Electronically Filed Docket: 14-CRB-0010-CD/SD (2010-2013) Filing Date: 12/29/2017 03:41:40 PM EST Before the COPYRIGHT ROYALTY JUDGES Washington, D.C. In re DISTRIBUTION OF CABLE ROYALTY FUNDS CONSOLIDATED DOCKET NO. 14-CRB-0010-CD/SD In re (2010-13) DISTRIBUTION OF SATELLITE ROYALTY FUNDS WRITTEN DIRECT STATEMENT REGARDING DISTRIBUTION METHODOLOGIES OF THE MPAA-REPRESENTED PROGRAM SUPPLIERS 2010-2013 SATELLITE ROYALTY YEARS VOLUME I OF II WRITTEN TESTIMONY AND EXHIBITS Gregory O. Olaniran D.C. Bar No. 455784 Lucy Holmes Plovnick D.C. Bar No. 488752 Alesha M. Dominique D.C. Bar No. 990311 Mitchell Silberberg & Knupp LLP 1818 N Street NW, 8th Floor Washington, DC 20036 (202) 355-7917 (Telephone) (202) 355-7887 (Facsimile) [email protected] [email protected] [email protected] Attorneys for MPAA-Represented Program Suppliers December 29, 2017 Before the COPYRIGHT ROYALTY JUDGES Washington, D.C. In re DISTRIBUTION OF CABLE ROYALTY FUNDS CONSOLIDATED DOCKET NO. 14-CRB-0010-CD/SD In re (2010-13) DISTRIBUTION OF SATELLITE ROYALTY FUNDS WRITTEN DIRECT STATEMENT REGARDING DISTRIBUTION METHODOLOGIES OF MPAA-REPRESENTED PROGRAM SUPPLIERS FOR 2010-2013 SATELLITE ROYALTY YEARS The Motion Picture Association of America, Inc. (“MPAA”), its member companies and other producers and/or distributors of syndicated series, movies, 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 procedural schedule set forth in Appendix A to the December 22, 2017 Order Consolidating Proceedings And Reinstating Case Schedule issued by the Copyright Royalty Judges (“Judges”), hereby submit its Written Direct Statement Regarding Distribution Methodologies (“WDS-D”) for the 2010-2013 satellite royalty years2 in the consolidated 1 Lists of MPAA-represented Program Suppliers for each of the satellite royalty years at issue in this consolidated proceeding are included as Appendix A to the Written Direct Testimony of Jane Saunders. 2 Concurrent herewith, MPAA is separately filing its Written Direct Statement Regarding Distribution Methodologies Of MPAA-Represented Program Suppliers For 2010-2013 Cable Royalty Years in the above- captioned consolidated docket. Prior to the Judges’ December 22, 2017 Order Consolidating Proceedings And Reinstating Case Schedule, MPAA had already prepared its Written Direct Statement Regarding Distribution Methodologies (“WDS-D”) for the 2010-2013 cable royalty years as a separate filing consistent with the procedural Introductory Memorandum, MPAA WDS-D, 2010-13 Satellite Distribution | 1 2010-2013 Cable and Satellite Royalty Distribution Proceeding. MPAA is submitting this introductory memorandum in order to summarize the evidence it will present in the distribution phase of this proceeding, and to state the royalty shares of the Program Suppliers category that MPAA is seeking for the 2010, 2011, 2012, and 2013 satellite royalty funds (“2010-13 Funds”). I. PROCEDURAL HISTORY On September 9, 2015, the Judges issued an order formally consolidating royalty distribution proceedings regarding the 2010-13 Funds and sought written submissions from the parties in an effort to clarify the definitions of claims categories for purposes of this proceeding.3 Thereafter, on December 1, 2015, the Judges adopted five program categories for the allocation phase (“Agreed Categories”) to which the Judges may approve an allocation of royalties for the 2010-13 Funds.4 The Agreed Categories are as follows: “Commercial Television Claimants.” Programs produced by or for a U.S. commercial television station and broadcast only by that station during the calendar year in question, except those listed in subpart (3) of the Program Suppliers category. “Devotional Claimants.” Syndicated programs of a primarily religious theme, but not limited to programs produced by or for religious institutions. schedule set forth in Appendix C to the October 23, 2017 Ruling And Order Regarding Objections To Cable And Satellite Claims (“Claims Ruling”). 3 See Notice Of Participants, Notice Of Consolidation, And Order For Preliminary Action To Address Claims Categories at 2 (September 9, 2015). 4 See Amended Notice Of Participant Groups, Commencement Of Voluntary Negotiation Period (Allocation), And Scheduling Order at Exhibit A (December 1, 2015). Introductory Memorandum, MPAA WDS-D, 2010-13 Satellite Distribution | 2 “Joint Sports Claimants.” Live telecasts of professional and college team sports broadcast by U.S. and Canadian television stations, except programs in the Canadian Claimants category. “Music Claimants.” Musical works performed during programs that are in the following categories: Program Suppliers, Joint Sports Claimants, Commercial Television Claimants, Public Television Claimants, Devotional Claimants, Canadian Claimants. “Program Suppliers.” Syndicated series, specials, and movies, except those included in the Devotional Claimants category. Syndicated series and specials are defined as including (1) programs licensed to and broadcast by at least one U.S. commercial television station during the calendar year in question, (2) programs produced by or for a broadcast station that are broadcast by two or more U.S. television stations during the calendar year in question, and (3) programs produced by or for a U.S. commercial television station that are comprised predominantly of syndicated elements, such as music videos, cartoons, “PM Magazine,” and locally-hosted movies.5 The Judges further recognized that the Agreed Categories are intended to be “mutually exclusive,” such that every program eligible to receive satellite statutory license royalties in this proceeding falls within only one of the Agreed Categories.6 MPAA seeks, on behalf of its represented claimants, a share of the 2010-13 Funds that will be allocated to the Program Suppliers category in this proceeding. The two parties who are currently asserting entitlement to royalties allocated to the Program Suppliers’ category are MPAA and Multigroup Claimants (“MC”).7 In this WDS-D, 5 See id. at Exhibit A. 6 See id. 7 On March 29, 2016, MC and Spanish Language Producers (“SLP”) filed a Joint Notice Of Settlement Of Controversy stating that “any SLP claims have been transferred to and will be prosecuted by MC and such parties Introductory Memorandum, MPAA WDS-D, 2010-13 Satellite Distribution | 3 MPAA will set forth its testimony and evidence in support of distribution awards within the Program Suppliers category as between MPAA and MC. On October 23, 2017, the Judges issued their Ruling And Order Regarding Objections To Cable And Satellite Claims (“Claims Ruling”), which resolved all pending motions related to claims validity and categorization issues among the participants regarding the 2010-13 Funds. In the Claims Ruling the Judges (1) denied MC a presumption of validity as to the claims it purports to represent, (2) dismissed MC’s claims on behalf of twenty different entities for one or more of the royalty years at issue in this proceeding, and (3) dismissed MC’s claims for 906 specific programs.8 The Judges directed the parties to “take care to ensure that their Written Direct Statements…reflect fully the rulings on allowance and disallowance of claims” set forth in the Claims Ruling.9 Accordingly, MPAA has directed its witnesses to apply the decisions on claims validity set forth in the Claims Ruling in their Written Direct Testimonies presented herein as a part of MPAA’s WDS-D. II. SUMMARY OF MPAA CASE The Judges must distribute royalties that satellite carriers paid to the Copyright Office for the privilege of distantly retransmitting broadcast stations to distant subscribers pursuant to the statutory license set forth in Section 119 of the Copyright Act for the have reached a confidential agreement that completely resolves the claims of represented claimants within the Program Suppliers, Sports, and Devotional categories.” See MC and SLP Joint Notice Of Settlement Of Controversy at 1 (March 29, 2016). 8 See Claims Ruling at 5-13, 16-40, and Appendices A and B. 9 See id. at 58. Introductory Memorandum, MPAA WDS-D, 2010-13 Satellite Distribution | 4 years 2010, 2011, 2012, and 2013. The standard that the Judges and their predecessors have used for distributing such royalties in past proceedings is the “the relative marketplace value of the distant broadcast signal programming retransmitted” by satellite carriers during the royalty years at issue.10 MPAA agrees that the Judges should distribute the 2010-13 Funds based on the relative market value standard. MPAA has long maintained that the relative market value of distantly retransmitted programming is most clearly expressed through measurements of distant viewing because viewing is consumption. It is axiomatic that consumers subscribe to a satellite system to watch the programming made available via their subscriptions. The more programming a subscriber watches, the happier the subscriber is, and the more likely he or she will continue to subscribe. Thus, a reasonable measure of the relative market value of a retransmitted program is the relative level of subscriber viewing of that program. In each of the past Phase II proceedings involving the Program Suppliers category (now known as “Distribution Phase proceedings”), MPAA-represented claimants received the overwhelmingly largest share of the royalties attributable to the Program Suppliers category.11 Most of these Phase II proceedings involved multiple Program Suppliers claimants. The awards to MPAA-represented claimants were well-justified: 10 See 75 Fed. Reg. 57063, 57065 (September 17, 2010). 11 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.