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Before the UNITED STATES COPYRIGHT ROYALTY JUDGES COPYRIGHT OFFICE Library of Congress Washington, D.C.

In the Matter of:

Determination of Royalty Rates Docket No. 16—CRB—0001 —SR/PSSR and Terms for Transmission of (201S-2022) Sound Recordings by Satellite Radio and "Preexisting" Subscri tion Services SDARS III

INDEX

Tab I Motion to Compel Tab 2 Declaration of Jackson Toof

Tab 3 Exhibits Tab 4 Certificate of Service e e e e e % % 0 0 0 0 P 0 0 0 0 0 0 0 4

gag .~ ~ ~ ~ a IMI ~ Il& Before the UNITED STATES COPYRIGHT ROYALTY JUDGES Library of Congress Washington, D.C.

In the Matter of:

Determination ofRoyalty Rates and Terms Docket No. 16-CRB-0001-SIUPSSR (2018-2022) for Transmission of Sound Recordings by Satellite Radio and "Preexisting" Subscription Services (SDARS III)

MUSIC CHOICE'S MOTION TO COMPEL SOUNDEXCHANGE TO PRODUCE AUDIT DOCUMENTS AND CABSAT SKTTLKMKNT DOCUMENTS

Pursuant to 17 U.S.C. $ 803(b)(6)(C)(v) and 37 C.F.R. $351.5(b), Music Choice respectfully requests that the Copyright Royalty Judges (the "Judges") compel SoundExchange,

Inc. ("SoundExchange") to produce two narrow categories of documents: (1) documents relating to SoundExchange's audits of its CABSAT'icensees that were commenced, conducted or completed in the years 2013-present, and (2) documents relating to the negotiation ofthe settlement that led to the current CABSAT royalty rates and the submission ofthat settlement to the Copyright Royalty Board for approval.

SoundExchange has proposed the current CABSAT rates as its sole benchmark for the

PSS royalty rates to be set in this proceeding. As such, the requested documents directly relate

'apitalized terms used but not defined in this Motion will have the meaning set forth in the Requests for Production ofDocuments to the Copyright Owner Participants trom Sirius XM and Music Choice, which was served on SoundExchange on October 24, 2016 (the "Request"). The Request is attached as Exhibit A to the Declaration ofJackson D. Toof, dated December 16, 2016 (the "ToofDecl."). The Request was a joint effort between Sirius XM Radio Inc. ("Sirius XM") and Music Choice; however, Request Nos. 2, 8 and 9 that were directed to SoundExchange and are at issue here pertain only to SoundExchange's case against PSS licensees. SoundExchange served its Responses and Objections to the Second Set ofRequests for Production ofDocuments to the Copyright Owner Participants trom Sirius XM and Music Choice on November 14, 2016 (the "Response"). The Response is attached as Exhibit B to the Toof Decl. to SoundExchange's Written Direct Statement and are highly probative of issues central to the

Judges'ask of setting PSS royalty rates. Music Choice is entitled to discovery of these documents.

CERTIFICATION

Pursuant to 37 C.F.R. g 351.5(b)(1), Music Choice certifies that the parties have met and conferred on these issues in a good faith effort to resolve the discovery disputes raised in this

Motion, including by teleconference on December 7, 2016, and through emails dated December

2, 9 and 13, 2016. See ToofDecl. $g 6-8. Although the parties resolved many of their disputes, they have been unable to reach agreement on those raised in this Motion, necessitating the involvement of the Judges to resolve these issues.

LEGAL STANDARD

The discovery standard governing this phase of this proceeding authorizes a participant to request non-privileged documents that directly relate to the written direct statement of an opposing participant. See 17 U.S.C. $ 803(b)(6)(C)(v); 37 C.F.R. $ 351.5(b). A party's written direct statement includes witness statements, exhibits, designated testimony from prior proceedings, and the party's rate proposal. See 17 U.S.C. g 803(b)(6)(ii)(II); 37 C.F.R. $

351.4(b).

The Judges'rior rulings in past proceedings have made clear that the "directly related" standard goes beyond documents that are directly reviewed or relied upon in preparing a participant's written direct statement, or documents that are expressly referenced therein. For example, in the Satellite II proceeding, the Judges found that the "directly related" standard encompassed documents that, although not expressly referenced, were related to a topic a participant had put "in issue" in its written testimony. Order Granting in Part and Denying in Part SoundExchange 's Motion to Compel Music Choice to Produce Documents and Respond to

Interrogatories, Docket No. 2011-1 CRB PSS!Satellite II (Aug. 8, 2012); see also Order

Grantingin Part and Denying in Part Sirius XM's Motion to Compel SoundExchange to

Produce Communications Between and Among SoundExchange, AFM, A2IMand Other Industry

Groups Regarding Sirius XM's Direct License Initiative, Docket No. 2011-1 CRB PSSISatellite

II (Mar. 29, 2012) (compelling production of industry communications concerning Sirius XM's direct licensing initiative as directly related to SoundExchange's proffered expert testimony asserting that he was "aware of no direct evidence on what rates might be negotiated between

Sirius XM and copyright holders in an arm's length setting"); Order Granting in Part and

Denying in Part Services 'otion to Compel SoundExchange to Provide Digital Music

Agreements, Docket No. 2011-1 CRB PSSISatellite II (Mar. 13, 2012) (compelling production of license agreements for all digital distribution services in a given license category, even where certain such agreements were not considered by SoundExchange's expert or mentioned in its

Written Direct Statement).

ARGUMENT

THK JUDGES SHOULD ORDER SOUNDEXCHANGE TO PRODUCE DOCUMENTS RELATING TO AUDITS OF CABSAT SERVICES.

Music Choice propounded the following document request to SoundExchange:

Request No. 2: For any audit of a CABSAT or PSS licensee (including audits of those licensees'on-CABSAT and non-PSS license payments) by SoundExchange commenced, conducted, or completed in the years 2013 to present, including but not limited to the audit of Stingray Digital's CABSAT and BES payments for the years 2011-2013 and DMX's CABSAT payments for the years 2012-2014, all Documents concerning such audits, including all audit reports, drafts of audit reports, internal communications, external communications, notes, working papers, internal analyses, spreadsheets, and financial Documents. See Toof Decl. g 4 and Ex. A, at 9-10 (Request No. 2 to Sound Exchange ). SoundExchange objected to the production of the requested documents on various grounds, including that Music

Choice seeks documents not "directly related" to SoundExchange's written direct statement and not reasonably limited to issues in this proceeding, and that the request for drafts, working papers and internal communications is unduly burdensome. See Toof Decl. $ 5 and Ex. B, at 20 (written objections to Request No. 2 to SoundExchange).

A. SoundExchange's Audit's of Sirius XM, Music Choice and Muzak

During the meet and confer process, SoundExchange indicated that for the 2013-present time period, it completed audits of Sirius XM, Music Choice and Muzak 2 and that it has produced {or will produce) the final audit report and communications with these audited parties concerning these audits. See Toof Decl. $ 8 and Ex. D (email from J. Freedman on Dec. 13 at

6:35pm). SoundExchange, however, continues to refuse to produce any drafts of audit reports, internal (as opposed to external) communications concerning the audits, notes, working papers, internal analysis, spreadsheets and financial documents concerning the audits. See id. Music

Choice believes such materials should be produced, but in order to lessen any burden on

SoundExchange in connection with producing such documents concerning the audits of Sirius

XM, Music Choice and Muzak—although Music Choice cannot imagine there is much burden—

Music Choice will not seek an order from the Judges to compel SoundExchange to produce these materials.3

2 SoundExchange also agreed during the parties'ecember 7 telephonic meet and confer that to the extent it produces documents responsive to Request No. 2, SoundExchange would not withhold documents ifthey were created or dated prior to January 1, 2013, if the documents related to an audit that was finalized after January 1, 2013. See Toof Decl. $ 7.a. 3 Music Choice understands that Sirius XM and SoundExchange are still conferring regarding communications related to SoundExchange's audit of Sirius XM, and that Sirius XM has indicated it may raise this issue with the Judges. B. SoundKxchange's Audit of Stingray or other CABSAT services

On the other hand, Music Choice must seek an order from the Judges compelling

SoundExchange to produce documents relating to SoundExchange's audits of any CABSAT service, including Stingray and DMX, in view of the fact that SoundExchange has proposed the current CABSAT rates as its sole benchmark for the PSS royalty rates to be set in this proceeding. See Toof Decl. )$ 9-10 and Exs. E and F (Introductory Memorandum to the Written

Direct Statement of SoundExchange, Inc., and Copyright Owner and Artist Participants at 7-8;

Written Direct Testimony of Paul Wazzan at 28).

Specifically, during the meet and confer process, SoundExchange indicated that it audited

Stingray, a CABSAT service, during the 2013-present time period, but the parties resolved that audit by agreement instead ofproducing a final audit report. See ToofDecl. $ 8 and Ex. D

(email from J. Freedman on Dec. 13 at 6:35pm}. SoundExchange has agreed to produce the letter that purportedly memorializes the resolution ofthis audit, the supporting schedules, and any communications with Stingray concerning this audit. See id. But, SoundExchange again refuses to produce any drafts ofthe audit report that were being prepared prior to or at the time ofthe settlement, internal (as opposed to external) communications concerning the audits, notes, working papers, internal analysis, spreadsheets and financial documents concerning the audit.

See id.

There can be no question that the documents sought are directly related to

SoundExchange's written direct statement and highly probative ofthe Judges'ate setting task here. As the Judges'rior rulings make clear, the "directly related" standard goes beyond documents that are directly reviewed or relied upon in preparing a participant's written direct statement, or documents that are expressly referenced therein. See supra at 2-3. By proposing the current CABSAT rates as the sole benchmark for the PSS rates to be determined in this proceeding, SoundExchange has placed issues relating to the financial condition, license rates, and license payments of each CABSAT service at the center of its case against Music Choice.

The information obtained and analyzed in the course ofthese audits are likely to shed significant light on these issues. To be able to adequately assess the CABSAT license rates in the context of the $ 801(b) factors, Music Choice and its experts must be allowed access to the full universe of relevant non-privileged information related to audits of any CABSAT services.

Any assertion by SoundExchange that producing drafts of audit reports, internal (as opposed to external) communications concerning the audits, notes, working papers, internal analysis, spreadsheets and financial documents concerning any CABSAT audits, does not attempt to weigh that alleged burden against the value of the information sought. Nor could it successfully do so, as the information sought is undeniably paramount to the determination of rates in this proceeding, whereas the burden ofproduction would be minimal given that they presumably would all be located within a handful of SoundExchange's own files. The information likely to be contained in these documents is directly related to SoundExchange's sole proposed benchmark for the PSS rates to be set in this proceeding and highly probative of that benchmark's suitability, and so the value ofthe information sought weighs far more heavily than the burden oF producing it. Particularly with respect to the Stingray audit, which apparently did not result in any final audit report, any draft report and other internal documents and working papers regarding SoundExchange's audit of Stingray are ofcritical importance.

For these reasons, the Judges should order SoundExchange to produce not only final audit reports, but also any draft audit reports, internal communications, notes, working papers, internal analysis, spreadsheets and other financial documents concerning any audit of a CABSAT service that was commenced, continued, or was finalized during the 2013-present time period.

THK JUDGES SHOULD ORDER SOUNDEXCHANGK TO PRODUCE DOCUMENTS RELATING TO THE NEGOTIATION OF THK SETTLEMENT THAT RESULTED IN THE CURRENT CABSAT RATES AND THK SUBMISSION OF THAT SETTLEMENT TO THK COPYRIGHT ROYALTY BOARD.

Music Choice propounded the following two document requests to SoundExchange:

Request No. 8: All Documents concerning the negotiation ofthe settlement that resulted in the current CABSAT rates, including internal and external communications, analyses, memoranda, abstracts, notes, working papers and draft agreements.

Request No. 9: All Documents concerning the submission ofthe settlement that resulted in the current CABSAT rates to the Copyright Royalty Board for approval and adoption ofthe rates therein.

See ToofDecl. $ 4 and Ex. A, at 10 {Request Nos. 8 and 9 to Sound Exchange ). As discussed above, SoundExchange has proposed the current CABSAT rates as its benchmark for the PSS royalty rates to be set in this proceeding. Thus, the Judges should compel production of all non- privileged documents responsive to these two requests.

Despite the obvious relevance of these documents to the issues raised by SoundExchange in its written direct statement, SoundExchange has staunchly refused to produce many of relevant documents. More specifically, SoundExchange refuses to produce communications with other parties to the CABSAT Settlement and documents regarding its submission ofthat settlement to the Copyright Royalty Board (on the basis that, because Sirius XM was a party to the CABSAT Settlement and the Request was served on SoundExchange by Sirius XM and

Music Choice, the documents are available to all licensee participants and it would thus be needlessly burdensome to require SoundExchange to produce them) and internal documents and communications relating to the CABSAT Settlement (again on the basis of burden). See Toof

Decl. $ 7.b.

Each of SoundExchange's proffered objections is baseless. The CABSAT Settlement and the circumstances and context from which that settlement arose are directly related to the central point of SoundExchange's case vis-a-vis Music Choice — its proposal that the Judges use the current CABSAT rates as the benchmark for the PSS rates to be determined in this proceeding. In fact, it is hard to fathom any discovery in this case being more directly related to

SoundExchange's written direct case against Music Choice than documents responsive to

Request Nos. 8 and 9. There can be no doubt that documents regarding the genesis ofthe rates which SoundExchange proposes as its sole benchmark are among the most relevant documents that could be sought in this proceeding, and that Music Choice is entitled to discovery of those documents.

In addition, SoundExchange's suggestion that the services share documents amongst themselves, rather than SoundExchange producing the documents requested, ignores the fact that the discovery process in this proceeding places the burden on SoundExchange to produce requested documents related to the benchmark proposed in its written direct statement. See 17

U.S.C. g 803(b)(6) (providing that parties may request of an opposing participant documents related to the written direct statement of that party). SoundExchange's implication that, by virtue of one licensee participant's purported custodianship of a responsive document, the document has fallen into the joint custody of all licensee participants generally, is wrong. Sirius XM and

Music Choice are separate entities, and separately maintain their business records. Indeed, Sirius

XM and Music Choice are not even participating with respect to the same license at issue. While

Sirius XM and Music Choice served joint Requests for the sake of efficiency (including a reduced burden on SoundExchange), Music Choice is not in possession ofnegotiating documents or settlement submission documentation relating to a settlement to which it was not a party. See ToofDecl. g 11. SoundExchange is in possession of those documents. The Judges should not countenance SoundExchange's attempt to impermissibly shift its discovery obligations onto Sirius XM, which is not an opposing party to Music Choice and has not put the

CABSAT settlement at issue in its written direct statement. SoundExchange has the burden to produce non-privileged documents responsive to document requests that seek information directly related to the central point of SoundExchange's written direct statement against Music

Choice. It should do so.

SoundExchange's further objection that Request Nos. S and 9 are overly burdensome cannot withstand scrutiny. As noted above, an assertion of burden must be balanced against the probative value ofthe documents sought in the context ofthe rates to be determined in this proceeding. See supra at 2-3. As a preliminary matter, SoundExchange cannot make any plausible showing that producing this small number of documents related to a very specific transaction would be burdensome. Moreover, given that the CABSAT rates are the focus of

SoundExchange's case in the context of the PSS royalty rates to be set in this proceeding, any documents that may shed light on the viability of CABSAT rates as a benchmark are highly directly related to SoundExchange's written direct case. Those rates are the product ofthe settlement at issue in these Requests. Thus, the circumstances surrounding the negotiation of the

CABSAT settlement agreement and the documents leading up to its acceptance and approval are directly related to, and highly probative of issues addressed in, the testimony of

SoundExchange's witness and should be produced.4

Past precedent also supports compelling the production ofthe negotiating documents sought by Request No. 8. The Judges previously upheld document requests directed at negotiating documents. In Docket No. 2006-1 CRB DSTR ("SDARS I"), for example,

SoundExchange sought, inter alia, negotiating documents related to seventeen content agreements to which XM and Sirius referred in their written direct statements. See Order

Granting in Part and Denying in Part SoundExchange 's Motion to Compel Sirius andXM to

Produce Certain Content Deals, ¹gotiating Documents, and Internal Analyses ofContent

Deals, Docket No. 2006-1 CRB DSTR (May 18, 2007) at 1. SoundExchange argued that the

Judges "have ordered the production of negotiating documents when the requests were sufficiently narrow in recognition ofthe limited nature of discovery and the witnesses having reviewed or relied upon the agreements in preparing their testimony." Id. at 2. The Judges granted SoundExchange's request for such negotiating documents. Id. at 3. Here, because the documents sought relate directly to SoundExchange's proposed benchmark for Music Choice, they are even more integral to the case at hand than those sought in SDARS L By proposing the

CABSAT rates as its sole benchmark, SoundExchange has placed at issue the viability of, and the considerations that led the parties to the CABSAT Settlement to agree to, the ctnrent

CABSAT rates.

Indeed, SoundExchange's own expert testified to many ofthe very reasons that events leading up to a settlement agreement may be relevant to an analysis of the suitability ofthat

4 Importantly, documents relating to the submission ofthe CABSAT settlement to the Copyright Royalty Board are not available online.

10 settlement as a benchmark. See ToofDecl. $ 10 and Ex. F (Testimony of Paul Wazzan at 16, stating that "I'r]ates contained in settlement agreements are not necessarily indicative of a market rate — i.e., what a willing buyer and willing seller would agree to... In short, there are many reasons why a settlement lacks reliability as to the true value of a royalty rate."). Dr. Wazzan's testimony cited many factors that may bring into question the reliability of a settlement as the indicator for a market rate, including litigation costs, time costs, publicity and privacy concerns.s

Music Choice should be permitted the opportunity to assess how any and all ofthose factors played into the adoption ofthe CABSAT Settlement by the parties thereto and into its submission to the Copyright Royalty Board.

The documents sought by Request Nos. S and 9 are likely to be highly probative ofthose considerations, and it is SoundExchange's duty to produce them. The value ofthese documents undeniably weighs much more heavily than the burden ofproducing them, considering that this burden would be minimal. There are at most a handful of high level personnel who would be the most likely custodians of such responsive documents, the volume ofresponsive documents is likely relatively small, and the time period to capture documents relating to the negotiation and submission of the CABSAT Settlement to the Copyright Royalty Board is quite narrow.

In light ofthe foregoing, the Judges should grant Music Choice's Motion to Compel as to

Request Nos. 8 and 9.

5 While Dr. Wazzan raised these concerns in the context of the settlement that led to early rates for the PSS services, prior to the adoption ofthe current rate-setting procedure, the same considerations could, and should, be applied in analyzing the appropriateness ofthe CABSAT Settlement as a potential benchmark.

11 CONCLUSION

For the foregoing reasons, Music Choice respectfully requests that the Judges compel

SoundExchange to produce {1) in connection with Request No. 2, for any CABSAT service, all draft audit reports, internal communications concerning any such audits, notes, working papers, internal analysis, spreadsheets and other financial documents concerning any such audits; and (2) all internal and external documents and correspondence responsive to Request Nos. 8 and 9, including all communications with Sirius XM and documents filed with the Copyright Royalty

Board.

/Signature onfollowingpageJ

12 Dated: December 16, 2016 Washington, DC

By son D. Toof Arent Fox LLP 1717 K Street, NW Washington, DC 20006-5344 Tel: (202) 857-6000 Fax: (202) 857-6395 [email protected]

Paul Fakler John P. Sullivan Margaret Wheeler-Frothingham Arent Fox LLP 1675 Broadway New York, NY 10019 Tel: 212-484-3900 Fax: 212-484-3990 paul,[email protected] [email protected] margaret.wheeler arentfox.corn

Counselfor Music Choice

13 e e e e e e e e e r e 0 0 0 0 N 0 0 0 0 Before the UNITED STATES COPYRIGHT ROYALTY JUDGES THK LIBRARY OF CONGRESS Washington, D,C,

In the Matter of:

Determination ofRoyalty Rates and Terms Docket No. 16-CRB-0001-SR/PSSR (2018-2022) for Transmission of Sound Recordings by Satellite Radio and "Preexisting" Subscription Services (SDARS III)

DECLARATION OF JACKSON D. TOOF IN SUPPORT OF MUSIC CHOICE'S MOTION TO COMPEL

I, JACKSON D. TOOF, declare as follows:

1. I am an attorney with Arent Fox LLP and am counsel for Music Choice in the above-captioned proceeding.

2. I submit this Declaration in support of Music Choice's Motion to Compel

SoundExchange to Produce Audit Documents and CABSAT Settlement Documents.

3. This declaration is made based upon my personal knowledge.

4. Exhibit A is a copy of relevant excerpts from the Public version of the Requests for Production of Documents to the Copyright Owner Participants from Sirius XM and Music

Choice, which were served on SoundExchange on October 24, 2016 (the "Request").

5. Exhibit B is a copy of relevant excerpts from the Public version of

SoundExchange's Responses and Objections to the Second Set of Requests for Production of

Documents to the Copyright Owner Participants from Sirius XM and Music Choice, which were served on Sirius XM and Music Choice on November 14, 2016 (the "Response").

6. On December 2, 2016, counsel for Sirius XM identified via email to counsel for SoundExchange a list of issues on which Sirius XM and Music ChoiceC.'. desired to meet and confer. A true and correct copy of that email is attached hereto as Exhibit

On December 7, 2016, I participated in a meet and confer teleconference (the

"December 7 teleconference") with counsel for SoundExchange and counsel for Sirius XM to discuss, inter alia, the issues raised in Exhibit C, including SoundExchange's objections and responses to Request Nos. 2, 8 and 9 directed to SoundExchange:

a. For Request No. 2, counsel for SoundExchange agreed that to the extent

produces documents responsive to Request No. 2, So undExchange i SoundExchange would not withhold documents if they were created or dated

prior to January 1, 2013, if the documents related to an audit that was finalized

after January 1, 2013. Counsel for SoundExchange further indicated that

SoundExchange would take under advisement whether to produce

communications with the auditor, internal communications concerning any audit,

or work product underlying the audits, including draft audit reports.

b. For Request Nos. 8 and 9, counsel for SoundExchange insisted that Music Choice

should seek responsive documents from Sirius XM since SoundExchange viewed

the Request as "joint requests" from Sirius XM and Music Choice. Although

Request Nos. 8 and 9 were included in the Request by Music Choice, as they are

plainly aimed at issues relevant to the PSS rate setting proceeding, counsel for

Sirius XM withdrew these two requests during the December 7 teleconference as

'ortions ofthe email relevant to this Motion have been highlighted in yellow for the Judges'onvenience. to Sirius XM to make it clear that Request Nos. 8 and 9 are issued by Music

Choice alone.

8. Following the December 7 teleconference, the parties exchanged additional emails between December 9 and 13, 2016, to further narrow the issues. A true and correct copy ofthose emails is attached hereto as Exhibit D.2

9. Exhibit E is a copy of relevant excerpts from the Public version of the

Introductory Memorandum to the Written Direct Statement of SoundExchange, Inc., and

10. Exhibit F& is a copy of relevant excerpts from the Public version of the Written

Direct Testimony of Paul Wazzan.

11. Music Choice does not have possession, custody or control of any documents concerning the settlement that resulted in the current CABSAT rates, as referenced in Request

Nos. 8 and 9 ofExhibit A hereto.

(Signature onfollowingpagej

Portions ofthe emails relevant to this Motion have been highlighted in yellow for the Judges'onvenience. Pursuant to 28 U.S.C. g 1746 and 37 C.F.R. $ 350.4(e)(1), I hereby declare under the penalty ofperjury under the laws ofthe United States that, to the best ofmy knowledge, information and belief, the foregoing is true and correct.

Respectfully submitted,

Dated: December 16, 2016 By Washington, DC ackson.D. Toof (DC Bar No. ARENT FOX LLP 1717 K Street, NW Washington, DC 20006-5344 Tel: (202) 857-6000 Fax: (202) 857-6395 Email: acheson.too arentfox.com

Counselfor Music Choice a a m a a e r e r e r w w w w m w w m a a % % % % N % % % N % S 0 S 0 S PUBLIC VERSION

Before the UNITED STATES COPYRIGHT ROYALTY JUDGES Washington, D.C.

) In the Matter of ) ) DETERMINATION OF RATES AND TERMS FOR ) Docket No, 16-CRB-0001- SATELLITE RADIO AND "PREEXISTING" ) SRIPSSR (2018-2022) SUBSCRIPTION SERVICES (SDARS III) ) )

RE UESTS FOR-'PRODUCTION OF DOCUMENTS TO THE COPYRIGHT OWNER PARTICIPANTS FROM SIRIUS XM AND MUSIC CHOICE

Pursuant to Chapter 8 of the Copyright Act, 17 U.S.C. $ 801 et seq., 37 C.F.R. $ 351.5,

and the Copyright Royalty Hoard's Orders dated March 14, 2016 and June 28, 2016

(collectively, the "Discovery Schedule"), you are required to respond to the following Document

Requests propounded by Sirius XM Radio Inc. ("Sirius XM") and Music Choice (collectively,

thc "Services"). Your written responses must be delivered to Sirius XM and Music Choice on or

before November 14, 2016, and Documents responsive to these Requests must be produced to

Sirius XM and Music Choice on or before November 22, 2016.

DEFINITIONS

1. "AZIM" means the American Association of Independent Music and its directors, officers, board members, committee members, employees, subsidiaries, parent corporations, divisions, affiliated companies, agents, servants and anyone else acting on its behalf.

2. "ADA" means the Alternative Distribution Alliance and its predecessors, including its directors, officers, board members, committee members, employees, subsidiaries, parent corporations, divisions, affiliated companies, agents, servants and anyone else acting on its behalf, PUBI IC VERSION

3. "AFM" means the American Federation of Musicians of the United States and Canada, and its directors, officers, board members (including national and local boards), committee members, employees, subsidiaries, parent corporations, divisions, affiliated companies, agents, servants and anyone else acting on its behalf.

4. "Digital Music Service" means any service providing users with access to digital audio transmissions or digital phonorecord deliveries of sound recordings and/or music videos, whether for free or by subscription, whether by streaming, download or other transmission (either permanent or temporary), whether offering a single type of music service or bundling together different music services (e.g., streaming and downloads), and whether available on a personal computer, television, receiver, set-top box, mobile/cellular phone, other mobile device (e.g., iPad, smartphone, tablet computer, laptop, ctc.), or any other device or platform. Digital Music Services include but are not limited to services offering digital downloads (e.g., Apple iTunes, Amazon), cloud services, providers ofringtones, mastertones and ringbacks, interactive streaming services

(e.g., Rhapsody, Spotify, Apple Music, Amazon), all statutory, non-interactive, and customized varieties of internet radio/webcasting (e.g., Pandora, radio station simulcasters, iHeart Radio), music video providcrs (c.g., YouTube, Vevo), mobile/cellular music providers (e.g., Verizon,

ATES), SDARS's (e.g., Sirius XM), PSS's (e.g., Mood, Music Choice), Business Establishment

Services (e.g., Muzak), and CABSATs.

5. "Document" or "Documents" shall have the same meaning as the term "document" in

Rule 34(a)(1) ofthe Federal Rules of Civil Procedure and shall include all such items that would be subject to inspection and copying under that Rule, including the original and any non-identical copy of, any written, printed, typed, photographed or recorded materials, including but not limited to writings, notes, memoranda, agreements, contracts, drafts, mark-ups, redlined materials, PUBLIC VERSION

proposals, offers, meeting minutes, agendas, reports, calendar or diary entries, drawings, graphs, charts, logs, photographs, phone records, tape recordings, computer disks, computer printouts or tape, email or any other data compilations from which information can be obtained or translated.

The term "Document" also means every copy of a document where such copy is not an identical duplicate of the original, whether because of delctions, underlinings, showing ofblind copies, initialing, signatures, receipt stamps, comments, notations, differences in stationary or any other difference or modification of any kind.

6. "CABSAT" means non-PSS services which provide audio digital music programming via residential television service using cable or satellite television providers or other multichannel video programming distributors ("iWPDs").

7. "Copyright Owner Participants," "you," and "your" shall mean SoundExchange, A2IM,

RIAA, Sony, UMG, Warner, AFM, or SAG-AFTRA, collectively and individually.

8. "Interactive Stream" or "Interactive Streaming" refers to the digital transmission of a sound recording or audiovisual recording embodying a musical composition to a computer or other electronic device at the specific request of an end user in order to allow the end user to listen to or view the recording contemporaneously with the user's request. Interactive Streams are sometimes referred to in the industry as "on-demand" streams.

9. "PSS" and "Preexisting Subscription Services" mean those services defined in 17

U.S,C. $ 114(j)(11).

10. "Record Company" means any company that owns sound recording copyrights (or, as in the case ofThe Orchard or ADA, distributes the sound recordings of other owners) and which

(1) is a participant in this proceeding; (2) has provided a witness or evidence in this proceeding; or

(3) is represented on the Board of Directors of SoundExchangc, A2IM, or RIAA. Any references PUBLIC VERSION

to a Record Company specifically by name shall likewise be construed to include any and all parent, subsidiary and/or affiliate recording companies and/or labels ofthat Record Company.

11. "RIAA" means the Recording Industry Association ofAmerica and its directors, officers, board members, committee members, employees, subsidiaries, parent corporations, divisions, affiliated companies, agents, servants and anyone else acting on its b'ehalf.

12. "SAG-AFTRA" means the Screen Actors Guild - American Federation ofTelevision and Radio Artists, and its directors, officers, board members (including national and local boards), committee members, employees, subsidiaries, parent corporations, divisions, affiliated companies, agents, servants and anyone else acting on its behalf, as well as the Screen Actors Guild and the

American Federation of Television and Radio Artists, as they existed prior to their merger in 2012.

13. "SDARS" means prccxisting satellite digital audio radio service, as defined in 17

U,S.C. g 114(j)(10).

14. "SDARS III Proceeding" shall mean the proceeding in Docket No. 16-CRB-0001-

SR/PSSR (2018-2022) before the Copyright Royalty Board.

15. "Sirius XM" shall include Sirius Satellite Radio Inc. ("Sirius") and XM Satellite Radio

Inc. ("XM"), unless explicitly limited in a specific request to the merged company only.

16. "Sony" shall mean Sony Music Entertainment and its predecessors (including Sony

BMG Music Entertainment), including its directors, officers, board members, committee members, employees, subsidiaries, parent corporations, divisions, affiliated companies, agents, servants and anyone else acting on its behalf.

17. "SoundExchange" shall mean SoundExchange, Inc., SoundExchange Witnesses and their respective employer companies, and SoundExchange's directors, officers, board members, PUBLIC VERSION

committee members, employees, subsidiaries, parent corporations, divisions, affiliated companies, agents, servants and anyone else acting on its behalf.

18. "Stingray Digital" means Stingray Digital Group, its predecessors, and any trade names under which it currently operates or has operated in the past (including Stingray Music and

Galaxie), including its directors, officers, board members, committee members, employees, subsidiaries, parent corporations, divisions, affiliated companies, agents, servants and anyone else acting on its behalf.

19. "Testimony" or "Written Direct Testimony" shall mean the written direct testimony offered by any witness filed with the Copyright Royalty Board in the above-captioned matter on

October 19, 2016.

20, "The Orchard" shall mean The Orchard and its predecessors, including its directors, officers, board members, committee members, employees, subsidiaries, parent,corporations, divisions, affiliated companies, agents, servants and anyone else acting on its behalf.

21. "Trade Association Participants" shall mean SoundExchange, A2IM, and RIAA, collectively and individually.

22. "WMG" shall mean Warner Music Group Corp and its directors, officers, board members, committee members, employees, subsidiaries, parent corporations, divisions, affiliated companies, agents, servants and anyone else acting on its behalf.

23. "UMG" shall mean Universal Music Group and its directors, officers, board members, committee members, employees, subsidiaries, parent corporations, divisions, affiliated companies, agents, servants and anyone else acting on its behalf, and shall include all HMI'entities that were merged with and/or are now owned by or affiliated with UMG. PUBLIC VERSION

24. "Web IV Proceeding" shall mean the proceeding in Docket No. 14-CRB-0001-WR

(Web IV) (2016-2020) before the Copyright Royalty Broad.

INSTRUCTIONS

1. These requests are continuing in nature, and in the event that you become aware

of additional responsive information or Documents at any time through the conclusion of this

proceeding, you are requested promptly to provide such additional information or Documents.

2. The responses to each request unless otherwise noted shall include Documents

that are within the possession, custody or control of any of the Copyright Owner Participants or

Record Companies, including without limitation Documents that are in the possession, custody

or control oftheir attorneys, agents, employees, representatives, or any other persons or entities

directly or indirectly employed by or connected with them.

3. Each request should be answered separately and in order.

4. If the Copyright Owner Participants object to any request or sub-part thereof on a

claim of any privilege, including an assertion of the attorney-client privilege or a claim that

responsive Documents constitute attorney work product, the Copyright Owner Participants are

hereby requested to provide at the time ofproduction the basis for the asserted privilege or

immunity set forth for each withheld Document, including the following information: (i) the date

of the Document; (ii) the name of the Document's originator, the name ofthe person(s) to whom

it is addressed and the names of all pcrson(s) who were shown copies or to whom copies were

distributed; (iii) a general physical description of the type ofDocument (e.g., PDF, Word, Excel),

and the subject matter to which it pertains; (iv) the Document's current custodian; and (v) a brief

statement of the basis upon which the Document has been redacted or withheld. PUBLIC VERSION

5. If, for any reason other than a claim ofprivilege, you refuse to respond to any request herein, state the grounds upon which such refusal is based with sufficient particularity to permit a determination of the propriety of such refusal.

6. If, in answering these requests, you claim that any request, or a definition or instruction applicable thereto, is ambiguous, do not use such claim as a basis for refusing to respond, but rather set forth as a part of the response the language you claim is ambiguous and the interpretation you have used to respond to the individual request.

7. Bach ofthe foregoing definitions and instructions is hereby incorporated by reference into, and shall be deemed a part of, each and every other definition and instruction contained herein as well as each specific request set forth below.

8. Unless otherwise stated, the period covered by these requests is from January 1,

2013, or the earliest date for which the Copyright Owner Participants seeks Documents from the

Services, to the present. In the event SoundBxchange seeks Documents from thc Services from a date earlier than January 1, 2013, all references to January 1, 2013 herein shall be replaced with such earlier date.

RK UESTS X~'OR DOCUMENTS

1. Any Documents requested in the Services'equests dated June 20, 2016 that have not already been produced in this SDARS III Proceeding.

2. All prior CARP/CRB written, oral, and deposition testimony and exhibits from any witness offering Testimony in support ofthe Copyright Owner Participants in this SDARS III

Proceeding. PUBS IC VERSION

Re uests-Directed Yo'Record Cpm anies

l. Each request propounded by the Services on June 20, 2016 on each of Sony, UMG, and WMG is hereby propounded on each Record Company as defined. Each such Record

Company is directed to respond to the requests served on Sony as if the requests had been directed to such Record Company — i.e., replacing the term "Sony" and "Sony Music

Entertainment" each time it appears with the name of such Record Company.

2. For each Record Company, Documents sufficient to show the amount ofrevenue received from SoundExchange in each year from 2013 to the present (and ye'ar to date for 2016) for the SDARS and PSS statutory licenses.

3. For each Record Company, artist contracts for each ofthe Record Company's top 10 highest selling active front-linc artists over the 2013-2016 period.

4. For each Record Company, Documents sufficient to show for all current Record

Company artists, the amount of any recoupable advances given since January 1, 2013, and the amount of such advances actually recouped to date.

5. Documents sufficient to show each Record Company's share on playlists on on- demand services, including relative to the share of other record companies on the same playlists/services, and relative to each Record Company's share ofuse on other services or types of services.

6. Documents sufficient to show, for each year from 2012 to 2016, the number ofnew artists signed by each Record Company and the number of new albums and singles released by each Record Company. PUBLIC VERSION

7. For each Record Company, Documents sufficient to show the amount ofrevenue received from SoundExchange in each year from 2013 to the present (and year to date for 2016) for the CABSAT license in the aggregate, and for each individual CABSAT licensee.

8. For each Record Company, Documents sufficient to show the amount of revenue received from SoundExchange in each year from 2013 to the present (and year to date for 2016) for the PSS license in the aggregate, and for each individual PSS licensee.

9. Documents sufficient to show each Record Company's annual operational costs by category for the years 2012 to 2016, including but not limited to the following categories: Artist k Repertoire ("A&R") staff, marketing and promotion, manufacturing and distribution, executive, legal, finance, copyright and royalties, information technology, digital distribution, human resources, corporate development and administrative departments.

10. Documents sufficient to show ariy of the costs enumerated in Request 9 above that are attributable to the use of such Record Company'ound recordings by any PSS, CABSAT or satellite radio service, including income statements.

Re uests Directed To Spun'dRxchari e:

1. For each CABSAT and PSS licensee that has made payments to SoundExchange in the years 2013 to present, Documents sufficient to show the annual amounts paid to

SoundExchange by each licensee for each year, and year to date for 2016.

2. For any audit of a CABSAT or PSS licensee (including audits ofthose liccnsces'on-

CABSAT and non-PSS license payments) by SoundExchange commenced, conducted, or completed in thc years 2013 to present, including but not limited to the audit of Stingray

Digital's CABSAT and BES payments for the years 2011-2013 and DMX's CABSAT payments for the years 2012-2014, all Documents concerning such audits, including all audit reports, drafts PUBLIC VERSION

of audit reports, internal communications, external communications, notes, working papers, internal analyses, spreadsheets, and financial Documents.

3. All Documents concerning the financial condition of Stingray Digital, including without limitation the financial performance of its CABSAT service.

4. All Documents concerning the financial performance of any CABSAT or PSS service.

5. For each CABSAT or PSS licensee that made payments to SoundExchange covering or during the time from 2013 to the present, all statements of account and other reporting

Documents submitted by each such licensee for their CABSAT, PSS, and webcasting services.

6. All correspondence between SoundExchange and each CABSAT or PSS licensee.

7. All analyses, memoranda, presentation decks, studies, surveys, research findings, or other similar Documents concerning the CABSAT rates.

8. All Documents concerning the negotiation of the settlement that resulted in the current CABSAT rates, including internal and external communications, analyses, memoranda, abstracts, notes, working papers and draft agreements.

9. All Documents concerning the submission of the settlement that resulted in the current CABSAT rates to the Copyright Royalty Board for approval and adoption of the rates therein.

Re ucstsDirectcdYoAIICo ri htOwnerPartici ants

1. All analyses, memoranda, presentation decks, studies, surveys, research findings, or

other similar Documents concerning the comparative value of sound recordings and the musical works embodied therein.

10 PUBLIC VERSION

October 24, 2016 Respectfully submitted,

Isl R. Bruce Rich ls/ Paul Fakler

R. Bruce Rich Paul Fakler Randi W. Singer Eric Roman Todd D. Larson John Sullivan David Yolkut Margaret Wheeler-Frothingham WEIL, GOTsHAL & MANGHs LLP ARENT Fox LLP 767 FiAh Avenue 1675 Broadway New York, New York 10153 New York, New York 10019-5874 Fax: (212) 310-8007 Fax: (212) 484-3990 r.bruce.richiweil.corn [email protected] randi.singer weil.corn [email protected] [email protected] [email protected]@arentfox.corn [email protected]

Martin Cunniff Counselfor Sirius XVRadio Inc. Jackson Toof ARENT Fox LLP 1717 K Street, N.W. Washington, DC 20006-5344 Fax: (202) 857-6395 martin.cunniff@arentfox,corn jackson.toof arentfox.corn

Counselfor Music Choice

39 CERTIFICATE OF SERVICE

I hereby certify that on October 24, 2016, I caused a copy of the PUBLIC version of Sirius XM Radio Inc.'s and Music Choice's Requests for Production ofDocuments to the Copyright Owner Participants, to be served by email to the participants listed below. A hard copy will follow by First Class Mail.

David Handzo Steven Englund Jared Freedman Devi M. Rao JENNER & BLOCK LLP 1099 New York Ave., NW, Suite 900 Washington, DC 20001 P: 202-639-6000 F: 202-639-6066 [email protected] senglund jenner.corn [email protected] [email protected]

Counselfor SoundExchange (SX); The American Federation ofMusicians ofthe United States and Canada (AFM); Screen Actors Guild and American Federation of Television and Radio Artists (SA G- AFTRA); American Association of Independent Music (A2IM); Universal Music Group (UMG); Sony Music Entertainment (Sony); Warner Music Group (WMG); Recording Industry Association ofAmerica (RIAA)

Is/Ro Gilchrist Roy Gilchrist reer eeeee PUBLIC VERSION

Before the UNITED STATES COPYRIGHT ROYALTY JUDGES The Library of Congress

Docket No. 16-CRB-0001-SR/PSSR In re (2018-2022)

Determination ofRoyalty Rates and Terms for Transmission of Sound Recordings by Satellite Radio and "Preexisting" Subscri tion Services SDARS Ill

RESPONSES AND OBSECTIONS TO THE SECOND SKT OF REQUESTS FOR PRODUCTION OF DOCUMENTS TO THE COPYRIGHT OWNER PARTICIPANTS FROM SIRIUS XM AND MUSIC CHOICE&

SoundExchange, Inc., the Recording Industry Association ofAmerica ("RIAA"), Sony

Music Entertainment ("Sony"), Universal Music Group ("UMG"), Warner Music Group

("WMG"), the American Association ofIndependent Music ("A2IM"), the American Federation

ofMusicians ofthe United States and Canada ("AFM"), and the Screen Actors Guild and

American Federation ofTelevision and Radio A'rtists ("SAG-AFTRA") (collectively,

"SoundExchange") by its attorneys, hereby responds and objects to the Second Set of Requests

for Production of Documents from Sirius XM and Music Choice (the "Requests").

GKNKRAI OBJECTIONS

1. SoundExchange objects to the Requests, including all Definitions and Instructions, to the

extent they purport to impose upon SoundExchange requirements that exceed or are inconsistent with 17 U.S.C. g 803(b), 37 C.F.R. g 351.5, or any other applicable rule or order governing this proceeding, including applicable prior precedent.

2. SoundExchange objects to the Requests, including all Definitions and Instructions, as overbroad and unduly burdensome to the extent any Request would require SoundExchange to spend an unreasonable amount oftime, effort and resources in order to respond when balanced PUBLIC VERSION against the potential probative value ofthe documents requested, and to the extent that full compliance with any Request is not possible in the time allowed by the governing statute, . regulations and discovery schedule.

3. SoundExchange objects to the Requests, including all Definitions and Instructions, to the extent they seek documents that are not "directly related" to SoundExchange's Written Direct

Statement. See 17 U.S.C. $ 803(b)(6)(C)(v), 37 C.F.R. $ 351.5(b). SoundExchange also objects to the Requests to the extent they include "broad, nonspecific discovery requestfs]" disallowed by 37 C.F.R. $ 351.5(b).

4. SoundExchange objects to the Requests, including all Definitions and Instructions, to the extent they are ambiguous, duplicative, and/or vague.

5. SoundExchange objects to the Requests, including all Definitions and Instructions, to the extent they are oppressive, harassing, overbroad, and/or unduly burdensome.

6. SoundExchange objects to the Requests, including all Definitions and Instructions, to the extent they call for information that is already in the possession of the parties propounding these

Requests or call for information that is publicly available and readily accessible. Such Requests are overbroad, unduly burdensome, oppressive, and harassing, and would needlessly increase the cost of this proceeding.

7. SoundExchange objects to the Requests, including all Definitions and Instructions, to the extent they seek information or documents protected from discovery under any statute, regulation, agreement, protective order or privilege, including, but not limited to, the attorney- client privilege and work-product immunity doctrine. Any inadvertent disclosure of such information shall not be deemed a waiver ofthe attorney-client privilege, the attorney work- product immunity doctrine, and any other applicable privilege or doctrine. PUBLIC VERSION

8. SoundExchange objects to the Requests, including all Definitions and Instructions, to the

extent any Request contains factually inaccurate information or statements, is argumentative, is

predicated on erroneous assumptions or states legal conclusions. The statements and omissions

in SoundExchange's responses and objections, including any statement that SoundExchange will

produce documents responsive to a Request, do not indicate and should not be construed as meaning that SoundExchange agrees, admits, or otherwise acknowledges the characterization of fact or law or the factual expressions or assumptions contained in the Request, that the scope of the Request is consistent with the discovery permitted in this proceeding, or that the documents are relevant and admissible.

9. SoundExchange objects to the Requests, including all Definitions and Instructions, to the extent they seek documents that are not in the possession, custody, or control of SoundExchange, including documents from members of SoundExchange.

10. SoundExchange objects to the Requests, including all Definitions and Instructions, to the extent they seek documents from other proceedings. Such requests are overbroad, harassing, and unduly burdensome. SoundExchange further objects to such requests to the extent they violate or are inconsistent with any statute, rule, order, or other authority governing the other proceeding, including applicable protective orders and prior precedent.

11. SoundExchange objects to the Requests, including all Definitions and Instructions, to the extent they seek "all documents" of a certain nature, as vague, ambiguous, overbroad, and unduly burdensome.

12. SoundExchange objects to the Requests, including all Definitions and Instructions, to the extent they seek documents that do not exist or are not maintained in the ordinary course of business. SoundExchange further objects to the Requests, including all Definitions and PUBLIC VERSION

Instructions, to the extent they seek to require the creation of documents or the compilation of

documents in a manner different from the manner in which they are maintained in the ordinary

course of business.

13. By agreeing to search for and produce documents responsive to any particular Request,

SoundExchange does not represent that such documents exist or that they are in the possession,

custody or control of SoundExchange, or that all documents responsive to the Request fall within

the permissible scope of discovery or will be produced.

14. SoundExchange reserves any and all objections to the use or admissibility in any

proceeding ofany information, material, documents, or communications identified, produced or

disclosed in response to the Requests.

15. SoundExchange objects to the Requests, including all Definitions and Instructions, as

overbroad, unduly burdensome, oppressive, and harassing to the extent they seek the production of draft documents, which may be numerous and irrelevant to resolution ofthe issues in this proceeding. The search for and review ofdry documents would needlessly increase the burden ofdiscovery and is not reasonable within the limited time afforded for discovery in this proceeding.

16. SoundExchange objects to the Requests, including all Definitions and Instructions, that seek to impose obligations on entities that are not participants in this proceeding and have not provided a witness in this proceeding. Such blanket requests are overbroad and unduly burdensome and not directly related to SoundExchange's written direct case.

17. SoundExchange objects to the Requests, including all Definitions and Instructions, to the extent they mischaracterize or misquote testimony, or quote or refer to testimony out ofcontext. PUBLIC VERSION

1S. SoundExchange objects to the Requests, including all Definitions and Instructions, to the

extent they seek documents in relation to testimony that was based on a witness's knowledge,

experience, and/or generally acknowledged facts.

19. SoundExchange objects to the Requests, including all Definitions and Instructions, to the

extent they seek documents which the parties have, by written agreement regarding the scope of

expert discovery, agreed not to seek from or produce to one another.

20. 'SoundExchange objects to the Requests, including all Definitions and Instructions, to the

extent they seek documents already produced in this proceeding, and to the extent they seek

documents the discovery ofwhich is cumulative.

21. The responses and objections contained herein are made to the best of SoundExchange's

present knowledge, belief, and information, and are based on a reasonable, diligent, and ongoing

search. SoundExchange reserves the right to amend or supplement its objections and responses based on, among other reasons, its continuing investigation ofthis matter, further review, or later acquisition of responsive information.

OBJECTIONS TO DEFINITIONS

1. SoundExchange objects to the definition of"A2IM," in Definition No. 1 as overbroad, unduly burdensome, oppressive, harassing, and beyond the scope ofpermissible discovery in this proceeding, to the extent it purports to impose an obligation to collect documents from an unreasonably wide array ofpeople and entities, including and not limited to anyone acting on

A2IM's behalf. A2IM objects to the inclusion ofboard and committee members in the definition as overbroad, unduly burdensome, oppressive and harassing. A2IM also objects to the definition to the extent it seeks to impose an obligation to produce record company documents not in the possession, custody or control of A2IM, and objects to the term "affiliated companies" as vague PUBLIC VERSION

and ambiguous. A2IM further objects to the Definition to the extent it imposes an obligation to

produce competitively sensitive information from record companies. A2IM does not collect or

possess such information.

2. SoundExchange objects to the definition of "ADA" in Definition No. 2 as overbroad,

unduly burdensome, oppressive, harassing, and beyond the scope of permissible discovery in this

proceeding, to the extent it purports to impose an obligation to collect documents related to an

unreasonably wide array ofpeople and entities, including and not limited to anyone acting on

ADA's behalf.

3. SoundExchange objects to the definition of "AFM," in Definition No. 3 as overbroad,

unduly burdensome, oppressive, harassing, and beyond the scope of permissible discovery in this

proceeding, to the extent it purports to impose an obligation to collect documents from an

unreasonably wide array of people and entities, including board members, committee members,

and anyone acting on AFM's behalf. AFM objects to the Definition as overbroad, unduly

burdensome, oppressive, harassing and beyond the scope ofpermissible discovery in this proceeding, to the extent it seeks to impose an obligation on any member of AFM that is not a participant and has not supplied a witness in this proceeding. AFM also objects to the definition to the extent it seeks to impose an obligation to produce documents not in AFM's possession, custody or control and objects to the term "affiliated companies" as vague and ambiguous.

4. SoundExchange objects to the definition of "Digital Music Service" in Definition No. 4 to the extent it purports to define the relevant universe of service providers and services as broadly as possible without limitation to issues that are relevant to this proceeding. To the extent the Requests purport to impose an obligation to produce documents related to the overbroad array of services described in the definition, including but not limited to downloads, cloud PUBLIC VERSION

services, ringtones, masterones and ringbacks, and including services operating outside the

United States, SoundExchange objects to the definition as irrelevant, overbroad, unduly

burdensome, oppressive, harassing, and not reasonably limited to the issues in this proceeding.

5. SoundExchange objects to the definition of "Document" and "documents" in Definition

No. 5 to the extent it purports to impose obligations beyond the scope ofthe applicable statute

and regulations governing discovery in this proceeding, including 17 U.S.C. $ 803(b), 37 C.F.R.

$ 351.5, and any other applicable rule or order governing this proceeding, and to the extent it

suggests that the Federal Rules of Civil Procedure govern discovery in this proceeding.

6. SoundExchange objects to the definition of"Copyright Owner Participants," in

Definition 7 to the extent it incorrectly implies that all ofthe listed participants are in fact

7. SoundExchange objects to the definition of "Record Company" in Definition No. 10 as

overbroad, unduly burdensome, oppressive, harassing and not reasonably limited to the issues in

this proceeding to the extent it seeks to impose obligations on record companies and distribution

companies that are not participants and have not supplied witnesses in this proceeding. Such an

overbroad definition is impermissible under 37 C.F.R. g 351.5(b)(1). SoundExchange objects to

the inclusion in the definition of board members of certain participants for the additional reason

that SoundExchange has already produced and is producing documents sufficient to provide

information about independent record companies, including evidence ofthe thick market of

agreements, rates and terms. SoundExchange objects to the definition to the extent it seeks to

impose an obligation to produce documents that are not in SoundExchange's possession, custody

or control. SoundExchange objects to the term "affiliate recording companies" as vague and ambiguous. SoundExchange also objects to the definition because it conflates the ownership and PUBLIC VERSION distribution ofsound recordings, and to the extent that it purports to impose obligations on distributors to produce documents related to third-party labels they distribute.

S. SoundExchange objects to the definition of"RIAA" in Definition No. 11 as overbroad, unduly burdensome, oppressive, harassing, and beyond the scope ofpermissible discovery in this proceeding, to the extent it purports to impose an obligation to collect documents from an unreasonably wide array ofpeople and entities, including and not limited to anyone acting on

RIAA's behalf. RIAA objects to the inclusion of board and committee members in the definition as overbroad, unduly burdensome, oppressive and harassing. RIAA also objects to the definition to the extent it seeks to impose an obligation to produce record company documents not in the possession, custody or control ofthe RIAA, and objects to the term "affiliated companies" as vague and ambiguous. RIAA further objects to the definition to the extent it imposes an obligation on RIAA to produce competitively sensitive information from record companies.

RIAA does not collect or possess such information.

9. SoundExchange objects to the definition of "SAG-AFTRA" in definition No. 12 as overbroad, unduly burdensome, oppressive, harassing, and beyond the scope of permissible discovery in this proceeding, to the extent it purports to impose an obligation to collect documents from an unreasonably wide array ofpeople and entities, including board members, committee members, and anyone acting on SAG-AFTRA's behalf. SAG AFTRA objects to the

Definition as overbroad, unduly burdensome, oppressive, harassing and beyond the scope of permissible discovery in this proceeding, to the extent it seeks to impose an obligation on any member of SAG-AFTRA that is not a participant and has not supplied a witness in this proceeding. SAG-AFTRA also objects to the Definition to thc extent it seeks to impose an PUBLIC VERSION obligation to produce documents not in SAG-AFTRA's possession, custody or control and objects to the term "affiliated companies" as vague and ambiguous.

9. SoundExchange objects to the definition of"Sony" in Definition No. 16 as overbroad, unduly burdensome, oppressive, harassing, and beyond the scope of permissible discovery in this proceeding, to the extent it purports to impose an obligation to collect documents related to an unreasonably wide array ofpeople and entities, including and not limited to anyone acting on

Sony's behalf.

10. SoundExchange objects to the definition of "SoundExchange," in Definition No. 17 as overbroad, unduly burdensome, oppressive, harassing, and beyond the scope of permissible discovery in this proceeding, to the extent it purports to impose an obligation to collect documents from an unreasonably wide array ofpeople and entities, including but not limited to anyone acting on SoundExchange's behalf. SoundExchange objects to the term "affiliated companies" as vague and ambiguous. To the extent that term seeks to impose an obligation to produce documents from the thousands of record companies to whom SoundExchange distributes royalty payments, it is overbroad, unduly burdensome, oppressive, harassing, and beyond the scope ofpermissible discovery in this proceeding.

11. SoundExchange objects to the definition of"Stingray Digital" in Definition 18 to the extent it purports to impose an obligation to collect and produce documents not in

SoundExchange's possession, custody or control. SoundExchange objects to the definition as overbroad, unduly burdensome, oppressive, harassing, and beyond the scope ofpermissible discovery in this proceeding, to the extent it purports to impose an obligation to collect documents unrelated to this proceeding. PUBLIC VERSION

11. SoundExchange objects to the definition of "The Orchard" in Definition 20 as overbroad, unduly burdensome, oppressive, harassing, and beyond the scope ofpermissible discovery in this proceeding, to the extent it purports to impose an obligation to collect documents related to an unreasonably wide array ofpeople and entities, including but not limited to anyone acting on The

Orchard's behalf.

12. SoundExchange objects to the definition of"WMG" in Definition No. 22 as overbroad, unduly burdensome, oppressive, harassing, and beyond the scope ofpermissible discovery in this proceeding, to the extent it purports to impose an obligation to collect documents related to an unreasonably wide array of people and entities, including but not limited to anyone acting on

WMG's behalf.

13. SoundExchange objects to the definition of "UMG'* in Definition No. 23 as overbroad, unduly burdensome, oppressive, harassing, and beyond the scope ofpermissible discovery in this proceeding, to the extent it purports to impose an obligation to collect documents related to an unreasonably wide array of people and entities, including but not limited to anyone acting on

UMG's behalf.

OBJECTIONS TO INSTRUCTIONS

1. SoundExchange objects to the Instructions to the extent they seek to impose obligations that are inconsistent with or not supported by the governing statute or regulations.

2. SoundExchange objects to Instruction No. 1 to the extent it is inconsistent with the requirements imposed by statute, regulations and the Court's "Notice of Participants,

Commencement ofVoluntary Negotiation Period, and Case Scheduling Order."

3. SoundExchange objects to Instruction No. 2 as overbroad, unduly burdensome, harassing, oppressive, to the extent it seeks to impose obligations beyond the scope of permissible

10 PUBLIC VERSION

discovery in this proceeding. SoundExchange also objects to the Instruction as overbroad, f unduly burdensome, harassing, oppressive, and exceedingly vague to the extent that it seeks to

impose an obligation to collect documents from an unreasonably wide array ofpeople and

entities, including but not limited to attorneys, agents, employees, representatives, or any other

persons or entities directly or indirectly employed by or connected with the identified entities.

There are thousands of people and entities who might fit this description and the request to produce documents in the possession ofany ofthem is egregiously overbroad.

4. SoundExchange objects to Instruction No. 4's request for a privilege log, which purports to impose upon SoundExchange requirements that exceed 17 U.S.C. g 803(b), 37 C.F.R. $ 351.5, and any other applicable rule or order governing this proceeding. The governing statute and regulations do not provide for the exchange ofprivilege logs, and providing privilege logs would be extremely burdensome given the limited time for discovery in this proceeding.

SoundExchange will not produce a privilege log in connection with its production of documents.

5. SoundExchange objects to Instruction No. 6 to the extent it seeks to impose an obligation to interpret language that is ambiguous.

6. SoundExchange objects to Instruction No. 8 to the extent it seeks documents from time periods the Services themselves have deemed not reasonably related to the matters in this proceeding (i.e., time periods prior to January 1, 2013). Unless otherwise indicated in response to a specific Request, SoundExchange will produce documents for the time period January 1,

2013 through the present.

RESPONSES AND OHJECTIONS

Document Request No. 1. Any Documents requested in the Services'equests dated June 20, 2016 that have not already been produced in this SDARS Ill Proceeding,

11 PUBLIC VERSION

to this request as overbroad, oppressive, harassing, unduly burdensome and not reasonably

related to the matters at issue in this proceeding to the extent that it requests documents from

time periods prior to January 1, 2013. SoundExchange objects to this request to the extent it

seeks documents not in the possession, custody or control of SoundExchange.

Additionally, SoundExchange objects to this request because the request for documents

showing costs "attributable" to the use of sound recordings by certain services is ambiguous and vague. In the ordinary course of business, record companies do not generally account for which costs are specifically attributable to which services. Services such as the SDARS and PSS make use of sound recordings, and record companies incur inany costs in creating and marketing the sound recordings used by those services. SoundExchange has already produced documents and provided testimony that show such costs. Without waiver ofand subject to SoundExchange's general and specific objections, SoundExchange will produce additional responsive, non- privileged documents for the time period 2013-present, if any, directly related to

SoundExchange's written direct statement that are located after a reasonable and diligent search.

Rc uests Directed Yo So'undE&xcchan e

Document Request No. 1. For each CABSAT and PSS licensee that has made payments to SoundExchange in the years 2013 to present, Documents sufficient to show the annual amounts paid to SoundExchange by each licensee for each year, and year to date for 2016.

RESPONSE: SoundExchange incorporates all of its General Objections and Objections to Definitions and Instructions as if fully stated here. SoundExchange objects to this request to the extent it seeks information in Sirius XM's and Music Choice's possession, custody and control — that is, information about the amounts they themselves paid to SoundExchange for their

CABSAT and PSS services. Such a request is harassing and needlessly increases the burden and cost of discovery. Without waiver of and subject to SoundExchange's general and specific

19 PUBLIC VERSION

objections, SoundExchange will produce responsive, non-privileged documents, if any, directly

related to SoundExchange's written direct statement that are located after a reasonable and

diligent search.

Document Request No. 2. For any audit of a CABSAT or PSS licensee (including audits of those licensees'on-CABSAT and non-PSS license payments) by SoundExchange commenced, conducted, or completed in the years 2013 to present, including but not limited to the audit of Stingray Digital's CABSAT and BES payments for the years 2011-2013 and DMX's CABSAT payments for the years 2012-2014, all Documents concerning such audits, including all audit reports, drafts of audit reports, internal communications, external communications, notes, working papers, internal analyses, spreadsheets, and financial Documents.

RESPONSKi SoundExchange incorporates all of its General Objections and Objections

to Definitions and Instructions as if fully stated here. SoundExchange objects to this request to

the extent it seeks documents not "directly related" to SoundExchange's written direct statement,

as required by 37 Q.F.R. $ 351.5(b)(1). SoundExchange objects to this request because it is

overbroad and not reasonably limited to the issues in this proceeding. SoundExchange objects to

the request to the extent it seeks information or documents protected &om discovery by the

attorney-client privilege, work-product immunity doctrine, and any other applicable privilege or

doctrine. SoundExchange objects to the extent this request seeks information in Sirius XM's

and Music Choice's possession, custody and control — that is, audits of their services and

communications with them about their services. Such a request is harassing and needlessly

increases the burden and cost of discovery. SoundExchange objects to this request to the extent that it requests documents to time periods prior to January 1, 2013. In addition, the request for draAs, working papers and internal communications is unduly burdensome, harassing and not reasonably calculated to lead to the discovery ofadmissible evidence. The audits speak for themselves. Without waiver of and subject to SoundExchange's general and specific objections,

20 PUBLIC VERSION

SoundExchange will produce responsive, non-privileged documents, if any, directly related to

SoundExchange's written direst statement that are located after a reasonable and diligent search.

Document Request No. 3. All Documents concerning the financial condition of Stingray Digital, including without limitation the financial performance of its CABSAT service.

SoundExchange objects to the request to the extent it seeks information or documents protected from discovery by the attorney-client privilege, work-product imnunity doctrine, and any other applicable privilege or doctrine. Without waiver of and subject to SoundExchange's general and specific objections, SoundExchange will produce responsive, non-privileged documents, if any, directly related to SoundExchange's written direct statement that are located after a reasonable and diligent search.

Document Request No. 4. All Documents concerning the financial performance of any CABSAT or PSS service.

RESPONSE: SoundExchange incorporates all of its General Objections and Objections to Definitions and Instructions as. if fully stated here. SoundExchange objects to this request to the extent it seeks documents not "directly related'* to SoundExchange's written direct statement, as required by 37 C.F.R. g 351.5(b)(1). SoundExchange objects to the request for all documents as overbroad, harassing, and unduly burdensome. SoundExchange objects to the request to the extent it seeks information or documents protected from discovery by the attorney-client

21 PUBLIC VERSION privilege, work-product immunity doctrine, and any other applicable privilege or doctrine

SoundExchange objects to this request because it calls for documents that are already in your possession, custody or control. Without waiver of and subject to SoundExchange's general and specific objections, SoundExchange will produce responsive, non-privileged documents, if any, directly related to SoundExchange's written direct statement that are located after a reasonable and diligent search.

Document Request No. 5. For each CABSAT or PSS licensee that made payments to SoundExchange covering or during the time from 2013 to the present, all statements of account and other reporting Documents submitted by each such licensee for their CABSAT, PSS, and webcasting services.

"other reporting Documents" is vague and ambiguous. To the extent that refers to reports ofuse, it is unduly burdensome. Reports of use contain a large volume of information, none of which is reasonably calculated to lead to the discovery ofrelevant or admissible information. Without waiver of and subject to SoundExchange's general and specific objections, SoundExchange will produce responsive statements of account that are located aAer a reasonable and diligent search.

Document Request No. 6. All correspondence between SoundExchange and each CABSAT or PSS licensee.

RESPONSK: SoundExchange incorporates all of its General Objections and Objections to Definitions and Instructions as if fully stated here. SoundExchange objects to this request to the extent it seeks documents not "directly related" to SoundExchange's written direct statement,

22 PUBLIC UERSION

as required by 37 C.F.R. $ 351.5(b)(1). This is precisely the kind of "broad, nonspecific discovery request" disallowed by 37 C.F.R. $ 351.5(b) (1). SoundExchange objects to this request because it is overbroad, unduly burdensome, harassing and not reasonably limited to the X issues in this proceeding — indeed, the request seeks "all correspondence" and reflects a failure to limit the request to the subject matters at issue in this proceeding. SoundExchange objects to this request because it calls for documents that are already in your possession, custody or control

— communications with Sirius XM's Cabsat service and Music Choice's PSS service.

SoundExchange does not agree to search for or produce the documents sought by this request.

Without waiver of and subject to SoundExchange's general and specific objections, to the extent that the Services propose a reasonable limitation on this request, SoundExchange will consider it.

Document Request Wo. 7. All analyses, memoranda, presentation decks, studies, surveys, research findings, or other similar Documents concerning the CABSAT rates.

RESPONSE: SoundExchange incorporates all ofits General Objections and Objections to Definitions and Instructions as if fully stated here. SoundExchange objects to the request for all documents of various types as overbroad, harassing, and unduly burdensome.

SoundExchange objects to the request to the extent it seeks information or documents protected from discovery by the attorney-client privilege, work-product immunity doctrine, and any other applicable privilege or doctrine. Without waiver ofand subject to SoundExchange's general and specific objections, SoundExchange will produce responsive, non-privileged documents, if any, directly related to SoundExchange's written direct statement that are located afler a reasonable and diligent search.

Document Request No. 8. All Documents concerning the negotiation ofthe settlement that resulted in the current CABSAT rates, including internal and external communications, analyses, memoranda, abstracts, notes, working papers and draft agreements.

23 PUBLIC VERSION

RESPONSE: SoundExchange incorporates all of its General Objections and Objections to Definitions and Instructions as if fully stated here. Moreover, SoundExchange negotiated the

Cabsat rates with Sirius XM. Accordingly, SoundExchange objects to this request to the extent it calls for docuinents that are already in your possession, custody or control. Such a request is harassing and needlessly increases the burdens and cost of discovery.

SoundExchange also objects to the request to the extent it seeks information or documents protected from discovery by the attorney-client privilege, work-product immunity doctrine, and any other applicable privilege or doctrine. SoundExchange further objects to providing the parties against whom it negotiates the Cabsat rates with its internal analyses of those negotiations. Without waiver of and subject to SoundExchange's general and specific objections, SoundExchange has conducted a reasonable and diligent search and has and determined it does not possess any non-privileged internal documents responsive to this request.

SoundExchange will not produce documents in response to this request.

Document Request No. 9. All Documents concerning the submission of the settlement that resulted in the current CABSAT rates to the Copyright Royalty Board for approval and adoption of the rates therein.

RESPONSE: SoundExchange incorporates all of its General Objections and Objections to Definitions and Instructions as if fully stated here. SoundExchange objects to this request as overbroad, unduly burdensome, harassing, and not reasonably limited to the issues in this proceeding, to the extent it seeks all documents. SoundExchange objects to the request to the extent it seeks information or documents protected from discovery by the attorney-client privilege, work-product immunity doctrine, and any other applicable privilege or doctrine.

SoundExchange objects to this request because it calls for documents that are already in your possession, custody or control. Such a request is harassing and needlessly increases the burden PUBLIC VERSION

and cost of discovery. Without waiver of and subject to SoundExchange's general and specific

objections, SoundExchange has conducted a reasonable and diligent search and has determined it

does not possess any non-privileged internal documents responsive to this request..

Re uests Directed To All Co ri htOwnerPartici ants

Document Request No. 1. All analyses, memoranda, presentation decks, studies, surveys, research findings, or other similar Documents concerning the comparative value of sound recordings and the musical works embodied therein.

RESPONSE: SoundExchange incorporates all of its General Objections and Objections to Definitions and Instructions as if fully stated here. SoundExchange objects to this request to the extent it seeks documents not "directly related" to SoundExchange's written direct statement, as required by 37 C.F.R. $ 351.5(b)(1). SoundExchange objects to this request because it is overbroad in that it seeks documents related to a very general subject matter, and because it is not reasonably limited to the issues in this proceeding. SoundExchange objects to this request to the extent it is duplicative ofother document requests served by you in this proceeding. Without waiver of and subject to SoundExchange's general and specific objections, SoundExchange will produce additional responsive, non-privileged documents, if any, directly related to

SoundExchange's written direct statement that are located after a reasonable and diligent search.

Document Request No. 2. All communications among andlor between executives and board members ofthe Record Companies or Copyright Owner Participants discussing Sirius XM's direct license program, and communications between such individuals and another record company regarding a direct license offer to that company by Sirius XM, including without limitation emails, correspondence, draft press releases, final press releases, and anyjoint representation or common interest agreements.

RESPONSE: SoundExchange incorporates all of its General Objections and

Objections to Definitions and Instructions as if fully stated here. The CRB previously ruled in this proceeding that a similar request was overbroad and unduly burdensome. This request remains objectionable for the same or similar reasons and because it is not directly related to

25 PUBLIC VERSION

Sony has purchased. SoundExchange objects to the request to the extent it seeks information or

documents protected from discovery by the attorney-client privilege, work-product immunity

doctrine, and any other applicable privilege or doctrine. SoundExchange objects to this request

to the extent it seeks negotiating documents for agreements not used as benchmarks by

SoundExchange in this proceeding. Without waiver of and subject to SoundExchange's general and specific objections, to the extent that the Services propose a reasonable limitation on this request, SoundExchange will consider it.

Respectfully submitted,

Jared O. Freedman (DC Bar 469679) David A. Handzo (DC Bar 384023) Steven R, Englund (DC Bar 425613) JENNER & BLOCK LLP 1099 New York Ave., N.W., Suite 900 Washington, D.C. 20001 (v) (202) 639-6000 (f) (202) 639-6066 dhandzo jenner.corn [email protected] [email protected] Dated: November 14, 2016

112 PUBLIC VERSION

CERTIFICATE OF SERVICE

I, Alex Trepp, do hereby certify that, on November 14, 2016, copies of the foregoing are being sent via electronic mail to all parties at the email addresses listed below. Hard copies will follow by First Class Mail.

Paul Fakler R. Bruce Rich John Sullivan Randi Singer Margaret Wheeler-Frothingham Todd Larson Miranda Perkins David Yolkut ARENT FOX, LLP Jacob Ebin 1675 Broadway Elizabeth Sperle New York, NY 10019-5874 Jennifer Oliver Fax: (212) 484-3990 WEIL, GOTSHAL k MANGES LLP [email protected] 767 Fifth Avenue [email protected] New York, NY 10153 Margaret.Wheeler arentfox.corn Fax: (212) 310-8007 Miranda.Perkins arentfox.corn [email protected] Randi.Singer weil.corn Jackson Toof Todd.Larson@weil,corn ARENT FOX, LLP David.Yolkut weil.corn 1717 K Street, N.W. Jacob.Ebin weil.corn Washington, DC 20006-5344 [email protected] Fax: (202) 857-6395 Jennifer.OliverNweil.corn [email protected] Counselfor SiriusXMRadio, Inc. Counselfor Music Choice

Dated: November 14, 2016 I Alex Trepp

113 W W 'W ~eeeeeeereereeeraeee Toof, Jackson

From: Oliver, Jennifer [email protected]& Sent: Friday, December 02, 2016 7.01 PM To: 'jfreedman jenner.corn'akler, Cc: Paul M.; Sullivan, John P.; Toof, Jackson; Yolkut, David; Sperle, Elisabeth; 'Trepp, Alex S.'ATrepp jenner.corn); Larson, Todd Subject: MBA on SX Objections and Responses

Jared,

We are writing to follow up on various questions and issues with SoundExchange's (including the RIAA, Sony, UMB, WMB, A2IM, AFM, and SAG-AFTRA) ("SX") objections and responses to the Second Set of Requests for Production of Documents to the Copyright Owner Participants from Sirius XM (SXM) and Music Choice (MC) (the "Requests"). Can you please let us know your availability for a meet and confer teleconference early next week? Below are a few of the topics we would like to discuss so that you can be prepared:

General Ob ections Definitions Global Issues

1. SX has objected, both in its general objections and in its specific objections, on the grounds that Requests are not "directly related" to SX's WDT. We would like to discuss the basis of each of these objections and to understand which if any documents (or categories of documents) were withheld on that basis.

3. Is SX withholding anything on the basis of its objection to the Requests "to the extent they violate or are inconsistent with any statute, rule, order, or other authority governing the other proceeding, including applicable protective orders and prior precedent&" (See below re: the agreement on expert discovery).

4. With regard to General Objection ¹15, we would like to discuss categories where both sides may agree to produce certain drafts, e.g., negotiation documents.

S. With regard to General Objection ¹18, SX has objected to the Requests "to the extent they seek documents in relation to testimony that was based on a witness's knowledge, experience, and/or generally acknowledged facts." Is SX withholding documents that directly support or contradict testimony that was based on a witness's knowledge, experience, and/or generally accepted facts on this basis?

6. SX objects to the definition of "Stingray Digital" as overbroad "to the extent it purports to impose an obligation to collect documents unrelated to this proceeding." See Objection to definition 11). Is SX withholding any documents on the basis of this objection? What is meant by "unrelated to this proceeding'?"

7. We would like to discuss an agreement that would allow release of restricted information in prior proceedings that SoundExchange doesn't need to redact. As for the request for prior testimony, at a minimum, we would like to discuss production of non-redacted testimony from fact witnesses who control the restricted information and experts whose testimony contains record label or Sirius XM/MC information (but not the restricted information of third parties not in this proceeding). RFPs to Record Com anies

1. Is SX withholding all documents responsive to the Requests propounded on June 20 on the basis that they are not "directly related" to SoundExchange's WDT? Is it withholding ~an documents on this basis?

2. With regard to Request 3, the CRB has ordered (twice) that documents must be produced notwithstanding third party confidentiality provisions. Is SX going to produce these documents in line with those orders?

3. With regard to Request 4 we'd like to understand SX's basis for saying these documents aren't directly related or aren't within the possession, custody, or control of any participant in this proceeding, as well as which responsive documents SX intends to produce in response to other more specific requests.

4. With regard to request to Request 10, we would like to clarify what each sides means by costs "attributable" to the use of sound recordings by certain services.

RFPs to SX

1. We would like to discuss the "directly related" objections, the January 2013 production objection, and whether SX will agree to produce work papers in addition to final documents.

2. With regard to Request ¹5, in the spirit of compromise, we can agree to forego our request for Reports of Use.

3. With regard to Request ¹6, our understanding in that there should not be much correspondence here, and what exists is relevant because it would likely discuss the license or the license payments. We would like to discuss why this is burdensome.

4. With regard to Requests S and 9, SX says it doesn't have any non-privileged internal docs relating to the CABSAT settlement with Sirius XM, but are there external docs? Are any docs being withheld on the basis of privilege?

RFPs to All Co ri ht Owner Partici ants "COPs"

1. With regard to Requests 2 and 3, we are willing to limit our request in line with the Judges'rder dated September 13, 2016, i.e.: "non-privileged communications between and!or among executives and board members ofSoundExchange, RlAA, A2IM, and any of the major labels discussing Sirius XM's direct licenses, and (2) non-privileged communications between such individuals and another record company regarding a direct license offer to that company by Sirius XM. The Services are also willing, for now, to limit the date of such request to January 1, 2013 forword."

RFPs Relatin to Testimon of All Ex erts

1. In its objection to Request 1, SX states that this request this asks for materials the parties have, by written agreement regarding the scope of expert discovery, agreed not to seek from or produce to each other. It is not our intent to alter that agreement, but we do not believe that all documents requested here are subject to that agreement, e.g., materials relied upon in forming opinions and work papers. We would also like to discuss the production of a materials considered list for all SX experts.

2. With regard to Request 3, we would like to discuss how we might obtain permission for production of material covered by protective orders in other proceedings,

RFPs to Wanan 1. We would like to discuss how SX is limiting the production here in general, and to understand the possession, custody, control objection raised.

RFPs to Bender

1. With regard to Request 1, we would like to discuss how we might potentially limit this request for Board minutes such that it is acceptable to both sides.

2. With regard to Request 3, SX appears to refuse to produce drafts of the audit reports or related communications within or between SX and the auditor. We believe work papers, internal discussion, and back and forth correspondence with the auditor, is directly related to the WDT of Mr. Bender, and do not believe production of such materials — which cannot be that voluminous — is overly burdensome. We would like to understand whether SX stands on its objections or would consider some limitation on the request.

RFPs to Kushner

1. With regard to Requests 3, 10, and 15, SX says it will consider reasonable limitations. We would like to confer on what might be acceptable to both sides.

2. With regard to Request 7, as discussed above, the iudges have rules that private third-party confidentiality agreements cannot shield documents from discovery, and SX has put these contracts at issue. We would like to discuss.

RFPs to Sirota

1. With regard to Request 7, we would like to discuss possible limitations acceptable to both sides.

RFPs to Van Arman

1. With regard to Request 2, we would like to discuss possible limitations acceptable to both sides.

2. With regard to Request 7, this request was not limited to Secretly Group's artist contracts. We would like to discuss possible limitations acceptable to both sides.

RFPs to Walker

1. With regard to Request 1, we would like to discuss possible limitations acceptable to both sides.

Please let us know when you are available on Monday through Wednesday to discuss these items. To the extent we identify other issues beyond this preliminary list, we will send those along as well. We reserve all rights.

Best,

Jennifer M. Oliver

Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 enn'fer oliver wei,corn +1 212 310 8480 Direct +1 212 310 8007 Fax

The information contained in this email message is intended only for use of the individual or entity named above. If the reader of this message is not the intended recipient, or the employee or agent responsible to deliver it to the intended recipient, you are hereby notified that any dissemination, distribution or copying of this communication is strictly prohibited. If you have received this communication in error, please immediately notify us by email, postmasteroweil.corn, and destroy the original message. Thank you. 'W e e e e e e e e e e e e e e r r e e e e e e e 0

N .:-& & 5% Nk W--.& & R '& %8 & W- tN Toof, Jackson

From: Freedman, Jared O. &JFreedman jenner.corn& Sent: Tuesday, December 13, 2016 6:35 PM

To: 'Oliver, Jennifer'akler, CC: Paul M.; Sullivan, John P.; Yolkut, David; Sperle, Elisabeth; Trepp, Alex S.; Larson, Todd; Wheeler-Frothingham, Margaret; Toof, Jackson Subject: RE: M8C on SX Objections and Responses

Hi Jennifer and Jackson,

Here's a consolidated response to some of the various questions you'e raised. This response addresses most, but not all, of your questions and comments. We'e still considering the others and will follow up on those.

- Our request to use Dr. Shapiro's Web IV testimony and the documents he relied on in Web IV. Our position is that Sirius XM put these docs in play when Dr. Shapiro relied on the Web IV rate as a benchmark. We believe we are prejudiced by Dr. Shapiro's effectively relying on Web IV Restricted info to which we are denied access. Earlier in the current proceeding, you demanded that we produce Restricted docs that SoundExchange produced in Web IV, even though some of those docs contain third parties'onfidential information, and the CRB ordered us to produce those documents, which we did. We believe you should do the same, especially given the centrality of the Web IV rate to Dr. Shapiro's testimony and to your case. If we file a motion to compel production of Shapiro's Web IV testimony and the documents he relied on in Web IV, will you agree not to oppose the motion {we could note that you have not agreed to produce the documents because of protective order concerns)? - Our request to use surveys that Sirius XM produced in SDARS II. We raised this during our meet and confer last week. I don't believe you have responded to this request yet. Given your request and our agreement {below) to allow you to use our Restricted SDARS I and SDARS II fact testimony, these surveys should be treated in the same manner. - Audit-related documents. With respect to SDARS, PSS and Cabsat, SoundExchange has completed audits of the following services during the 2013-present time period: Sirius XM, Music Choice, Muzak. We will produce {or have produced already) the final audit reports and communications with the audited parties about the audits. SoundExchange also audited Stingray. That audit did not result in a report; instead, the audit was resolved by agreement. We will produce the letter that memorializes resolution of the audit, the supporting schedules and any communications with Stingray related to the audit. We do not agree to produce draft audit reports or internal communications, to the extent any non-privileged documents exist. - Artist contracts. During the meet and confer, we asked what information you wanted from the artist contracts, You indicated that you'e interested in streaming rates and information about recoupment of advances. As discussed, your request for the contracts of the top 10 selling artists will not provide a useful or representative sample. The streaming rates or recoupment status of a particular artist are not particularly relevant. By contrast, our interrogatory response provides information on streaming rates for hundreds of artists. We do not understand why you believe this information is not sufficient. We would be open to hearing your concerns so that we can try to reach a resolution, In addition, we are in the process of identifying documents that would show you information about recoupment for a wider array of artists. These are issues we believe we may be able to resolve through ongoing discussion and, as you may recall, we expressed our willingness to continue discussing how we might resolve these issues without troubling the CRB. (One additional note — Jennifer, your email mentions the bates number for a UMG doc showing aggregate data. As

I clarified at the end of our call, we have not yet produced that document, though I initially thought we had. We will identify it by bates number for you in an upcoming production.) - Objection re testimony based on knowledge and experience, etc. You'e asked a question about a general objection. We did not generally limit our search based on this objection. Our responses to particular requests indicate whether we'e agreed to search for and produce docs. We typically raised this objection where a document request was related to testimony that was based on knowledge or experience. See, e.g., Request No. 6 to Gallien. If you have questions about a particular request, we'e glad to discuss further. - Correspondence between SoundExchange and each PSS and Cabsat licensee, You narrowed this request to correspondence "relating to the statutory license pursuant to which a service pays." This is still a fairly vague and overbroad request. Nonetheless, we believe there are not a lot of responsive documents and that it is thus not worth the time and effort of a discovery dispute. We will produce what we can find following a reasonable search. - Documents related to the negotiation and submission of the Cabsat settlement. As we have discussed, the only responsive external communications were with Sirius XM. We do not believe the request for these documents satisfies the standard for discovery. If you truly want them, there is no reason you cannot obtain those documents from Sirius XM. As for responsive internal communications, we will search for and produce non-privileged documents, if any, that we can find after a reasonable search. - Prior CRB testimony. You requested Restricted testimony from prior CRB proceedings by people who are fact and expert witnesses in the current proceeding. We agree that you can use our Restricted fact witness testimony from

SDARS I and SDARS II, so long as you agree that we can do the same with respect to your Restricted fact witness testimony from those proceedings. None of our current fact witnesses were witnesses in Web III.

Thanks.

Jared

From: Oliver, Jennifer [mailto:[email protected]] Sent: Tuesday, December 13, 2016 5:09 PM To: Freedman, Jared 0, &JFreedmangjenner.corn& Cc: Fakler, Paul M. &Paul,[email protected]&; Sullivan, John P. &John.Sullivanlarentfox.corn&; Yolkut, David &David.Yolkutoweil.corn&; Sperle, Elisabeth &Elisabeth.Sperleeweil.corn&; Trepp, Alex S. [email protected]&; Larson, Todd &Todd.Larsonlweil.corn&; Wheeler-Frothingham, Margaret [email protected]&; Toof, Jackson &Jackson.ToofNarentfox.corn& Subject: RE: Mg C on SX Objections and Responses

Jared,

With the deadline for discovery and motions to compel coming up next week, we would also like to confirm that SoundExchange is still planning to timely produce negotiation documents as agreed upon by the parties. This includes any agreements entered into subsequent to SoundExchange's Web IV production or involving services not included in SoundExchange's Web IV production.

Please advise, thanks.

Jennifer M. Oliver

Weil, Gotshal & Manges LLP 787 Fifth Avenue New York, NY 10153 ennlfer.oliver weil.com +1 212 310 8480 Direct +1 212 310 8007 Fax

From: Oliver, Jennifer Sent: Monday, December 12, 2016 10:26 PM To: Freedman, Jared O. Cc: Fakler, Paul M.; Sullivan, John P.; Yolkut, David; Sperle, Elisabeth; Trepp, Alex S.; Larson, Todd; Wheeler-

'Toof, Frothingham, Margaret; Jackson'ubject: RE: MISC on SX Objections and Responses

Jared, We are writing to memorialize and follow-up on a few items our meet and confer call on Wednesday.

As Jackson mentioned in his email, we would like to see a list of the board members that have not cooperated in searching for materials responsive to our documents requests, or who were not searched at all for any reason. As for your request for Carl Shapiro's restricted testimony and documents relied on in Web IV, we have re-reviewed the protective order from that proceeding do not believe we can produce those documents in this proceeding without violating the protective order. If you have a contrary interpretation of the order, we'e happy to consider it. SXM is requesting communications related to SX's audit of SXM (internal and between SX staff and the auditors, including drafts). As discussed on our call, please let us know whether SX will agree, or whether we will need to move for relief from the CRB. As for SXM's first set of requests propounded on June 20, SX objected to producing responsive to these requests in its most recent objections on the basis that they are not "directly related" to SX's WDT. Is it our understanding that SX is not withholding documents that it has already collected on this basis, but has not gone back to re-search for everything requested in June. SXM reserves its rights to seek updated documents in response to certain of those requests if not covered by the other more recent requests. With regard to Request 3 to the Record Companies, SX indicated it will not produce record company contracts with artists, and contends that its response to Interrogatory number 4 provides sufficient relevant information to satisfy SXM's request. Sirius XM has reviewed that interrogatory response and does not find that it is sufficient, and maintains its request for sample contracts. With regard to Request 4 to the Record Companies (regarding advances), SX agreed to provide bates numbers for aggregate data already produced by UMG and to produce additional album-specific advance data from Atlantic. SXM reserves its rights as to this request pending review of that data, and reiterates its request for similar information from other record companies. With regard to Requests 8 and 9 to SoundExchange, SXM confirmed that these are Music Choice requests and not SXM requests (and that we believe it is appropriate for SX, not SXM, to provide them). With regard to Requests 2 and 3 in the RFPs to All Copyright Owner Participants, SX indicated that it is willing to respond to this request if it is limited to "non-privileged communications between and/or among executives and board members of SoundExchange, RIAA, A2IM, and any of the major labels discussing Sirius XM's direct licenses, and (2) non-privileged communications between such individuals and another record company regarding a direct license offer to that company by Sirius XM... [from] January 1, 2013 forward." With regard to Requests 3, 10, and 15 to Mr. Kushner, based on clarification of the requests provided by SXM, SX indicated it would let us know how it proposes to limit this Request to reduce burden on SX. Please advise. With regard to SXM's RFPs to Pascal, SX indicated that it would take SXM's objection to SX's refusal to produce these relevant documents under advisement. Please advise on your position with respect to these requests. ~ With regard to Request 1 to Mr. Walker, SX agreed that the volume of responsive documents should be small, and indicated that it would take SXM's objection to its refusal to produce under advisement. Please advise on your position with respect to this request.

We look forward to hearing from you soon.

Best,

Jennifer Iyl ~ Oliver

Weil, Gotshal & Manges LLP 767 Fiffh Avenue New York, NY 10153 'enn'fe .oliver wei . m +1 212 310 8480 Direct +1 212 310 8007 Fax

From: Toof, 3ackson [ ': a n T f r . ] Sent: Friday, December 09, 2016 12:29 PM To: Freedman, 3ared O.; Oliver, 3ennifer Cc: Fakler, Paul M.; Sullivan, 3ohn P.; Yolkut, David; Sperle, Elisabeth; Trepp, Alex S.; Larson, Todd; Wheeler- Frothingham, Margaret Subject: RE: MSC on SX Objections and Responses

Jared,

I omitted two points to my email below.

In addition to the A2IM board members referenced in D. below, please include in the list RIAA board members whose companies have not cooperated with searching for materials responsive to the document requests.

With respect to Request No. 2 to Soundfxchange, please advise whether the audit of Stingray has been compieted. If it has not been completed, what is its current status? If it has been completed, do you expect to produce that audit report? I ask because thus far we have not seen a draft or final audit report concerning Stingray in SoundExchange's productions,

Music Choice reserves all rights.

Thanks, Jackson

Jackson D. Toof Partner

Arent Fox LLP Attorneys at Law l 1717 K Street, NW Washington, DC 20006-5344 FAX 202.857 6130 oiREcT ( 202.857.6395 ackson.ioof arentfox, om l www.arentfox.corn

From: Toof, Jackson Sent: Friday, December 09, 2016 12:08 PM To: Freedman, Jared O. &JFreedman 'enner.com&; 'Oliver, Jennifer'Iennifer.Oliver weil.com& Cc: Fakler, Paul M. &Paul.Fakler arentfox.corro; Sullivan, John P. &J hn. ullivan entfox. om&; Yolkut, David

Larson, Todd & odd.Larson weil.com&; Wheeler-Frothingham, Margaret &Mar aret.Wheeler arentfox.com& Subject: RE: M&C on SX Objections and Responses

Jared,

Good afternoon. I wanted to follow up on a few points that we discussed during the call on Wednesday.

A. Regarding General Objection No. 18 (¹5, below) — You indicated that SoundExchange is not deliberately withholding any documents on the basis of this objection. This may have been said during the call and I missed it, but did SoundExchange limit in any way its search for documents based on this objection? Because while a witness may have provided testimony based on the witness's knowledge, experience, and/or generally acknowledged facts, if SoundExchange has materials that support or contradict such testimony, we are entitled to discovery of those materials.

B. With regard to Request No. 6 to SoundExchange, you indicated that all correspondence would be with Music Choice or Sirius XM; therefore, SoundExchange does not need to produce these documents. You indicated, however, that you will consider producing documents responsive to this request if we limit the request by subject matter and service. A few points here. First, Music Choice agrees to limit what would be deemed "responsive documents" to correspondence relating to the statutory license pursuant to which a service pays.

Second, and as discussed during the call with respect to Request Nos. 8 and 9 to SoundExchange, Sirius XM and Music Choice are different entities. We served SoundExchange with combined requests for efficiency purposes, among other reasons. That said, Music Choice would not have correspondence between SoundExchange and Sirius XM (just as Sirius XM wouldn't have correspondence between SoundExchange and Music Choice). In fact, Music Choice does not have CABSAT documents. Thus, Music Choice will agree that SoundExchange need not produce correspondence between SoundExchange and Music Choice, but requests SoundExchange produce correspondence between SoundExchange and Sirius XM, as well as correspondence between SoundExchange and Muzak (and any others) as limited above. In the spirit of compromise, we agreed to exclude Reports of Use from materials that would otherwise be deemed responsive to this requests, and SoundExchange is already producing Statements of Accounts. After these two categories, anything else that is responsive should be minimal per the limitation above and should be produced.

C. Music Choice does not need Ford's prior testimony.

D. Please provide us a list of the SoundExchange and A2IM board members that have not cooperated in searching for materials responsive to our documents requests.

This email is without prejudice to Music Choice's rights to seek additional discovery (and object to any discovery requests) in the future. Music Choice reserves all rights.

Best regards, Jackson

Jackson D. Toof Partner

Arent Fox LLP ( Attorneys at Law 1717 K Street, NW Washington, DC 20006-5344 oiREcT FAX 202.857.6130 ( 202.857.6395

ackson.toof arentfox.com ( www.arentfox.corn

From: Freedman, Jared 0, [mailtoJFreedman 'e ner.com] Sent: Monday, December OS, 2016 10:38 AM To: 'Oliver, Jennifer'Jennifer.Oliver weil.com& Cc: Fakler, Paul M. &Pa I.Fakler rentfox.com&; Sullivan, John P. &John.Sullivan arentfox.com&; Toof, Jackson &Jackson.Toof arentfox,corn&; Yolkut, David &David.Yolkut weil.com&; Sperle, Elisabeth &Elisabeth.S erie weil.com&;

Subject: RE: M&C on SX Objections and Responses

Hi Jennifer,

Glad to discuss. Wednesday at 11 am would work for us.

Thanks.

Jared

From: Oliver, Jennifer [mailto:Jennifer.Oliver weil,com Sent: Friday, December 02, 2016 7:01 PM To: Freedman, Jared O. &JFreedman enner.com& Cc: 'Fakler, Paul M.'Paul.Fakler are tfox.com) &Paul.Fakler arentfox.com&; Sullivan, John P. (John.Sullivan arentfox.corn) (John. Sullivan arentfox,com) &John.Sullivan arentfox.com&; ackson.toof arentfox.com Yolkut, David &David.Yolkut weil. om&; Sperle, Elisabeth &Elisa eth. erie w il. o PJ""" Subject: M&C on SX Objections and Responses

Jared,

General Ob ections Definitions Global Issues

2. With regard to General Objection number 9, are we correct that SX is refusing to produce documents even from those members of SX whose representatives sit on SX's board? Is SX refusing to produce documents from its members on the basis that its members are not directly named participants in the proceeding? (See General Objection number 16.) Are other association participants (e.g., A2IM, RIAA) refusing to produce documents from their board members, including indies whose representative sit on their boards? (See Objection to definition ¹7). 3. Is SX withholding anything on the basis of its objection to the Requests "to the extent they violate or are inconsistent with any statute, rule, order, or other authority governing the other proceeding, including applicable protective orders and prior precedent?" (See below re: the agreement on expert discovery).

4. With regard to General Objection ¹15, we would like to discuss categories where both sides may agree to produce certain drafts, e.g., negotiation documents.

5. With regard to General Objection ¹18, SX has objected to the Requests "to the extent they seek documents in relation to testimony that was based on a witness's knowledge, experience, and/or generally acknowledged facts." Is SX withholding documents that directly support or contradict testimony that was based on a witness's knowledge, experience, and/or generally accepted facts on this basis?

RFPs to Record Com anies

1. Is SX withholding all documents responsive to the Requests propounded on June 20 on the basis that they are not "directly related" to Soundfxchange's WDT? Is it withholding ~an documents on this basis?

4. With regard to request to Request 10, we would like to clarify what each sides means by costs "attributable" to the use of sound recordings by certain services.

RFPs to SX

1. We would like to discuss the "directly related" objections, the January 2013 production objection, and whether SX will agree to produce work papers in addition to final documents.

2. With regard to Request ¹5, in the spirit of compromise, we can agree to forego our request for Reports of IJse.

4. With regard to Requests 8 and 9, SX says it doesn't have any non-privileged internal docs relating to the CABSAT settlement with Sirius XM, but are there external docs? Are any docs being withheld on the basis of privilege? RFPstoAIICo ri htOwnerPartici ants "COPs"

1. With regard to Requests 2 and 3, we are willing to limit our request in line with the Judges'rder dated September 13, 2016, i.e.: "non-privileged communications between and/or among executives and board members ofSoundExchange, RlAA, A2IM, and any of the major labels discussing Sirius XM's direct licenses, and (2) non-privileged communications between such individuals and another record company regarding a direct license offer to that company by Sirius XM. The Services are also willing, for now, to limit the date ofsuch request to January 1, 2013 forward."

RFPs Relatin to Testimon of Ail Ex erts

2. With regard to Request 3, we would like to discuss how we might obtain permission for production of material covered by protective orders in other proceedings.

RFPs to Wazzan

1. We would like to discuss how SX is limiting the production here in general, and to understand the possession, custody, control objection raised.

RFPs to Bender

1. With regard to Request 1, we would like to discuss how we might potentially limit this request for Board minutes such that it is acceptable to both sides.

2. With regard to Request 3, SX appears to refuse to produce drafts of the audit reports or related communications within or between SX and the auditor. We believe work papers, internal discussion, and back and forth correspondence with the auditor, is directly related to the WDT of Mr. Bender, and do not believe production of such materials- which cannot be that voluminous — is overly burdensome. We would like to understand whether SX stands on its objections or would consider some limitation on the request.

RFPs to Kushner

1. With regard to Requests 3, 10, and 15, SX says it will consider reasonable limitations. We would like to confer on what might be acceptable to both sides.

2. With regard to Request 7, as discussed above, the Judges have rules that private third-party confidentiality agreements cannot shield documents from discovery, and SX has put these contracts at issue. We would like to discuss.

RFPs to Sirota

1. With regard to Request 7, we would like to discuss possible limitations acceptable to both sides.

RFPs to Van Arman

1. With regard to Request 2, we would like to discuss possible limitations acceptable to both sides. 2. With regard to Request 7, this request was not limited to Secretly Group's artist contracts. We would like to discuss possible limitations acceptable to both sides.

RFPs to Walker

1. With regard to Request 1, we would like to discuss possible limitations acceptable to both sides.

8est,

Jennifer IN. Oliver

Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 'ennifer oliver eil co +1 212 310 8480 Direct +1 212 310 8007 Fax

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10 W W W W W a

Rg Before the UNITED STATES COPYRIGHT ROYALTY JUDGES Washington, D.C.

In the Matter of:

Determination ofRoyalty Rates and Terms Docket No. 16-CRB-0001 SR/PSSR for Transmission of Sound Recordings by (2018-2022) Satellite Radio and "Preexisting" Subscription Services (SDARS III)

INTRODUCTORY MEMORANDUM TO THE WRITTEN DIRECT STATEMENT OF SOUNDEXCHANGE, INC., AND COPYRIGHT OWNER AND ARTIST PARTICIPANTS

SoundExchange, Inc., the Recording Industry Association of America ("RIAA"), Sony

Music Entertainment ("Sony"), Universal Music Group ("UMG"), Warner Music Group

("WMG"), the American Association of Independent Music ("A2IM"), the American Federation of Musicians ofthe United States and Canada ("AFM"), and the Screen Actors Guild and

American Federation of Television and Radio Artists ("SAG-AFTRA") (collectively,

"SoundExchange"), through their undersigned counsel, respectfully submit this Introductory

Memorandum to SoundExchange's written direct statement in accordance with 37 C.F.R. $

351.4. This memorandum describes the contents of SoundExchange's written direct statement and briefly summarizes the testimony of its witnesses.

CONTENTS OF SOUNDEXCHANGE'S WRITTEN DIRECT STATEMENT

Volume 1 contains (A) this Introductory Memorandum; (B) SoundExchange's Proposed

Rates and Terms; (C) an index of SoundExchange's witness testimony; (D) an index of

SoundExchange's exhibits; (E) a declaration regarding Protected Material and an accompanying redaction log; and, (F) a certificate of service. companies and interactive subscription services require adjustment to serve as the basis for rates for indie record companies, and concludes that they do not.

Further, he provisionally adjusts the benchmark-derived rates to account for the possibility of steering in the satellite radio market, using as his outer bound for a potential steering adjustment the direct licenses negotiated between Sirius XM and certain indie record labels. Given the very small segment of the relevant market represented by those direct licenses, however, and given the other concerns about the direct licenses explained in the testimony of Dr.

Lys, Mr. Orszag declines to use the direct licenses as a separate benchmark. Mr. Orszag's analysis results in proposed percentage-of-revenue royalty rates ranging Rom 22.12/0 to 24.08/0 and per-subscriber rates ranging &om $2.37 to $2.58.

C. Paul Wazzan Ph.D., heads Berkeley Research Group's Century City (Los Angeles) office and has taught business and economics at the University of Southern California, Marshall

School of Business and California State University, Los Angeles. His testimony provides an

economic framework for establishing a statutory royalty rate for the PSS. Dr. Wazzan observes that setting PSS rates has historically been challenging because ofthe relative lack of services

suKciently comparable to the PSS. That remains an issue today. After searching for suitable benchmarks to use in setting PSS rates, he concludes that no marketplace benchmark is ( sufficiently comparable to the PSS to be used for this purpose, even with adjustment. He

concludes that the television-based "new subscription services" subject to the rates in 37 C.F.R.

Part 383 (which SoundExchange refers to as "CABSAT" services) provide the best available

indication of an appropriate royalty for PSS, even though the statutory rates for such services are

not a marketplace benchmark. He also considers ancillary Internet streaming by certain PSS, because that activity is not encompassed within the rates in Part 383. Dr. Wazzan concludes that the most reasonable result would be to apply to the PSS the same webcasting statutory rates that would apply to ancillary Internet streaming by the services subject to the Part 383 rates. Dr.

Wazzan then analyzes the Section 801(b)(1) objectives, and concludes that they do not compel any adjustment to SoundExchange's proposed royalty rate for the PSS. He concludes that

SoundExchange's rate proposal for the PSS is reasonable and consistent with the 801(b)(1) objectives.

Princeton University, where he held ajoint appointment in the Economics Department and at the

Woodrow Wilson School of Public and International Affairs since 1978. His testimony considers the appropriate rates for licensing catalogues of sound recordings by Sirius XM under the 801(b)(1) statutory objectives based on both public interest pricing principles and market- based profit-maximizing behavior.

Public interest pricing principles considered by Dr. Willig include Ramsey Pricing and the Efficient Component Pricing Rule. With respect to profit-maximizing behavior, Dr. Willig considers the recent evolution ofthe market for the sale and distribution of sound recordings. He finds that the recording industry is changing rapidly, with an accelerating shift from the sale of physical products and digital downloads to distribution of sound recordings through streaming services. The royalties obtained by record companies from subscription interactive services through marketplace negotiations are far higher than those obtained from Sirius XM at current rates, and Dr. Willig finds that the record companies would account for that opportunity cost in negotiations with Sirius XM.

His analysis, based on a survey conducted by Dr. Ravi Dhar, suggests a substantial increase in the sound recording royalties paid by Sirius XM to a level from $2.55 to $3.94 per Respectfully submitted,

David A. Handzo (DC Bar 384023) Steven R. Englund (DC Bar 425613) Jared O. Freedman (DC Bar 469679) JENNER & BLOCK LLP 1099 New York Ave., N.W., Suite 900 Washington, D.C. 20001 (v) 202-639-6000 (f) 202-639-6066 [email protected] [email protected] [email protected]

Counselfor SoundExchange, Inc., the Recording Industry Association ofAmerica, Sony Music Entertainment, Universal Music Group, 0'amer Music Group, the American Association of Independent Music, the American Federation of Musicians ofthe United States and Canada, and the Screen Actors Guild andAmerican Federation of Television and Radio Artists

October 19, 2016

16 r r r e r e e e r r r e r e r e e e e e N r e Public Version

Before thc UNITED STATES COPYRIGHT ROYALTY JUDGES Washington, D.C.

ln the Matter of:

Determination ofRoyalty Rates and Terms Docket No. 16-CRB-0001 SR/PSSR for Transmission of Sound Recordings by (2018-2022) Satellite Radio and "Preexisting" Subscription Services (SDARS III)

WRITTEN DIRECT TESTIMONY OF Paul %'azzan

Berkeley Research Group, LLC Managing Director and Head of Century City (Los Angeles) Office

October, 2016 Public Version

TABLE OF CONTENTS

I. Introduction and Qualifications,..~...... ,...... ,~.....,...... ~...... „.. ~ .,...... ,...,~..... 1 II. Summary ofTestimony.. III. The Section 801(b)(1) Policy Objectives.

IV. Overview of Options for Benchmarks for Setting Royalty Rates for PSS ~ ..... 7 V. Currently Prevailing Rates Do Not Approximate the Result ofMarketplace Negotiations Because They Rest Primarily on the Discredited Musical Works Benchmark .....~.....,...... ,. 9 VI. Direct Licenses Covering PSS Do Not Provide a Reasonable Basis for Estimating the Fair Market Value ofthe Use of Sound Recordings in a PSS 17 VII. The Judges Have Found That Other Services with More Robust Licensing Markets Are Not Sufficiently Comparable to the PSS .„...„.....„„...,.....„.....,...... ,...... :...,.....„...... „. 20 VIILDirect Licenses Entered into by Sirius XM Do Not Provide a Reasonable Basis for Estimating the Fair Market Value ofthe Use of Sound Recordings in a PSS ...... 21 -IX. The Regulated Rates in Part 383 Provide the Best Available Basis for Estimating the Fair

~ Market Value ofthe Use of Sound Recordings in a PSS„....,..„....,.....~.....,...,.„... ~ ...... ,.. 23 X. The Regulated Rates in Part 380 Provide a Reasonable Basis for Estimating the Fair Market Value ofthe Use of Sound Recordings in Internet Transrnissions Made as Part of a PSS .. 29

XI. Application ofthe Section 801(b)(1) Objectives. ~ o oo ~ oo ~ o ~ oo oo or ~ ~ ~ ~ oo 30

XII. SoundExchange's Rate Proposal ~ oorooorooroorrr ot ooo ~ oo ~ ~ o oo 35

XIII.Conclusion . 38

Appendrx Ao o ~ ~ oo r to oot ~ r ~ ~ ~ ~ oto ~ ~ rto

Appendix B. ~ I II Public Version

I. Introduction and Qualifications I am a Managing Director with Berkeley Research Group ("BRG"), a firm that provides analyses and consulting in matters involving economics, finance, and statistics. I received my Ph.D. in Finance from the Anderson Graduate School of Management at the University of California, Los Angeles in 1996. I received my B.A. in Economics from the University ofCalifornia, Berkeley in 1989. I have been an Adjunct Assistant Professor of Business and Economics at California State University, Los Angeles, and have also taught optiori pricing classes at the University of Southern California, Marshall School ofBusiness.

I am President and CEO of Wazzan Ec Co. Investment LLC, a venture capital firm providing seed-level funding to various technology firms. My research has been published in peer-reviewed economics journals and law reviews, and I have testified in a wide range of matters in federal, state and bankruptcy courts, the International Trade Commission, domestic and international arbitration proceedings, and in front of legislative bodies. My analyses have covered a wide range of industries, including high-tech industries, such as aircraft and avionics, semiconductors, digital signal processors, coinputer peripherals; financial services; pharmaceuticals; basic manufacturing industries, such as automotive, mining, oil and gas, steel, food processing and distribution; and real estate. 6. I have provided financial, economic and statistical expertise in the areas of intellectual property (e.g., patent and trademark infringement, theft of trade secrets), antitrust and competition policy {e.g., market definition, merger analysis, predatory pricing, price-fixing, exclusionary conduct, price discrimination, attempted monopolization), finance (e.g., valuation, corporate finance, securities fraud/10b-5, option valuation, class certification, pricing of inortgage risk and MBS/CDOs, commodities price mianipulation), complex damages, labor and employment {e.g., class certification, managerial misclassification, wage and hour, discrimination), and public policy. I also specialize in large scale (i.e., millions of Public Version

records) data analytics (e.g., data acquisition, database design and development and statisticalleconometric analysis). My curriculum vitae, including testimony provided in the last four years is attached as Appendix A. BRG is being compensated for my time in this matter at the rate of $600 per hour. II. Summary of Testimony A. Assignment 8. It is my understanding that the purpose of this proceeding is to establish the rates and terms for digital audio transmissions made by preexisting subscription services ("PSS") and satellite digital audio radio services ("SDARS") under the statutory license provided by Section 114 of the Copyright Act, together with the making of ephemeral recordings necessary to facilitate such transmissions under the statutory license provided by Section 112(e) ofthe Copyright Act, during the period January

1, 2018 through December 31, 2022. 9. Counsel for SoundExchange asked me to provide an economic framework for establishing a statutory royalty rate in this proceeding for the PSS—i.e., certain services provided by Music Choice and Muzak.'y analysis does not address SDARS. 10. In performing my analysis, my staff and I have examined documents produced in this matter, as well as other documents provided by counsel or otherwise accessed through public records. I may use any of the evidence referred to above and any subsequently obtained documents or information, as well as summaries or exhibits based on these documents, as support for my opinions. Ifother relevant information becomes available, I may revise my report to incorporate or reflect this information. A list of the materials I have considered in connection with this assignment is 1 included as Appendix B.

' PSS is defined as "a service that performs sound recordings by means of noninteractive audio-only subscription digital audio transmissions, which was in existence and was making such transmissions to the public for a fee on or before July 31, 1998, and may include a limited number ofsample channels representative ofthe subscription service that are made available on a nonsubscription basis in order to promote the subscription service." 17 U.S.C. tJ 114(jj(11). Public Version

B. Summary of Conclusions 11. I begin the process of developing a framework for determining PSS rates with the basic economic concept that there are market based rewards to capital and labor.a In the present context, that implies that those with an economic stake in sound recording copyrights should be compensated for uses of their rights at rates consistent with marketplace outcomes. This basic economic concept is consistent with the benchmark approach commonly applied in establishing the royalty rates for statutory licenses.3 In employing a benchmarking approach, a benchmark market should be as comparable to the target market as practicable, and should not be affected by regulated rates if practicable. To the extent there are differences between the benchmark and target markets, appropriate adjustments should be made.4. 12. Based on my review of previous proceedings, it appears that setting PSS rates has historically been challenging because of the relative lack of services sufficiently comparable to the PSS. That remains an issue today. As described further below, I have searched for suitable benchmarks to use in setting PSS rates, and identified no marketplace benchmark that is sufficiently cdmparable to the PSS to be used for this purpose, even with adjustment. However, the Judges are charged with setting regulated rates for other services that share similar characteristics with the PSS— that is, the television-based "new subscription services" subject to the rates in 37 C.F.R. Part 383 (which SoundExchange refers to as "CABSAT" services). I ultimately conclude that these regulated rates provide the best available proxy for a marketplace royalty for PSS, even though they are not a marketplace benchmark.

s See Hyun Soo Kwon, Economic Theories ofLow-0'age IVork, Journal ofHuman Behavior in the Social Environment 62 (20]4). See generally Mona A. Elbannan, The Capital Asset Pricing Model: An Overvtetv of the Theory, International Journal ofEconomics & Finance, Vol. 7, No. I (2015). s Roy J. Epstein & Paul Malherbe, Reasonable Royalty Patent Irtfringement Damages after Uniloc, AIPLA Quarterly Journal, Vol. 39, No. 1, at g (2011); llidio Lopes, Intangible Assets Identification and Valuation — a Theoretical Framework Approach ta the Portuguese Airlines Companies, Electronic Journal ofKnowledge Management, Vol. 5, Issue 2, at 196 (2007); Jody C. Bishop, The Challenge of Valuing Intellectual Property Assets, Northwestern Journal ofTechnology and lnielleciual Property, Vol. I, Issue I, at 64 (Spring 2003). 'd.; Jeffrey'. Eiscnach, The Sound Recording Performance Right at a Crossroads: IVIII Market Rates Prevail?, Commlaw Conspectus, Vol. 22, at 20 (2014). Public Version

I also consider the matter of ancillary Internet streaming by a PSS, because that activity is not encompassed within the rates in Part 383. I conclude that the most reasonable result would be to apply to the PSS the same statutory rates that would apply to ancillary Internet streaming by the services subject to the Part 383 rates. 13. The Section 801(b)(1) statutory objectives arc aligned with a royalty rate determination that approximates the terms that would be arrived at through voluntary, arm's length transactions between a willing buyer and a willing seller. I recognize, however, that the 801(b) statutory standard has a "broader scope" than the "willing buyer/willing seller" standard that applies to certain other proceedings before the Judges.s Thus, I also consider whether the Section 801(b) policy objectives "weigh in favor of divergence from the results indicated by the benchmark marketplace evidence." I conclude that they do not. 14. I understand SoundExchange will propose that, for their core service delivered to subscribers'elevision sets through cable and satellite television providers, PSS pay a monthly per-subscriber royalty of: $0.0190 in 2018; $0.0196 in 2019; $0.0202 in 2020; $0.0208 in 2021; and $0.0214 in 2022. Because that is based on and consistent with my conclusions summarized above, I find these proposed rates to be economically justified and consistent with the policy directives set out in 17

U.S.C. $ 801(b)(1). 15. I further understand SoundExchange will propose that, to the extent PSS engage in Internet streaming, they should pay per-performance royalties equivalent to those paid by commercial subscription webcasting services. Because that is based on and consistent with my conclusions summarized above, I find these proposed rates to be economically justified and consistent with the policy directives set out in 17

U.S.C. Il 801(b)(1).

'ee Determination of Rates and Terms for Preexisting Subscription Services and Satellite Digital Audio Radio Services, Final Rule and Order, 73 Fed. Reg. 4080, 4088 (Jan. 24, 2008) [hereinaAer SDARS IJ. a Id.at 4094

Public Version favoring the services based on the digital music environment and the services'inancial condition in the late 1990s. 41. Rates contained in settlement agreements are not necessarily indicative ofa market rate—l.e., what a willing buyer and a willing seller would agree to. As one court has explained: Pvl]any factors come into play in reaching and obtaining settlement and, as such, settlement payments could not be a reliable guide for computing the value of a reasonable royalty. For instance, a party may wish to avoid incurring attorney's fees or other litigation expenses. It may wish to avoid the distraction caused by litigation, or avoid the negative publicity which

attends litigation. A patty may value its privacy, and be willing to settle a case to preclude discovery into its affairs. A settlement may also more

refiect the parties'erceptions of the true merits ofthe claim and not the true value ofthe claim, ifthe claim was in fact a valid one."50 as to the true In short, there are many'2. reasons why a settlement lacks reliability value ofa royalty rate. Here, I believe that the 2003 and 2007 settlements must be viewed as anchored in the original PSS I decision, and thus more reflective of the parties'redictions of how the Judges would adjust that rate and other considerations such as those described above than of a marketplace royalty rate for the use of sound recordings in a PSS. 43. The Judges have recognized that the PSS rate should not be derived from the musical works rate. Because the current PSS rate is largely a function of musical works rates, along with policy-based decisions in SDARS Il and PSS I (the latter of which were based on market conditions 20 years ago), it can in no way be said to refiect the marketplace for sound recordings today. Instead, we must look

sc Vardon CalfCo., Inc. v. BBMG Golf Ltd., 156 F.R.D. 641, 651 (N.D. 111. 1994). s'. Gregory Sidak, The Meaning ofFROND, Part I: Royalries, Journal ofCompetition Law & Economics, vol. 9, no. 4, at 1005 (2013). Public Version

approximately [+~] based on its use of direct-licensed recordings and pre-1972 recordings, and other exclusions from actual revenue, so its pre-deduction revenue from providing its SDARS in 2015 was at least about [~~]. By contrast, Sirius XM reported only [~~]] in 2015 revenue from its CABSAT service. I have no information as to whether such revenue was reduced in the same manner as for computation of Sirius XM's SDARS royalties. Nonetheless, it is clear that by any measure, Sirius XM's CABSAT generates less than ~] as much revenue as its SDARS. 56. Because Sirius XM's CABSAT business constitutes such a small part of Sirius XM's overall business, its direct licenses for sound recording rights covering its whole suite of service offerings cannot be understood as specifically reflecting the economics ofthe CABSAT service. Ifanything, they must overwhelmingly reflect the economics ofthe SDARS business. 57. Moreover, Dr. Lys identified various problems in using these direct licenses as a benchmark even for Sirius XM's SDARS. He concluded that the royalty rates in the agreements are unrelated to the underlying market value ofthe rights conveyed in those agreements, and that the actual market value of those rights cannot be inferred from the direct license agreements. I agree with this analysis. Dr. Lys also noted that the total pool ofdirect licensees is oflimited consequence to Sirius XM's royalty obligations, and a substantial portion ofthe direct license agreements are of no consequence at all. 58. For these reasons, I conclude that Sirius XM's direct licenses do not provide a useful benchmark for setting PSS rates. IX, The Regulate'd Rates in Part 383 Provide the Best Available Basis for Estimating the Fair Market Value of the Use of Sound Recordings in a PSS 59. CABSAT set~ices such as Sirius XM's CABSAT service discussed above are the

services of which 1 am aware that are inost like the core service of each PSS. In

"Statement of Account for a New-Subscription Service (CABSAT) -2015 Monthly Liability (February 16, 2016) (SoundExchange Exhibit 15).

23 Public Version

each case, what is provided is a service delivered to the television sets ofconsumers through their cable or satellite provider (referred to as a "multichannel video programming distributor" or "MUPD") as part of a subscription bundle consisting overwhelmingly of television programming. PSS and CABSAT services are similarly-situated buyers of sound recording rights, because both create audio music channels incorporating the licensed sound recordings and sell thein to MUPDs, who in turn resell those channels to consumers as part of subscription bundles. 60. As noted above, the CABSAT services are "new subscription services" covered by the rates in 37 C.F.R. Part 383. An NSS is defined in the Copyright Act as "a service that performs sound recordings by means of noninteractive subscription digital audio ttansmissions and that is not a preexisting subscription service or 'a preexisting satellite digital audio radio service."~9 The pai&icular subset of NSS

subject to the CABSAT rates in Part 383 are defined in 37 C.F.R. g 383.2(f) as: a non-interactive (consistent with the definition of"interactive service" in

17 U,S.C. $ 114(I)(7)) audio-only subscription service (including accompanying information and graphics related to the audio) that is transmitted to residential subscribers of a television service through a Provider which is marketed as and is in fact primarily a video service

~ where: 1. Subscribers do not pay a separate fee for audio channels. 2. The audio channels are delivered by digital audio transmissions through a technology that is incapable of tracking the individual sound recordings received by any particular consumer. 3. However, paragraph (f)(2) of this section shall not apply to the Licensee's current contracts with Providers that are in effect as of the effective date of this part if such Providers become capable in the future of tracking the individual sound recordings received by any particular consumer, provided that the audio channels continued to be delivered to

24 Public Version

Subscribers by digital audio transmissions and the Licensee remains incapable of tracking the individual sound recordings received by any particular consumer.

61 The term Provider is defined in 37 C.F.R. $ 383.2(e) as: "a 'multichannel video programming distributor's that term is defined in 47 CFR 76.1000(e); notwithstanding such definition, for purposes of this part, a Provider shaH include only a distributor of programming to televisions, such as a cable or satellite television provider." 62 According to payment data provided by SoundExchange, CABSAT services that have paid statutory royalties in recent years are Sirius XM, Stingray Music (formerly Galaxie), and DMX (before its service was effectively merged into Muzak as of May 1, 2014). As explained in greater detail below, these businesses provide essentially the same services as the PSS, are distributed through the same distribution channels, and compete with each other: a. In addition to its SDARS, Sirius XM provides approximately 70 music channels through the Dish Network, which had roughly 14 million subscribers in 2015.s Premium service subscribers get the satellite radio channels as part of their packages. 'irius XM also provides a business music service+ and makes some of its channels available for Internet streaming. b. Stingray Music is a Canadian digital pay television audio service owned and operated by Stingray Digital. It has approximately 50 music channels that are availablc to television service subscribers of several cable and IPTV providers in

~ Dish, http://www.dish.corn/music/ (last visited Oct. 10, 2016). s'ish, Select the Package that's right for you, http://www.dish.corn/packages/(last visited Oct. 10, 2016); Satellite Solutions, http://www.satellitcsolutions.corn/dishnetwork/channels-sirius-xm-satellite-radio.asp (last visited Oct. 10, 2016). ~ Sirius XM, Our Music's Just Good Business, https://www,siriusxm.corn/siriusxmforbusiness (last visited Oct. 10, 2016). Sirius XM, Streaming, https://m.siriusxm.corn/streaming (last visited Oct. 10, 2016). "Stingray Music, Channels, http;//music.stingray.cont/en US/channels (last visited Oct. l0, 2016).

25 Public Version

the United States. Like Sirius XM, it also provides a business service, as well as Internet streams to individuals who subscribe to television services providing

Stingray Music.s? c. Before it was effectively absorbed into Muzak as of May 1, 2014, DMX provided approximately 100 music channels through various MVPDs, but principally in the

form of the SonicTap service provided through DirecTV. s Muzak appears still to provide at least 55 audio channels through DirecTV.89 d. Muzak also continues to provide 32 music channels through its historic DishCD service.~ Its parent'. company Mood Media is primarily a provider of business music service. Music Choice provides 75 audio channels through various MVPDs,+ along with a business service93 and streaming to subscribers of the cable services that carry its channels, through a family of apps94 and a web portal.

Stingray Music, How to Get Stingray Music, httpJ/music.stingray.corn/en US/about/subscribe (last visited Oct. 10, 2016). Stingray Music, Music for Business, http://music.stingray.corn/en US/about/enterprise (last visited Oct. 10, 2016). " Stingray Music, Stingray Music Mobile, hnp://tnusic.stingray.corn/en US/mobile (last visited Oct. 10, 2016). SoundExchange tells me that Stingray has separately paid webcasting royalties to SoundExchange for its streaming. ~s See Rebuttal Testimony of Gregory S. Crawford, /n re Determination of Rates and Terms for Preexisting Subscription Services and Satellite Digital Audio Radio Services, Docket No. 2011-1 CRB PSS/Satellite II (3uly 2, (" 2012) g 110, available or https://www.loc.gov/crb/proceedings/2011-1/rps/music choice crawford.pdf Crawford Testimony"). s~ Find Your Groove with the Music Channels on Satellite TV, http://www.satellite-reviews.net/compare/satellite- music (last visited Oct. 10, 2016). ~ Choose Your Package and Order Dish TV!, http://www.getsatellite.corn/Satellite-TV-Packages/music/DishCD/ (last visited Oct. 10, 2016); DISH CD (32 Music Channels), http://www.satellitesolutions.corn/dishnetwork/channels- dish-cd-music-channels.asp (last visited Oct. 10, 2016). Ben Sisario, Murak, Background Music /o Life. io Lose its Name, N.Y. Times (Feb. 4, 2013), http://www.nytimes.conut2013/02/05/business/muzak-background-music-to-life-to-lose-its-name.htntl? r 0 (business music services generate about 90% of the revenues ofMood lvledia). ~ Music Choice, Music Channels, https://www.musicchoice.corn/(last visited Oct. 10, 2016). ~ Music Choice, MC for Business, http://corporate.musicchoice.corn/about-us/mc-business/ (last visited Oct. ]0, 2016). +Music Choice, Download the App, http://app.musicchoice.corn/; Music Choice, iTunes Preview, https://itunes.apple.conatus/app/music-choice/id573887614?mt 8; Music Choice for iPad, https://itunes.apple.corn/us/app/music-choice-for-ipad/id621427918'?mt=8; Google Play- Music Choice, https://play.google.corn/store/apps/details?id~corn.music.choice&hi-"en.

26 Public Version

f. The PSS and the CABSAT services have the same functional characteristics (noninteractive audio channels included in cable and satellite TV packages), and all offer wide selections of audto channels that include multiple channels in popular. genres. Music Choice's expert in SDARS II (when DMX was a CABSAT service) expressly acknowledged that Muzak is "like DMX."95 g. The PSS and the CABSAT services compete for the same MVPD wholesale buyers. Sirius XM's CABSAT service is distributed by Dish Network just like Muzak's PSS. Sirius XM provided audio channels to DirecTV until it was replaced by DMX. Now, Muzak is providing DirecTV's music channels. Music Choice has complained publicly about facing increasing competition from other providers ofmusic channels to MVPDs,+ which presumably means the CABSAT services. h. Stingray bought Music Choice's European affiliate in 2011, and Stingray now operates it as Music Choice International.99 In the V.S., the two companies are

direct competitors. A 2015 Music Choice document f ].t Similarly, Music Choice documents dated 2013 and 2014 toi 2014, Stingray replaced Music Choice as the provider ofmusic channels on the ATILT U-verse service, and now the two companies are in patent litigation with

~s Crawford Testimony at g 112. ~ Crawford Testimony at g 113. ~ Comments of Music Choice in Copyright Office Docket No. 2014-03, at 2 (May 23, 2014), available ar http://www.copyrightgov/policy/musiclicensingstudy/comments/Docket2014 3/Music Choice MLS 2014,pdf. Julian Clover, Music Choice Europ'e Sold for a Song, Broadband TV News (Apr. 4, 2011), httpJ/www.broadbandtvnews.corn/2011/04/04/music-choice-europe-sold-for-a-song/. ~ Stingray Digital, Our Properties, http //demo stingray corn/en/our-properties/music-choice php (last visited October 15, 20]6). '+ See, e.g„MC0000586 to -625, -621. un MC0002925 to -950, -927; MC0003099 to -129, -104. Public Version

each other.'usic Choice's press release announcing its patent suit specifically refers to competition from Stingray.'nder 63. the statutory license, CABSAT services pay scheduled per-subscriber rates during the current CABSAT rate period. For stand-alone contracts, the per subscriber rates increase every year by approximately 3%: 2016 ($0.0179); 2017 to4 ($0.0185); 2018 ($0.0190); 2019 ($0.0196), and 2020 ($0 0202) 64. These are not marketplace benchmarks, because they are regulated rates. However, the applicable rate standard is the willing buyer/willing seller standard under 17

U.S.C. $ 114(f)(2). Thus, they" purport to be fair market rates. While the PSS rates must be viewed as anchored in the musical works benchmark and reflective of the

policy-based determinations in PSS I and SDARS 11, these rates are more likely to be indicative ofrates that might be agreed to in marketplace transaction between a sound recording copyright owner and the provider ofa PSS. 65. I conclude that the CABSAT rates are the best available proxy for a market based royalty for PSS. 66. I further considered whether the difference between PSS and CABSAT rates might be explained by the nutnber of channels provided, and whether any adjustment to 'he CABSAT rates might be appropriate based on differences in the number of channels provided by the PSS and CABSAT senrices. However, as set forth above, there appears to be no clear linkage between PSS and CABSAT status and rates I and the number ofchannels provided. The largest providers ofeach type ofservice (Music Choice and Sirius XM) each provide similar numbers of channels (75 and 70), while the number of channels provided by others has varied widely. Music Choice and Stingray compete directly, and Music Choice offers more channels than

'~ Kent Gibbons, /v/usic Choice Sues Riva! Sringray /Jigita/ over Patents, Multichannel Hews (June 6, 2016), http://www.multichannel.corn/news/networks/music-choice-sues-rival-stingray-digital-over-patents/405445. ' Music Choice, Music Choice Sues Stingray for Patent Infringement(Jun. 6, 2016) ("Stingray must compete fairly"), avaVnble at http://corporate.musicchoice.corn/about-us/press-roonVpress-article/music-choice-sues-stingray-patent- infringement/. ' A separate rate is provided for CABSAT service provided pursuant to bundled contracts, which are those contracts between a licensee and a provider, such as a cable or satellite te!evision provider, in which the service is not the only content licensed by the licensee to the provider. f . '8 Public Version

Stingray. While a larger number of channels may provide some advantage to a service, that does not seem to be a critical consideration once a service provides the several dozen channels that allow it to cover a wide selection of genres of music, and provide depth of coverage in popular genres. Accordingly, it does not appear that the CABSAT rates are a function of the number of channels provided, or that it is necessary to adjust the CABSAT rates to account for any difference in the number ofchannels provided. X. The Regulated Rates in Part 380 Provide a Reasonable Basis for Estimating the Fair Market Value of the Use of Sound Recordings in Internet Transmissions Made as Part of a PSS 67. As described above, I understand that, among the PSS, at least Music Choice provides Internet simulcasts of its channels to subscribers of the MVPDs that distribute Music Choice. 68. SoundExchange informs me that Music Choice does not pay separately for its Internet streaming or report it to SoundExchange, because it takes the position that such streaming is part of its PSS. 69. I do not have an opinion on the legal question whether Music Choice's Internet streaming is properly considered part of its PSS, and so subject to rates to be determined in this proceeding. 70. However, as an economic matter, I believe that Music Choice's Internet streaming should be valued separately from its television-based service. As described above, the CABSAT rates in Part 383 are quite clearly limited to a service "transmitted to residential subscribers of a television service" through an MVPD using "a technology that is incapable of tracking the individual sound recordings received by any particular consumer." Internet streaming is something else, because streams are typically transmitted to devices other than televisions, over the public Internet. Because Internet transmissions are made on a one-to-one basis, Internet performances can be counted. 71. Thus, it is clear that a provider of a CABSAT service that wished to simulcast its channels over the Internet in reliance on the statutory license could not pay only the

29 I declare under penalty ofperjury that the fore ~oing testimony is true and correct.

Io I $Q( C. aul Wazzan m m m m m m W W W W W W W W W & & % % W 'W Before the UNITED STATES COPYRIGHT ROYALTY JUDGES Library of Congress Washington, D.C.

In the Matter of:

Determination of Royalty Rates Docket No. 16-CRB-0001-SR/PSSR and Terms for Transmission of (2018-2022) Sound Recordings by Satellite Radio and "Preexisting" Subscri tion Services SDARS III

CERTIFICATE OF SERVICE

I, Jackson D. Toof, hereby certify that a copy ofMusic Choice's Motion to Compel SoundExchange to Produce Audit Documents and CABSAT Settlement Documents, and the accompanying exhibits has been served this 16'" day ofDecember, 2016 by email on:

George Johnson David Handzo 23 Music Square East, Suite 204 Michael DeSanctis Nashville, TN 37203 Steven Englund [email protected] Jared Freedman Jenner & Block LLP GEO Music Group 1099 New York Avenue, NW, Suite 900 Washington, DC 20001 dhandzo jenner.corn [email protected] senglund jenner.corn jfreedman jenner.corn

Counselfor SoundExchange (SX), The American Federation ofMusicians ofthe United States and Canada (AFM), Screen Actors Guild andAmerican Federation of Television and Radio Artists (SAG-AFTRA), American Association ofIndependent Music (A2IM), Universal Music Group (UMG), Sony Music Entertainment (SME), 8'amer Music Group PVMG), and Recording Industr Association o America RIAA R. Bruce Rich Todd Larson David Yolkut Weil, Gotshal & Manges LLP 767 Fifth Avenue New York, NY 10153 brucesich weil.corn [email protected] [email protected]

Counsel or SiriusXMRadio Inc.

Jackson D. Toof