Before the COPYRIGHT ROYALTY JUDGES Washington, D.C. ) In the Matter of ) ) Distribution of the ) Docket No. 2012-6 CRB CD 2004-2009 ) (Phase II) 2004, 2005, 2006, 2007, 2008, and ) 2009 Cable Royalty Funds ) ) WRITTEN DIRECT STATEMENT OF THE MPAA-REPRESENTED PROGRAM SUPPLIERS VOLUME I OF II WRITTEN TESTIMONY AND EXHIBITS Gregory O. Olaniran D.C. Bar No. 455784 Lucy Holmes Plovnick D.C. Bar No. 488752 Kimberly P. Nguyen D.C. Bar No. 996237 Naomi Straus D.C. Bar No. 1011753 MITCHELL SILBERBERG & KNUPP LLP 1818 N Street, NW, 8th Floor Washington, D.C. 20036 Telephone: (202) 355-7917 Facsimile: (202) 355-7887 [email protected] [email protected] Attorneys for MPAA-Represented May9,2014 Program Suppliers Before the COPYRIGHT ROYALTY JUDGES Washington, D.C. ) In the Matter of ) ) Distribution of the ) Docket No. 2012-6 CRB CD 2004-2009 ) (Phase II) 2004, 2005, 2006, 2007, 2008, and ) 2009 Cable Royalty Funds ) ) WRITTEN DIRECT STATEMENT OF MPAA-REPRESENTED PROGRAM SUPPLIERS The Motion Picture Association of America, Inc. ("MPAA"), on behalf of its member companies and other producers and/or distributors of syndicated movies, series, specials, and non-team sports broadcast by television stations who have agreed to representation by MPAA ("MPAA-represented Program Suppliers"),1 in accordance with the September 23, 2013 Order of the Copyright Royalty Judges ("Judges"), hereby submit their Written Direct Statement in the captioned matter. MPAA submits this introductory memorandum in order to summarize the evidence it intends to present in this proceeding and to state the Phase II Claims of MPAA-represented Program Suppliers for the 2004, 2005, 2006, 2007, 2008, and 2009 cable royalty funds ("2004-2009 Cable Royalties"). ~ A listing of MPAA-represented Program Suppliers is being submitted as Appendix A to the testimony of Jane Saunders. I. INTRODUCTION The Phase I portion of the distribution of the 2004-2009 Cable Royalties was resolved by litigation as to the 2004 and 2005 cable royalty funds, followed by a confidential settlement among the Phase I Parties.2 Following resolution of the Phase I disputes, MPAA, on behalf of its represented Program Suppliers claimants, endeavored to resolve all disputes among all Program Suppliers in order to avoid the instant proceeding. Accordingly, MPAA engaged all of the parties who had identified themselves as having claims within the Program Suppliers category in settlement discussions. Before the Judges commenced this proceeding, MPAA reached confidential Phase II settlements with the National Association of Broadcasters, Home Shopping Network, and USA/IAC,3 all of whom, but for the settlements, would be participating in this proceeding. As a result of these settlements, all three parties relinquished any further claims to the 2004-2009 Cable Royalties. On January 2, 2014, MPAA notified the Judges that despite MPAA’s good faith efforts to reach settlements, Phase II controversies remained in the Program Suppliers category among MPAA, David Powell, and Independent Producers Group ("IPG"). On April 18, 2014, the Judges dismissed Mr. Powell’s Petition to Participate in this proceeding. Accordingly, as of the date of this See 75 Fed. Reg. 57063, 57079 (Sept. 17, 2010); Order on Motions for Distribution, Docket Nos. 2007-3 CRB CD 2004-05; 20084 CRB CD 2006; 2009-6 CRB CD 2007; 2010-6 CRB CD 2008; 2011-7 CRB CD 2009; 2010-2 CRB SD 2004-07; 2010-7 CRB SD 2008; 2011-8 CRB SD 2009 (February 17, 2012). 3 USA Broadcasting Productions, Inc., InterActive Corp. (formerly USA Interactive) and Studios USA are collectively referred to herein as "USA!IAC." 2 filing, the only unresolved Phase II controversy in the Program Suppliers category as to the 2004-2009 Cable Royalties is between MPAA and IPG. In each of the past Phase II proceedings involving the Program Suppliers category, MPAA-represented claimants received the overwhelmingly largest share of the royalties attributable to the Program Suppliers category.4 Most of these Phase II proceedings involved multiple Program Suppliers claimants. The awards to MPAA-represented claimants were well-justified: first, MPAA-represented claimants outnumbered other claimants within the Program Suppliers category; second, MPAA-represented claimants owned more titles than any other Program Suppliers claimant; third, MPAA-represented claimants’ programs constituted, by farl the largest volume of programs (i.e., minutes of program air time) available to subscribers; and fourth, MPAA-represented claimants’ programs had more viewing than those of any other claimants. Moreover, MPAA- represented claimants’ programs, which cover the entire spectrum of program genres, belonged to small mom-and-pops as well as to large motion picture studios who supply the predominant share of programs on television. The foregoing elements also characterize the claims of MPAA-represented claimants for this Phase II proceeding. For the purpose of the allocation of the 2004--2009 Cable Royalties, MPAA- represented Program Suppliers continue to believe that the relative market value standard 4 MPAA Phase II awards by cable royalty year were 96.3% in 1979 (49 Fed. Reg. 20048 (May 11, 1984)), 96.9% in 1980 (48 Fed. Reg. 9552 (Mar. 7, 1983)), 96.9% in 1981 (49 Fed. Reg. 7845 (Mar. 2, 1984)), 97.5% in 1982 (49 Fed. Reg. 37653 (Sept. 24, 1984)), 98.2% in 1983 (51 Fed. Reg. 12792 (Apr. 15, 1986)), 98.475% in 1984 (52 Fed. Reg. 8408 (Mar. 17, 1987)), 99.175% in 1985 (53 Fed. Reg. 7132 (Mar. 4, 1988)), 98.5% in 1986 (54 Fed. Reg. 16148 (Apr. 21, 1989)), 99.788% in 1997 (66 Fed. Reg. 66433 (Dec. 26, 2001), subsequently vacated, 69 Fed. Reg. 23821 (Apr. 30, 2004)); 98.84% in 2000, 99.69% in 2001, 99.64% in 2002, and 99.77% in 2003 (78 Fed. Reg. 64984 (Oct. 30, 2013)). applies. To that end, MPAA-represented Program Suppliers will offer a simple, direct and statistically sound methodological approach to the allocation of the royalties between MPAA’s and IPG’s claimants. That approach presumes, first, that the programs within the Program Suppliers category are generally homogeneous and, second, that such homogeneity equalizes the cost factors associated with retransmitting the various types of programs within the Program Suppliers category. As a result, MPAA submits that within the Program Suppliers category, the best three measures of market value are (1) volume of programming available to distant subscribers, (2) viewing of such programs, and (3) the effect, if any, of such programs on subscriber growth. Taking these factors into account, MPAA-represented claimants should receive between 99.90% and 99.99% of the 2004-2009 Cable Royalties. II. DIRECT TESTIMONY SUBMITTED BY MPAA-REPRESENTED PROGRAM SUPPLIERS Program Suppliers will present the following witnesses, each of whom will sponsor his or her testimony and accompanying appendices and/or attachments: Jane V. Saunders serves as Senior Vice-President, Rights Management Policy and Relations ("RPMR") at MPAA. Ms. Saunders oversees MPAA’s RMPR department, which is responsible for copyright royalty policy as it relates to collective and statutory rights management both in the United States and worldwide on behalf of MPAA’s members and other producers and distributors of protected works. Ms. Saunders will provide information regarding the MPAA-represented Program Suppliers’ claim in this proceeding, including the claimants MPAA represents and the titles that comprise 4 MPAA’s Phase II claim. Further, Ms. Saunders will describe the process MPAA’s RMPR department undertook to confirm that all of MPAA’s represented claimants are eligible for the 2004-2009 Cable Royalties. Ms. Saunders will also describe her international experience in negotiating and collecting retransmission royalties on behalf of MPAA members and others, and the important role that viewing information plays in international royalty allocations and distributions. Jonda K. Martin is the President and Owner of Cable Data Corporation ("CDC"), which collects and computerizes the data contained in the cable operator statements of account ("SOAs") on file with the Copyright Office. Ms. Martin will provide an overview of CDC’s operations and data collection methodologies. She will also describe data reports that CDC generated and provided to MPAA and Dr. Jeffrey Gray, MPAA’s economist witness, in connection with the Nielsen data presented by MPAA in this proceeding. Paul B. Lindstrom is a Senior Vice President with Nielsen, where he is in charge of research design and analysis for the Nielsen Strategic Media Research Group. Mr. Lindstrom will provide an overview of Nielsen’s audience measurement methodology. Mr. Lindstrom will also provide information about the Nielsen viewing data that MPAA is relying on in this proceeding, including his role in designing the custom Nielsen Studies that MPAA commissioned for 2000-2003. Jeffrey S. Gray, Ph.D. is the founder and President of Analytics Research Group, LLC. Relying on certain basic economic principles, Dr. Gray employs three different forms of Nielsen data, multiple other data sources, and regression analysis to calculate the level of distant viewing to a random sample of stations carrying MPAA claimed works for each royalty year at issue in this proceeding. Dr. Gray’s economic analyses produce the relative market value of MPAA- and IPG-claimed works for each of the 2004-2009 cable royalty years based on multiple factors, including volume, viewership, and distant subscribers. III. DESIGNATED PRIOR TESTIMONY Pursuant to 37 C.F.R. § 351.4(b)(2), Program Suppliers hereby designate for incorporation in their Written Direct Statement the following witnesses’ testimonies from the 2000-2003 Cable Phase II Distribution Proceeding, Docket No. 2008-2 CRB CD 2000-2003 (Phase II) (copies of which are included in Volume II of MPAA-represented Program Suppliers’ Written Direct Statement): WITNESS RECORD DESIGNATION Marsha E. Kessler, former Vice-President, Direct Testimony and Exhibits (filed May Retransmission Royalty Distribution, 30, 2012).