings, the
Judges have determined and continue to determine relative marketplace
value based on evidence of viewership.
That is not to say that viewership evidence alone is an optimal
means of determining relative market value. The Judges have
acknowledged that viewership evidence may be ``subject to marginal
adjustments needed to maximize subscribership.'' 2000-03 Cable
Determination, 78 FR at 64995. Nevertheless, the Judges have found
viewership evidence to be an acceptable alternative in the absence of
evidence ``by which to establish the relative marketplace values of . .
. programs in the optimal theoretical manner.'' 1998-99 Phase II Cable
Determination, 80 FR at 13432. The Judges may, however, make
appropriate adjustments to proposed allocations based on viewership
evidence, provided those adjustments are supported by other record
evidence.
In short, the authorities on which IPG relies--the 1998-99
Librarian Order and the CARP report that it adopted--are not on point.
The Judges will follow the precedents from Phase II distribution cases
and consider viewership evidence in apportioning royalties among
programs within programming categories.
IV. Distribution of Royalties in the Program Suppliers Category
A. MPAA's Methodology
MPAA's proposed apportionment of royalties in the Program Suppliers
category is in proportion to the respective number of hours that cable
and satellite subscribers viewed MPAA-represented and IPG-represented
programs on a distant basis. See Gray WDT at 4. Generally, MPAA added
the hours of distant viewing of MPAA-represented programs and divided
by the total number of distant viewing hours for both MPAA- and IPG-
represented programs to determine the MPAA share. See id. ] 49.
MPAA's expert, Dr. Gray, derived levels of distant viewing from
three types of Nielsen data: Local ratings viewing data \15\ collected
from meters recording from 2000 to 2009; distant viewing data from
viewer diaries recorded from 2000 to 2003; and distant viewing
household metered data from 2008 to 2009. See id. ]] 29-31. Because of
cost considerations in obtaining the Nielsen and Gracenote data for all
stations distantly retransmitted by CSOs and satellite carriers in
every royalty year, for most of the royalty years, Dr. Gray selected a
sample of stations retransmitted by CSOs and satellite carriers based
on a stratified random sampling methodology.\16\ See id. ] 26. Dr. Gray
used data from Gracenote, Inc.\17\ and program logs from the Canadian
Radio-television and Telecommunications Commission (CRTC) to identify
compensable MPAA and IPG programming carried on the sample stations.
See id. ]] 32, 35.
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\15\ Local ratings are the percentage of television-viewing
households in a particular station's designated market area (DMA)
that tune to that station.
\16\ Stratified random sampling is a statistical technique that
permits oversampling of elements with a given characteristic while
still allowing for valid statistical inferences about the universe
of elements as a whole. Items that are selected with a lower
probability of selection are given a higher weight to adjust for the
differing probability of selection. See discussion in Initial
Determination of Royalty Allocation, Docket No. 14-CRB-0010-CD
(2010-13), at 89 (Oct. 18, 2018) (2010-13 Initial Allocation
Determination). In this proceeding, Dr. Gray sampled stations with
many distant subscribers (which he identified using Statement of
Account (SOA) data from Cable Data Corporation (CDC)) ``with
certainty'' whereas stations with ``few'' distant subscribers were
selected ``with lower probability.'' See Gray WDT ] 26 & n.27; 4/10/
18 Tr. 384-85 (Gray).
\17\ Gracenote is the successor to Tribune Media, Inc. an entity
in the business of producing a database of television programming
information. In their testimony, the experts in this proceeding
occasionally used ``Gracenote'' and ``Tribune'' interchangeably.
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MPAA did not supply Dr. Gray with Nielsen custom analyses\18\ of
distant viewing for all of the years covered in this proceeding. See
Gray WDT ] 28 (``both due to cost and time, among other constraints,
custom analyses of certain types of Nielsen data were not available for
all royalty years''). Because he did not have distant household viewing
data for every year, Dr. Gray devised a methodology to predict levels
of distant viewing using the data that MPAA made available to him. He
``establish[ed] a mathematical relationship between local ratings and
distant viewing levels for the years the data are available'' and
``extrapolate[d] that mathematical relationship using a regression
analysis to estimate distant viewing for all compensable programs each
year . . ..'' Gray WDT ] 36; see also id. ] 47 (regression calculates
``mathematical relationship between distant viewing and (1) local
ratings for the program, (2) the total number of distant subscribers of
that station, (3) the time of day the program aired by quarter hour,
(4) the type of program aired, (5) the station affiliation the program
aired on, and (6) the aggregate total fees paid by CSOs or satellite
carriers in [sic] year the program aired''). Dr. Gray then replaced the
actual viewing data with the values for distant viewership his
regression model predicted, to compute viewership (and thus royalty)
shares. See id. ] 49.
---------------------------------------------------------------------------
\18\ A ``custom analysis,'' as the name suggests, is an analysis
that Nielsen conducts at a specific client's request, of data that
Nielsen has already collected. This is in contrast to ``custom
research,'' where Nielsen collects data at a specific client's
request. See Designated Testimony of Paul Lindstrom, Docket No.
2008-02 CRB CD 2000-2003 (Phase II), Trial Ex. 8014, at 282-83
(Lindstrom 2000-03 Oral Testimony). Nielsen refers to reports that
it prepares for multiple clients as ``syndicated products.'' 4/10/18
Tr. 312 (Lindstrom).
---------------------------------------------------------------------------
B. IPG's Criticisms of MPAA's Methodology
1. Dr. Gray Relied on an Inadequate Amount of Data
IPG argued that the Judges should reject MPAA's methodology because
Dr. Gray relied on an ``unreasonably small amount of data'' \19\ in
computing royalty
[[Page 16043]]
shares. IPG PCL ] 134; see id. ]] 19-22. Specifically, IPG argued that
Dr. Gray failed to supplement his original methodology with enough
additional data to overcome the Judges' earlier objection \20\ that his
proposed royalty shares were supported by insufficient data. See IPG
PFF ]] 20-22. IPG stated that ``[i]n response to the Order Reopening
Record, the only change to Gray's analysis was the addition of Nielsen
2008-2009 National People Meter distant viewing data. No data was added
for calendar years 2004-2007.'' Id. ] 20 (citations omitted). IPG
asserted, ``MPAA could have performed a National People Meter distant
viewing analysis for each of the years 2000-2009, but contended that it
was `difficult' but not `impossible' given the three-month timeframe
afforded by the Judges . . ..'' Id. ] 21 (citations omitted).
---------------------------------------------------------------------------
\19\ Elsewhere in its proposed findings IPG claimed that Dr.
Gray's conclusions were ``[b]ased on approximately 6% of the distant
retransmitted broadcasts from 2000-2003, and 6% of distant
retransmitted broadcasts from 2008-2009 . . ..'' Id. ] 25. IPG
purported to reach this conclusion by counting only broadcasts with
positive viewing measurements in the Nielsen data. Id. IPG offered
no evidence or expert analysis to support this 6% number (which was
apparently computed by IPG's counsel), and Dr. Gray testified that
it was incorrect. See 4/10/18 Tr. 427-29. Nor did IPG offer any
evidence or expert analysis to support its implicit equating of
zero-measured-viewing observations with missing data.
\20\ See Order Reopening Record at 2-4.
---------------------------------------------------------------------------
MPAA responded that IPG mischaracterized the record. MPAA noted
that in addition to incorporating an additional two years' metered
distant viewing data (for both cable and satellite) into his analysis,
Dr. Gray ``also modified his regression specification to address the
Judges' concerns set forth in their May 4, 2016 Order.'' MPAA Reply PFF
] 6 (citing 4/10/18 Tr. 393-94 (Gray)). By adding the additional two
years of data to his cable analysis, Dr. Gray increased the number of
distant viewing observations used in his regression analysis from 1.68
million to 3.86 million (the increase for satellite was ``a similar
order of magnitude''). See 4/10/18 Tr. 395-96 (Gray). As to the
availability of additional distant viewing data for 2004-2007, Dr. Gray
testified that it was ``nearly impossible to attain.'' Id. at 396
(Gray).
In the Order Reopening Record, the Judges stated that they could
not rely upon MPAA's viewership-based methodology without either
``contemporaneous data (whether local ratings and distant viewership
data, as Dr. Gray utilized, or other data and analysis that might
underlie a modified methodology); or (2) competent evidence that
persuades the Judges that such data are not needed to produce reliable
results . . ..'' Order Reopening Record at 4.
Dr. Gray modified his methodology in response to the Order
Reopening Record. Most notably, he added two years of contemporaneous
distant viewing data, increasing the number of distant viewing
observations by approximately 130%. Dr. Gray testified that the
addition of the contemporaneous distant viewing data resulted in little
change to his regression-based viewing estimates:
I would view the estimates as reasonably similar. For example,
in 2004 . . . the estimate [of MPAA's share of distant viewing]
increases from 99.59 [percent] to 99.60 [percent] when also using
the contemporaneous distant viewing data.
And then for satellite, in 2004, actually there is no impact.
The satellite estimate remains at 99.87 with or without the
additional contemporaneous data.
4/10/18 Tr. 399 (Gray). Dr. Gray testified further that these
results ``comported with'' his expectation that the additional data
would not change his estimates significantly: ``[E]ven based upon the
2000-2003 analysis, that . . . estimated a relationship between distant
viewing and a host of factors, local ratings being one of them . . .
that mathematical relationship I did not expect to change much over
time, particularly to the advantage or disadvantage to one party.'' Id.
at 399-400. Dr. Gray also testified that, in his opinion, based on the
foregoing analysis, the absence of distant viewing data for 2004-2007
did not render his analysis unreliable. Id. at 397.
The Judges find that Dr. Gray's analysis, and the reasonable
proximity of his current results to his previous results (i.e., those
without the benefit of the 2008-09 distant viewing data), constitute
competent evidence that persuades the Judges that further
contemporaneous distant viewing data are not needed to produce reliable
estimates of distant viewing shares. The Judges reject IPG's contention
that Dr. Gray relied on an inadequate amount of data.\21\
---------------------------------------------------------------------------
\21\ In the Order Reopening Record, the Judges also noted a
dispute between Dr. Gray and IPG's expert in the original
evidentiary hearing concerning Dr. Gray's regression specification
and his use of a ``base year.'' Order Reopening Record at 4 n.5. The
Judges stated their intention of addressing the substance of that
dispute ``if this issue remains outstanding in the parties'
submissions in the reopened proceedings . . ..'' Id. Dr. Gray
testified that he modified his regression specification in a manner
that, in his opinion, resolved the dispute. 4/10/18 Tr. 394 (Gray).
In the absence of any contrary rebuttal evidence, the Judges find no
basis to pursue the issue further.
---------------------------------------------------------------------------
2. Dr. Gray Supplanted Viewing Data With Regression Results
IPG criticized Dr. Gray's analysis for relying on a ``sliver of
data,'' then ``supplant[ing]'' those data with regression-based
predictions of distant viewing. See IPG PFF ]] 25-37.
As discussed in the preceding section, the Judges reject IPG's
contention that Dr. Gray relied on an inadequate amount of data. As to
Dr. Gray's use of regression-based predictions of distant viewing, IPG
has presented no evidence or expert analysis that even suggests that
this approach is improper or unreliable. Moreover, the Judges have
relied on a similar approach that Dr. Gray presented on MPAA's behalf
in an earlier Phase II distribution proceeding. See 2000-03 Cable
Determination, 78 FR at 64994-98, 65002-03. IPG has provided the Judges
with no basis for rejecting that approach in the instant proceeding.
In the course of IPG's discussion of Dr. Gray's ``supplanting'' of
distant viewing observations with regression-based predictions, IPG
also pointed out that Dr. Gray used imputed values for local ratings
whenever the Nielsen data did not include ratings measurements. See IPG
PFF ]] 26-28. IPG noted that, during the period covered by this
proceeding, Nielsen produced meter-based local ratings only in the ``56
largest U.S. markets.'' Id. ] 27. IPG stated, ``Gray only had local
ratings data from 56 markets, and conspicuously failed to clarify what
number of the 122 sampled cable retransmitted stations were covered by
such markets.'' However, IPG presented no analysis that would explain
whether--much less how and why--these observations are problematic or
diminish the reliability of Dr. Gray's methodology. The Judges,
therefore, give no weight to IPG's observations concerning Dr. Gray's
imputation of local ratings in certain markets.
3. The MPAA Methodology Fails To Measure Relative Market Value
IPG argued that Dr. Gray, in his live testimony, admitted that the
MPAA methodology failed to measure relative market value. IPG PFF at
18. According to IPG, ``[Dr.] Gray actually constructed his methodology
on the incorrect assumption that the willing seller is the copyright
owner and the willing buyer is the broadcast station, i.e., not a CSO/
SSO.'' Id. ] 39. IPG noted that the Judges have previously found that,
in determining the relative market value of programming, the seller in
the hypothetical market is the copyright owner and the buyer is the
Cable System Operator (CSO) or Satellite System Operator (SSO). Id. ]
42 (citing Distribution of 1998 and 1999 Cable Royalty Funds, 69 FR
3606, 3613 (Jan. 26, 2004) (1998-1999 Phase I Determination)).
In his live testimony, Dr. Gray sought to elaborate on the nature
of the hypothetical market for retransmission of television programming
absent the
[[Page 16044]]
compulsory licenses in sections 111 and 119.\22\ Dr. Gray described a
hypothetical market in which broadcast stations would, in essence, act
as middlemen between copyright owners on one hand and cable and
satellite operators on the other. In Dr. Gray's opinion as an
economist, broadcast stations in an unregulated market would ``pay for
the right to transmit [programming] in its local market and then pay a
surcharge for the right to retransmit to a cable system or satellite
system.'' 4/10/18 Tr. 456 (Gray). The broadcast station will then
``seek to recoup its surcharge in its transactions with the cable
system and the satellite system.'' Id. at 457.
---------------------------------------------------------------------------
\22\ Dr. Gray discussed this conception of the hypothetical
market in greater detail in a recent allocation phase cable
distribution proceeding. See Final Determination of Royalty
Allocation, Docket No. 14-CRB-0010 CD (2010-13), at 80-81 (Dec. 18,
2018). The Judges did not rely upon Dr. Gray's testimony in the
2010-13 allocation proceeding in this proceeding.
---------------------------------------------------------------------------
IPG contended that, because of Dr. Gray's views concerning the role
of broadcasters in the hypothetical market, he concluded,
``[V]iewership ratings are significant because they are what a
broadcaster considers significant.'' IPG PFF ] 41. That is not what Dr.
Gray actually said in his testimony. Dr. Gray testified that in an
unregulated market cable and satellite systems would be ``negotiating
to retransmit the bundled signal, and they will do that in proportion
to how much it is going to be valued by the subscriber, as evidenced by
distant viewing.'' 4/10/Tr. 457 (Gray). In essence, Dr. Gray was
repeating the argument that underlies the use of viewership evidence to
determine relative market value, which the Judges discussed, supra,\23\
The Judges are not persuaded by IPG's further attempt to discredit
viewership evidence.
---------------------------------------------------------------------------
\23\ See supra, section III (derived demand factors transmitted
through broadcast stations as buyers-resellers of distant
retransmission rights in hypothetical market).
---------------------------------------------------------------------------
4. Dr. Gray Injected Impermissible Factors Into his Analysis
IPG argued that ``Dr. Gray disregard[ed] the premise of the
`Program Suppliers' program categorization, and his own stated premise,
by injecting impermissible factors into his analysis that have a
`significant' effect on the regression analysis and his predicted
distant viewership.'' IPG PFF at 21. Noting that Dr. Gray described the
Program Suppliers category as ``relatively homogenous,'' IPG contended
that Dr. Gray's use of explanatory variables for, e.g., Tribune Media
program type and station affiliation were inconsistent with that
description and, thus, improper. Id. ]] 48-53. IPG did not present any
evidence or expert analysis to support that contention, and the Judges
therefore reject it.
5. Dr. Gray Relied on Nielsen Data That Contain an Excessive Amount of
``Zero Viewing'' Without Adequate Explanation
IPG argued that the levels of ``zero viewing'' \24\ in the Nielsen
data that Dr. Gray relied on render his analysis unreliable. See IPG
PFF ]] 54-67; see also id. ]] 29-31. IPG relies on the 93-97 Librarian
Order to argue that the Judges are precluded from relying on Nielsen's
viewing measurements.
---------------------------------------------------------------------------
\24\ IPG defines ``zero viewing'' as ``the percentage occurrence
of unmeasured viewing on a broadcast-by-broadcast basis.'' IPG PFF ]
108. Although IPG cites to the 93-97 Librarian Order for that
definition, the decision does not actually define ``zero viewing,''
or suggest that it is a term of art.
---------------------------------------------------------------------------
IPG stated that MPAA's expert witness, Dr. Gray, ``acknowledged
that for Nielsen distant diary data, only sixteen weeks of sweeps data
was utilized, with approximately 80% average zero viewing.'' IPG PFF ]
60. IPG then argued that ``[m]athematically . . . this constitutes 94%
zero viewing (16 weeks x .8 plus 36 weeks x 0.0 [sic] \25\ /52 = 94%
zero viewing).'' Id. IPG compares this purported zero viewing
percentage unfavorably with levels of zero viewing that the Librarian
found unacceptable in the 93-97 Librarian Order. See id. ] 56.
---------------------------------------------------------------------------
\25\ IPG appears to intend a value of 1.0, denoting 100% zero
viewing for the non-sweeps weeks. As written, IPG's formula would
yield 25% zero viewing (rounded to the nearest whole number).
---------------------------------------------------------------------------
IPG's assertions regarding the levels of zero viewing in the data
underlying the respective methodologies are without evidentiary basis.
IPG's reliance on Dr. Gray's testimony is entirely misplaced: Dr. Gray
did not ``acknowledge'' IPG's estimate of 80% average zero viewing for
the sweeps periods. More importantly, Dr. Gray testified that it is
improper to impute zero values to periods not covered by the Nielsen
data, as IPG's counsel attempted to do. See 4/10/19 Tr. 428-31 (Gray).
IPG failed to demonstrate the existence of a high incidence of zero
viewing. The Judges, therefore, need not reach the question whether
MPAA has ``demonstrate[d] ``the causes for the large amounts of zero
viewing and explain[ed] in detail the effect of the zero viewing on the
reliability of the results'' of its methodology. 93-97 Librarian Order,
66 FR at 66450.\26\
---------------------------------------------------------------------------
\26\ Further, the Judges previously have found MPAA's
explanation of the levels of zero viewing in the Nielsen data in
another Phase II proceeding to be sufficient. IPG has not provided
any evidence to call that finding into question. See 2000-03 Cable
Determination, 78 FR at 64995 & n.47.
---------------------------------------------------------------------------
6. MPAA's Methodology Uses a Time-of-Day Indicium That the Judges
Previously Rejected
IPG argued that Dr. Gray included the time of day, broken down into
six dayparts, as part of his methodology for determining relative
market value. Id. ] 70. IPG contends that the use of dayparts was one
reason the Judges rejected IPG's proposed methodology in the Order
Reopening Record, and should reject MPAA's methodology for the same
reason. See id.
Dr. Gray used local ratings as an input in his regression analysis.
In cases in which local ratings were unavailable because programs were
broadcast outside Nielsen metered markets, he used imputed values. See
supra, section IV.B.2; Gray WDT ] 48 n.41. The imputed values were
``the average local ratings of retransmitted programs of the same type
broadcasting during the same time of day.'' Id. Dr. Gray defined six
time- of-day categories, and computed average ratings for the various
Tribune program types (e.g., ``Game Show,'' ``Movie,'' or ``Network
Series''). Id. ``For example, a Network Series program broadcasting at
9 p.m. with no local ratings information is given the average local
rating of all Network Series programs broadcasting between 8 p.m. and
11 p.m.'' Id. Dr. Gray used the imputed ratings values, together with
Nielsen metered ratings and other data points in his regression
analysis to predict the distant viewing values that he aggregated and
used in computing relative market value.
By contrast, in the methodology the Judges rejected in the Order
Reopening Record, IPG used the time of day that a program was broadcast
as one of a number of ``indicia of economic value,'' along with program
length, fees paid, and number of subscribers. See Written Direct
Testimony of Dr. Laura Robinson, ] 10 (Robinson WDT). Dr. Robinson's
use of time of day was different from Dr. Gray's use of time of day.
The Judge's ruling in the Order Reopening Record is not directly on
point, and IPG has presented no evidence or expert analysis that would
lead the Judges to conclude that the Judges should apply their earlier
criticism to cover the present circumstances.
7. Dr. Gray Impermissibly Mixed Nielsen Metered Data and Diary Data in
his Methodology
IPG asserted that, by using both Nielsen meter data and diary data
in his methodology, Dr. Gray violated ``a clear edict . . . that doing
so invalidated the
[[Page 16045]]
purported results of any analysis relying thereon.'' IPG PFF ] 76. To
support its assertion, IPG quotes a statement from a 1992 CRT decision:
``Mr. Lindstrom stated that it was invalid to mix metered viewing with
diary viewing. We accept Mr. Lindstrom's statement.'' \27\ 1989 Cable
Royalty Distribution Proceeding, 57 FR 15286, 15300 (Apr. 27, 1992);
see also id. at 15291 (referring to the same testimony by Mr.
Lindstrom).
---------------------------------------------------------------------------
\27\ Paul Lindstrom was a senior vice president in Nielsen's
Strategic Media Research group prior to his retirement in 2017. See
4/10/18 Tr. 282 (Lindstrom). He worked for Nielsen for nearly 40
years and testified in numerous distribution proceedings before the
Judges and their predecessors. See id.
---------------------------------------------------------------------------
Mr. Lindstrom's testimony in the 1989 Cable Royalty Distribution
Proceeding is not part of the record of this proceeding. There is no
evidence before the Judges that could give context and meaning to the
CRT's laconic summary of Mr. Lindstrom's statement. The Judges note,
however, that the CRT's earlier mention of this same testimony was less
categorical, merely stating, ``mixing meter data with diary data could
invalidly alter the percentage viewing shares . . ..'' Id. at 15291
(emphasis added).
Mr. Lindstrom did testify, however, in the instant proceeding. Mr.
Lindstrom testified on direct examination about the decision to use
meter data for 2008-09 to supplement Dr. Gray's earlier analysis. See
4/10/18 Tr. 300-03 (Lindstrom). Mr. Lindstrom raised the issue of
mixing data collection methodologies in the course of this discussion,
noting his concern regarding the mixing of diary and meter data to
measure distant viewing for the same time frame--i.e., 2008-09. See id.
at 302. In neither his direct nor his cross-examination testimony did
Mr. Lindstrom criticize Dr. Gray's use of diary and meter data in his
regression. Accordingly, IPG's counsel had the opportunity to explore
the ``mixed data'' issue when cross-examining Dr. Gray. See 37 CFR
351.10(b) (cross-examination permitted on ``matters raised on direct
examination''). Nonetheless, IPG's counsel did not conduct cross-
examination on this issue.
Further, the CRT did not--and the Judges do not--issue ``edicts,''
clear or otherwise. Even if it did, the CRT's brief statement in the
1989 Cable Royalty Distribution Proceeding would not qualify as one.
The statement is an evidentiary finding, based on testimony regarding a
specific study. Neither the testimony, nor the study is in evidence.
The testimony in this proceeding supports neither IPG's categorical
statement concerning mixing of diary and meter data, nor IPG's
application of that statement to Dr. Gray's study. The Judges reject
IPG's criticism of Dr. Gray's use of distant viewing data in this
proceeding.\28\
---------------------------------------------------------------------------
\28\ IPG also referred to a subsequent CARP decision in which
the CARP found that there were ``unanswered technical questions
regarding . . . mixing diary and meter data.'' IPG PFF ] 77. This
statement is no more an ``edict'' concerning the permissible use of
Nielsen data than the CRT's 1992 statement.
---------------------------------------------------------------------------
C. Conclusions Concerning the MPAA Methodology
The Judges find and conclude that MPAA's distribution methodology
is adequate on its face. IPG has presented no evidence or expert
analysis that could serve as a basis for rejecting MPAA's methodology
or adjusting MPAA's proposed royalty shares to account for any alleged
methodological shortcomings. The Judges award royalty shares in the
Program Suppliers category as proposed by MPAA and detailed in Table 1.
V. Distribution of Royalties in the Devotional Category
A. The SDC's Methodology
Dr. Erkan Erdem, the SDC's economic expert, devised a methodology
that estimates relative marketplace value by using Nielsen local
ratings, scaled by numbers of distant subscribers, as a proxy for
distant cable and satellite viewership. See Erdem WDT at 13. Broadly
speaking, Dr. Erdem multiplied the ratings reported in Nielsen's Report
on Devotional Programming (RODP) \29\ by the numbers of distant
subscribers to cable and satellite systems that carry the programs
reported in the RODP to obtain what he described as a ``reasonable
proxy'' for distant viewership. See id. at 13, 15. He then summed the
resulting distant viewership estimates for each of IPG's and the SDC's
programs, and allocated the royalty shares proportionally. See id. at
15. In this respect, the SDC's current methodology does not differ from
the methodology the SDC presented prior to the Order Reopening Record.
---------------------------------------------------------------------------
\29\ The RODP is a syndicated report that Nielsen produces
quarterly. It provides nationwide, annualized average ratings for
regularly scheduled Devotional programs.
---------------------------------------------------------------------------
Dr. Erdem sought to validate his reliance on local ratings in his
methodology by conducting three regression analyses ``to establish that
there is a positive, statistically significant correlation between
local and distant ratings . . ..'' Erdem WDT at 18. His initial
analysis (prior to the Order Reopening Record) relied only on February
1999 data to establish this correlation. See id. In his testimony in
the reopened proceeding, Dr. Erdem used distant viewing data for all
four sweeps periods in 1999 through 2003. He continued to find a
positive and statistically significant correlation in all three
regression analyses. See id. at 19. Dr. Erdem's analysis also showed
that ``after controlling for local ratings, distant ratings appear to
be consistent and stable over 1999-2003.'' Id. at 20.
During each of the years covered by this proceeding, Nielsen
produced RODPs for each of four quarterly ``sweeps'' periods. When he
initially computed royalty shares, Dr. Erdem only had RODPs for one
month in each year from 1999 through 2003.\30\ See Order Reopening
Record at 5. The SDC obtained copies of page R-7 (the summary page)
from an additional eight RODPs (May, July, and November 1999; May and
July 2000; November 2001; July 2002; and May 2003) (the Supplemental
Nielsen RODPs). Erdem WDT at 17. Dr. Erdem ``exclude[d] the
Supplemental Nielsen RODPs from [his] baseline royalty share
calculations,'' but used them in four analyses to demonstrate the
validity and reliability of those baseline calculations. Id.
---------------------------------------------------------------------------
\30\ This shortcoming only affected the SDC's proposed shares of
satellite royalties, since the cable portion of this proceeding
covers only 2004-09. Dr. Erdem used RODPs for each of the four
sweeps periods in 2004-09 in computing cable and satellite royalty
shares for those years. See Erdem WDT at 4, 7 n.8, 21.
---------------------------------------------------------------------------
First, Dr. Erdem ``analyzed the consistency of ratings for claimed
programs over all Nielsen sweep months over 2004-2009'' (i.e., the
years for which he had complete sets of RODPs) by calculating how often
a claimed program that is rated in February is also rated in the
remaining three sweeps months. Id. at 20. He found that ``if a program
was rated in February, it was also rated in all three remaining sweep
months for approximately 91 percent of the time implying that it is
highly likely that a program is rated for the rest of the year if it is
rated in February.'' Id. Dr. Erdem conducted the same analysis
including 1999 (using the Supplemental Nielsen RODPs for the remaining
sweep periods for that year) and he obtained ``almost identical''
results (91.84% including 1999 versus 90.70% excluding 1999). Id. at
20, 31 Ex. 4.
Second, Dr. Erdem ``calculated the change in the ratings between
February and every other sweep month for each claimed program'' in
2004-2009. Id. at 21 (footnote omitted). He found that ratings for any
given program were ``highly stable within a year,'' rarely
[[Page 16046]]
differing by more than 0.1 percentage points. Id. When Dr. Erdem
included 1999 in this analysis, he found ``the change was at most 0.1
percentage points for 96.4 percent of the time (calculated over 278
comparisons).'' Id.
Third, Dr. Erdem ``checked the impact of using only February
ratings data on [his] royalty estimates even for years when [he had]
access to four reports,'' reasoning that ``[i]f the impact is small,
then this is further evidence that February is representative of the
whole year.'' Id. He found that the largest changes in the SDC's
computed royalty shares were 2.8 percentage points for cable and 0.3
percentage points for satellite. Id.
Finally, Dr. Erdem computed royalty shares for 1999-2003 using all
of the Supplemental Nielsen RODPs. He found ``the impact of using a
more comprehensive data has almost no impact (when rounded to 1 decimal
point) on the royalty shares.''\31\ Id.
---------------------------------------------------------------------------
\31\ This had no effect on the cable royalty shares because Dr.
Erdem already had RODPs for all sweeps months in 2004-09. See supra,
note 32.
---------------------------------------------------------------------------
B. IPG's Criticisms
1. Dr. Erdem had no ``Foundational Familiarity'' with Data Used to
Bolster Methodology
IPG acknowledged that the SDC obtained additional data that Dr.
Erdem used to bolster the analysis that he presented before the Judges
reopened the record. See IPG PFF ] 83. IPG argued, however, that Dr.
Erdem was not sufficiently familiar with one portion of the additional
data: distant household viewing hours (HHVH) data for 2000-2003 that
Nielsen prepared for MPAA and that the SDC received through discovery.
Id. ] 85. IPG supported this conclusion only with the fact that Dr.
Erdem received the data in discovery, instead of developing, designing
or commissioning it himself. Id.
IPG's criticism is unsupported by expert analysis or record
evidence. Therefore, the Judges reject it.
2. Dr. Erdem Relied on National Average Ratings Data instead of
Station-by-Station Local Ratings
IPG noted that the SDC methodology measures distant viewership
using national average ratings set forth on the R-7 summary page of
RODPs. IPG asserted, ``there is no way to determine if a higher rating
was derived from a station with de minimus [sic] distant subscribers or
extraordinarily high distant subscribers.'' IPG PFF ]] 89-90. IPG
contended that the RODPs include local ratings on a station-by-station
basis but that Dr. Erdem failed to use that information in the SDC
methodology. Id. ] 90.
In this proceeding, the Judges must determine royalty shares on an
annualized basis. The two methodologies presented by MPAA and the SDC
demonstrate that there are different ways of measuring those shares.
MPAA starts with disaggregated viewership measurements and aggregates
them up to royalty shares. The SDC begins with data that Nielsen has
already aggregated and averaged on an annualized basis. IPG, in spite
of its criticism of the MPAA methodology, appears to criticize the SDC
for not using the same general approach.
In the absence of any expert analysis supporting IPG's assertion,
the Judges find no credible support in the record to indicate that Dr.
Erdem's choice of a starting place is deficient. Dr. Erdem reasonably
explained and justified his methodological choices as part of his
expert testimony. Therefore, the Judges accept Dr. Erdem's testimony as
authoritative. Criticism by IPG's counsel is not a substitute for
expert rebuttal testimony. The Judges reject this criticism of the
SDC's methodology because it is unsupported by expert analysis or
record evidence.
3. The SDC Relied on Insufficient Data to Establish Correlation between
Local Ratings and Distant Viewership
IPG argued that Dr. Erdem based his conclusion that there is a
positive and statistically significant correlation between local
ratings and distant viewership on a quantum of data that the Judges
previously found to be insufficient in the Order Reopening Record. See
IPG PFF ] 93. Specifically, IPG faulted Dr. Erdem for using only 1999-
2003 distant HHVH data to establish the existence of a correlation
between local ratings and distant viewing. Id. ]] 83-84, 93.\32\ IPG
noted that the Judges rejected MPAA's original methodology in this
proceeding because Dr. Gray relied on distant viewership data from
2000-2003 to establish a mathematical relationship between local
ratings and distant viewing that he used to predict levels of distant
viewing for the entire period covered by the proceeding. See id.
93; Order Reopening Record at 3.
---------------------------------------------------------------------------
\32\ Dr. Erdem and Mr. Sanders testified that it was not
possible for the SDC to obtain distant viewing data for 2004-2009.
See Erdem WDT at 22; Sanders WDT at 14; 4/9/18 Tr. 62, 122 (Erdem);
4/9/18 Tr. 239 (Sanders) (``there was a limitation on that data and
I just don't recall exactly what it was''). IPG argued that the SDC
could have acquired metered distant viewing data as MPAA did. See
IPG PFF ] 84; 4/9/18 Tr. 238-39 (IPG Counsel). Assuming for the sake
of argument that the SDC could have acquired metered distant viewing
data, IPG presents no evidence that the SDC should have acquired
those data. The record does not even suggest that those data would
have changed Dr. Erdem's conclusions materially to IPG's benefit.
---------------------------------------------------------------------------
The Judges did find the original methodologies and data that the
parties presented in this proceeding to be substantively insufficient.
The Judges required the parties to present additional data ``or
competent persuasive evidence that such data are not needed to produce
reliable results . . ..'' Id. at 5; see id. at 4. MPAA and the SDC have
done both. Specifically, both MPAA and the SDC have now presented a
quantum of persuasive evidence and analysis demonstrating a positive
correlation between local ratings and distant viewing that is
consistent over time. See Erdem WDT at 19-20; 4/9/18 Tr. 63-65 (Erdem);
cf. Gray WDT ]] 13-14 (additional two years of contemporary distant
viewing data produced results ``consistent with'' earlier results
without those data). That consistency provides the Judges with adequate
assurance regarding the reliability of the viewing data in the record
to support a consistent positive correlation between local ratings and
distant viewing data over the years at issue in this proceeding,
particularly when computing the royalty shares directly from local
ratings data as in Dr. Erdem's methodology. The Judges, therefore,
reject IPG's argument that Dr. Erdem used insufficient distant viewing
data.
4. Dr. Erdem ``Misrepresented'' a Positive Correlation between Local
Ratings and Distant Viewership
IPG stated, ``[f]or the first time, in his oral testimony [Dr.]
Erdem revealed that his asserted local ratings/distant viewership
correlation is not between broadcasts for which he has both local
ratings data and distant viewership data, but annual averages of
broadcasts for programs.'' IPG PFF ] 97.\33\ IPG then argued that Dr.
Erdem's analysis does not support a conclusion that there is a positive
correlation between local ratings and distant viewing, because there is
no way of knowing whether the local ratings and distant viewing
measurements relate to the same broadcasts. See id. ]] 98-99.
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\33\ The Judges emphatically reject IPG's implication that Dr.
Erdem ``misrepresented'' his results or tried to conceal the nature
of the data on which he relied. Dr. Erdem was clear, both in his
written and oral testimony, that he relied on the average nationwide
ratings presented in Nielsen's RODPs. See, e.g., Erdem WDT at 13
(``The average ratings provided in the Nielsen Reports on Devotional
Programming . . . constitute the primary data source to allocate
royalties.''); 4/9/18 Tr. 118-119 (Erdem).
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[[Page 16047]]
The Judges regard this criticism as a particular instance of IPG's
more general criticism of Dr. Erdem's use of annualized national
average ratings in his methodology. The Judges reject this criticism
for the same reasons already articulated in this Determination. See
infra, section V.B.2.
5. Dr. Erdem failed to Account for Number of Broadcasts of
Retransmitted Programs
IPG stated,
[t]here is no evidence or testimony to demonstrate that [Dr.]
Erdem accounted for the number of broadcasts of a program on a
station when calculating ``the number of subscribers for channels''
on which the program is broadcast. That is, no evidence or testimony
demonstrates that [Dr.] Erdem valued a program differently if it had
been retransmitted on a station 100 times versus 1,000 times.
IPG PFF ] 102.
Dr. Erdem's methodology multiplies ratings by numbers of distant
subscribers to derive a measurement of distant viewing. Volume of
programming, whether measured by numbers of minutes or numbers of
broadcasts, is not a part of Dr. Erdem's methodology, and Dr. Erdem
testified that volume is not a reliable indicium of value. See Erdem
WDT at 9. According to Dr. Erdem, ``a determination of relative market
value should not be based on total hours or total number of programs''
because ```quality' of the content and the time slot when a show is
broadcast . . . are significant drivers of `demand''' and thus relative
market value. Id.
The Judges accept Dr. Erdem's assessment and no witness testified
otherwise. Specifically, no witness testified that the failure to
include volume measurements renders a viewership-based methodology
unreliable.
IPG's criticism on this issue is unsupported by any expert analysis
or record evidence. The Judges, therefore, reject it.
6. The RODP does not Measure all Compensable Devotional Programming
IPG contended, and the SDC confirmed, that the Nielsen RODPs do not
report ratings for all of the Devotional programs at issue in this
proceeding. See IPG PFF ] 103; Erdem WDT at 7, 13; Sanders WDT at 20-
21. Under Nielsen's reportability standards, the RODP only includes
programs that, inter alia, are ``telecast in at least five NSI markets
on reportable commercial TV stations and scheduled at the same time and
day in at least two of the four [sweeps] weeks.'' \34\ Erdem WDT at 6
(quoting Nielsen RODP for February 2004 at pp. A-B). IPG argued that,
as a result, the SDC methodology omits ``significant IPG-represented
programming,'' including programs carried on WGNA.\35\ IPG PFF ] 103
(citing Erdem WDT at 16 n.25).
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\34\ NSI stands for ``Nielsen Station Index,'' and is Nielsen's
local ratings product.
\35\ WGNA, the national feed for WGN Chicago, is the most widely
retransmitted television station in the U.S., reaching over 32
million distant cable subscribers and more than 9 million distant
satellite subscribers during each year covered by this proceeding.
See Gray WDT at 20, 36-49 (Appendices C-1 and C-2).
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Dr. Erdem testified that it was appropriate to exclude non-
regularly scheduled programs from an analysis of relative market value
because ``from an Operator's perspective, with rare exception, programs
that are not scheduled on a regular basis are less likely to drive
subscriptions than regularly scheduled programs (such as the ones
captured by the Nielsen reports).'' Erdem WDT at 9 n.14. John Sanders,
the SDC's expert on media valuation, expressed a similar opinion:
To attract a subscriber, I would argue there has to be some
level of predictability to the program. So if you know that a
program is going to be aired five days a week, that's something that
someone could subscribe to with some level of certainty.
If it is something that may or may not be aired several times a
year, as a special, there is no way of foreseeing that.
4/9/18 Tr. 240 (Sanders). Dr. Erdem also noted that the omitted IPG
programs that aired on WGNA had no effect on IPG's share of cable
programming in this proceeding because the excluded WGNA programming
that IPG claimed comprised only a few irregularly scheduled telecasts
from 2000-2003. See Erdem WDT at 16 & n.25.\36\
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\36\ By contrast, one SDC program was aired regularly on WGNA in
1999-2001. See Erdem WDT at 16 n.25. Dr. Erdem did not include any
WGNA programming in his calculations of royalty shares. Since the
SDC claimed the only regularly scheduled program on WGNA during this
time period, this methodological decision had the effect of reducing
the SDC's royalty share. See id.
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The Judges accept the unrebutted testimony of the SDC's experts
that the omitted programs were significantly less valuable than the
programs that were included in the RODP. The Judges also accept Dr.
Erdem's unrebutted testimony that exclusion of non-regularly scheduled
programs was an appropriate methodological choice.\37\ With respect to
the exclusion of WGNA programming, the Judges accept Dr. Erdem's
conclusion that the exclusion had no impact on IPG's shares of cable
royalties. Moreover, with respect to satellite, the exclusion of WGNA
programming from Dr. Erdem's methodology was intended to avoid giving
an unfair advantage to the SDC and did not unfairly decrease IPG's
satellite royalty shares for the years at issue given the irregularity
of the broadcasts that IPG claims.
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\37\ Mr. Sanders testified that it might be necessary to adjust
royalty shares based on RODP data to reflect audiences attributable
to programs that do not meet Nielsen's reporting criteria. Sanders
WDT at 21. However, in the absence of any evidence of the value, if
any, of the omitted programs, the Judges are unable to determine
whether (and, if so, to what extent) they should adjust the SDC's
proposed royalty shares.
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7. Dr. Erdem Relied on RODP Data with Excessive ``Zero Viewing''
As it did with MPAA's methodology, IPG attacked the SDC's
methodology based on the supposed levels of ``zero viewing'' in the
underlying Nielsen data. IPG argued that the 93-97 Librarian Order,
therefore, precludes the Judges from accepting the SDC's methodology.
See IPG PFF ]] 108-116.
None of the RODPs that Dr. Erdem used in the SDC methodology
contained zero viewing measurements. Nielsen credits all programs that
meet its reportability standards with either a numerical rating or the
designation ``LT,'' meaning that the rating is too low to report (less
than 0.1% of households). For programs receiving a ``LT'' rating, Dr.
Erdem computed a numeric rating from the number of households viewing
the program and the number of households sampled--essentially the same
computation that Nielsen performs for higher-rated programs--and used
that value in his analysis. See Erdem WDT, at 14-15 & n.22; 4/9/18 Tr.
113 (Erdem).
Nevertheless, IPG argued that the SDC's methodology suffers from a
zero viewing problem. IPG contended that the SDC's methodology, by
relying on sweeps data (which cover only 16 weeks a year at most),
``automatically'' has levels of zero viewing ranging from 69% to more
than 84%. See IPG PFF ] 109. IPG reached this conclusion by imputing
zero viewing values for the weeks of the year not covered by available
sweeps data. IPG also endeavored to show that the Nielsen RODP data on
which the SDC rely have high levels of zero viewing on a station-by-
station basis. See id. ] 110.
IPG's effort to demonstrate a zero viewing problem with the Nielsen
RODP data employed by the SDC is not supported by record evidence.
IPG's zero viewing estimates appear for the first time in IPG's
proposed findings, without citation to the record. See IPG
[[Page 16048]]
PFF ] 109. IPG again improperly imputed zero values to periods not
covered by the data to achieve this result.\38\
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\38\ See supra, section IV.B.5.
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IPG failed to demonstrate the existence of any significant
incidence of zero viewing. The Judges, therefore, need not evaluate
whether the SDC have ``demonstrate[d] the causes for the large amounts
of zero viewing and explain[ed] in detail the effect of the zero
viewing on the reliability of the results'' of its methodology. 93-97
Librarian Order, 66 FR at 66450.
8. Dr. Erdem Relied on Cable Data to Establish Viewership Correlation
for Satellite Transmissions
IPG faulted Dr. Erdem for determining a correlation between local
and distant ratings by using HHVH data that combined distant viewing by
cable and satellite. According to IPG,
[Dr.] Erdem testified that the MPAA distant HHVH figures that he
utilized were ``an average'' of distant cable and satellite HHVH
Figures. No evidence or testimony exists as to why [Dr.] Erdem would
blend the distant cable and satellite HHVH figures when attempting
to calculate and impute a distant satellite rating.
IPG PFF ] 107 (citations omitted).
Dr. Erdem computed royalty shares based on local ratings. He used
HHVH data to demonstrate that his reliance on local ratings was
reasonable, by showing that there is a positive and statistically
significant correlation between local ratings and distant viewing. Dr.
Erdem testified that that stage of the analysis ``is not specifically
for cable or satellite.'' 4/9/18 Tr. 108 (Erdem). In light of Dr.
Erdem's description of the particular, limited use of the HHVH data,
and in the absence of any contrary evidence or expert analysis, the
Judges find Dr. Erdem's use of the HHVH data to be reasonable.
C. Conclusions Concerning the SDC Methodology
The Judges find and conclude that the SDC's distribution
methodology is facially adequate and an appropriate means in the
current proceeding based on the record evidence for measuring relative
market values of Devotional programming for the years at issue. IPG has
presented no evidence or expert analysis that could serve as a basis
for rejecting the SDC's methodology or adjusting the SDC's proposed
royalty shares to account for any alleged shortcomings in that
methodology. The Judges award royalty shares in the Devotional category
as proposed by the SDC and detailed in Table 2.
VI. Conclusion
The Judges adopt the MPAA and SDC methodologies and proposed
percentages for final distribution of satellite royalties deposited for
the years 1999 through 2009 and cable royalties deposited for the years
2004-2009 and allocated to the Program Suppliers and Devotional
categories, respectively. The Judges therefore ORDER distribution of
funds in the Program Suppliers category as set forth in Table 1 and in
the Devotional category as set forth in Table 2.
The Register of Copyrights may review the Judges' Determination for
legal error in resolving a material issue of substantive copyright law.
The Librarian shall cause the Judges' Determination, and any correction
thereto by the Register, to be published in the Federal Register no
later than the conclusion of the 60-day review period. When this
Determination becomes final and non-appealable, either party may or the
parties jointly may file a motion for distribution of the funds. The
Judges will then order distribution in accordance with this Final
Determination.
February 13, 2019.
So ordered.
Suzanne M. Barnett,
Chief United States Copyright Royalty Judge.
David R. Strickler
United States Copyright Royalty Judge.
Jesse M. Feder
United States Copyright Royalty Judge.
The Register of Copyrights closed her review of this
Determination on March 29, 2019, with no finding of legal error.
Dated: April 1, 2019.
Jesse M. Feder,
Chief United States Copyright Royalty Judge.
Approved by:
Carla B. Hayden,
Librarian of Congress.
[FR Doc. 2019-07695 Filed 4-16-19; 8:45 am]
BILLING CODE 1410-72-P
