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Electronically Filed Docket: 19-CRB-0005-WR (2021-2025) Filing Date: 09/26/2019 10:44:23 PM EDT Before the UNITED STATES COPYRIGHT ROYALTY JUDGES Washington, D.C. ) In the Matter of ) ) DETERMINATION OF RATES AND TERMS ) Docket No. 2011-1 FOR PREEXISTING SUBSCRIPTION AND ) CRB PSS/Satellite II SATELLITE DIGITAL AUDIO RADIO ) SERVICES ) WRITTEN DIRECT TESTIMONY OF STEVEN BLATTER (On behalf of Sirius XM Radio Inc.) I. Introduction 1. I am Senior Vice President and General Manager of Music Programming at Sirius XM Radio Inc. (“Sirius XM”). I have worked professionally in radio, as well as in marketing, promotion and online for over 25 years. In terrestrial radio, I was responsible for the programming of local stations in New York and Los Angeles. My prior experience also includes the creation and oversight of content syndicated to hundreds of local radio stations across North America. Prior to the merger of Sirius Satellite Radio Inc. (“Sirius”) and XM Satellite Radio Holdings, Inc. (“XM”), I was at Sirius for approximately five years. 2. I testified on behalf of Sirius in the prior proceeding before the Copyright Royalty Board (“CRB”) to set rates for the period from 2007 through 2012 (“Satellite I”). In my prior written testimony, which is incorporated herein (and which has been designated for inclusion in this proceeding according to the governing regulations), I covered three key areas: (1) the range and coverage of the Sirius music channels; (2) how each music channel is developed and programmed and Sirius’ creative contribution to that process; and (3) the promotional benefits of radio, including satellite radio. To the extent that there have been any material changes since the last proceeding before the CRB, I will update each of these categories in my testimony here. In addition, I will provide testimony describing how airplay on Sirius XM channels has a direct impact on the sale of recorded music. The correlation between Sirius XM airplay and music sales – which has been repeatedly acknowledged to me and my staff by record company executives, artists, and their managers – is substantially greater than it was when I testified in the Satellite I proceeding five years ago. II. Description Of Sirius XM’s Music Programming And Current Music Channels A. Sirius XM’s Services And Music Programming Structure 3. As is described in more detail in the accompanying testimony of James Meyer, even after the merger of Sirius and XM, Sirius XM maintains two separate distribution platforms. For the most part, the content offerings on the two services, including the music channels, are almost identical. Although there remain “Sirius” and “XM” platforms, by illustration, a subscriber listening to the 80s on 8 channel on the Sirius platform hears the same channel as a subscriber listening to the 80s on 8 channel on the XM platform. 4. I am responsible for all of Sirius XM’s music programming operations and I have a significant role in other areas related to music programming, such as artist and talent relations. I currently supervise approximately 285 full and part-time employees, including six Music Programming heads, two Programming Operations supervisors, and one head of Production. Each Music Programming head is responsible for a genre or two of music, including Jazz, Standards, Latin, Pop, Rock, Urban/Hip Hop, and Country, and supervises the programming personnel responsible for Sirius XM’s various music channels within each genre. 5. The Sirius satellite platform offers 71 full-time music stations without commercials (64 are produced by Sirius XM in the United States; the other seven are produced 2 by our Canadian affiliate).1 The XM satellite platform offers 71 full-time music stations without commercials (67 are produced by Sirius XM in the United States; the other four are produced by our Canadian affiliate).2 The most current versions of the channel line-ups are attached as Sirius XM Direct Exhibit (“SXM Dir. Ex.”) 1. These line-ups do not include limited-engagement channels, which are offered for shorter periods of time and which I discuss below in paragraphs 56-58. 6. As can be seen on the channel line-ups, most of the music stations continue to be era- or genre-based. For example, our thirteen pop stations (fourteen on XM) include Sirius XM Hits 1 (Top 40 hits), ’40s on 4, ’50s on 5, ’60s on 6, and so on. Our 22 rock channels include a wide mix of classic rock, alternative and indie rock, hard rock and heavy metal, and several more mellow, “adult” rock formats. Each of the Hip-Hop/R&B, Dance, Country, Christian, Jazz/Standards, and Classical categories likewise offers between three and seven stations covering several listening options – including a variety of niche channels (like Bluegrass, Reggae and Show Tunes) that cannot be found on terrestrial radio. 7. As I described in my Satellite I testimony, a number of our music channels are devoted almost exclusively to music recorded before 1972 (and thus, as I understand, not subject to the statutory license at issue in this proceeding). These include ’40s on 4, ’50s on 5, ’60s on 6, and Elvis Radio. Other music stations on our services make substantial (though not exclusive) use of pre-1972 recordings, including Classic Vinyl, the Grateful Dead Channel, Underground 1 Sirius XM recently introduced sixteen additional full-time music stations that are available to subscribers that purchase the latest Sirius XM radio and one of our new “SiriusXM” branded packages which come with a suite of 20+ “Xtra” channels. The required radio includes the new Sirius XM Edge and Lynx products. Over time, more and more of our subscribers will be able to access these stations. 2 There are slight differences between the full-time music channels of XM and Sirius. For example, there are a few music channels offered on XM that are not available through Sirius because the XM platform is capable of hosting a few more channels than the Sirius platform, and there are a few Clear Channel- programmed radio stations available on XM that are not available on Sirius. 3 Garage, Siriusly Sinatra, Radio Margaritaville, On Broadway, The Bridge, ’70s on 7, and Soul Town. B. Development Of Channel Style And Identity 8. Sirius XM goes to great lengths to create an identity for each of its music channels. In many cases, our distinctive channel identities have been crafted over the course of eight or ten years. During this time, we have strategically built true national “brands” for each of these channels, as follows: While the era or genre will define the universe of music upon which the programmers will draw, the channel style and personality will shape the overall energy level of the channel, for example, whether it is edgy and energetic or conservative and mellow. The channel identity also helps determine the appropriate on-air hosts for the channel – and is in turn shaped by the personalities of those hosts. Each channel has a concise name that captures its format and identity such as “Octane,” (uptempo hard rock) or “BPM” (dance). Moreover, a distinctive channel logo is associated with the channel name so as to permit instant visual identification in our marketing materials and on receivers. Further, the name and logo are supported by additional positioning or attitudinal statements that are used to reinforce the brand image of the channel. For example, the slogan of our flagship Top 40 Station, Sirius XM Hits 1, is “The Sound of Generation Now.” Sirius XM music channels also typically include production elements or interstitial audio pieces heard between the songs that further develop the image and personality of the channel for the intended audience. Each music channel has its own station voice and slogan, and some even employ custom jingles that help enhance the mood and flow of the channel. Interactive contests and promotions are aired on the appropriate channels to further build listener loyalty and create an even stronger bond with the audience. The identity of a channel guides the types of special programming that may be created and scheduled. Artists often participate in interviews and perform live on certain rock channels, while on our pop channels artists will guest-host special programs like countdown shows and new music showcases. 9. All of these factors – which go beyond simply playing music – work together to enhance the personality of each station, make the listening experience more engaging to the 4 target audience, and create meaningful and satisfactory channel options for the subscriber. As a result of Sirius XM’s success in building these national channel brands, our listeners develop valuable relationships with their favorite Sirius XM channels. C. The Music Selection Process For Sirius XM Music Channels 10. Our stations are far from mere “jukeboxes” of songs from a given era or genre. Rather, each channel has a clearly defined style and identity that shapes the programming and presentation of the channel in multiple ways. As I mentioned in my Satellite I testimony (at paragraph 25 through 30), the creation and maintenance of a particular music channel requires a great deal of planning and resources. Selecting, sequencing and packaging music is a difficult and ongoing task carried out by our music programming specialists. It is not enough just to rotate down an alphabetical or random list of pieces that are within the universe defined by a channel’s format. Instead, trained music programming experts who are deeply familiar with the music bring to bear both scientific and artistic judgment to curate an optimal musical flow and mood on a song-by-song basis. Each Music Programmer also utilizes software called MusicMaster that helps in maximizing the rotation and sequencing of songs for each music channel.