```

[Federal Register Volume 80, Number 49 (Friday, March 13, 2015)]
[Notices]
[Pages 13423-13444]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-05777]

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LIBRARY OF CONGRESS

Copyright Royalty Board

[Docket No. 2008-1 CRB CD 98-99 (Phase II)]

Distribution of 1998 and 1999 Cable Royalty Funds

AGENCY: Copyright Royalty Board, Library of Congress.

ACTION: Final distribution determination.

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SUMMARY: The Copyright Royalty Judges announce the final Phase II 
distribution of cable royalty funds for the year 1999. The judges 
issued their initial determination in December 2014 and received no 
motions for rehearing.

DATES: Effective date: March 13, 2015.

ADDRESSES: The final distribution order is also published on the 
agency's Web site at www.loc.gov/crb and on the Federal eRulemaking 
Portal at www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Richard Strasser, Senior Attorney, or 
Kim Whittle, Attorney Advisor, (202) 707-7658 or crb@loc.gov.

SUPPLEMENTARY INFORMATION:

I. Introduction

    In this proceeding, the Copyright Royalty Judges (Judges) determine 
the final distribution of royalty funds deposited by cable system 
operators (CSOs) for the right to retransmit television programming 
carried on distant over-the-air broadcast signals during calendar year 
1999.\1\ Participants have received prior partial distributions of the 
1999 cable royalty funds.\2\ The remaining funds at issue are those 
allocated to the Devotional Claimants category.\3\ Two participants are 
pursuing distribution from the Devotional Claimants funds for 1999: 
Worldwide Subsidy Group LLC dba Independent Producers Group (IPG) and 
the ``Settling Devotional Claimants'' (SDC).\4\ The Judges conducted 
three and

[[Page 13424]]

a half days of hearings. After considering written evidence and oral 
testimony, the Judges determine that the SDC should receive 71.3% and 
IPG should receive 28.7% of the 1999 fund allocated to the Devotional 
Claimants category.\5\
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    \1\ Although this proceeding consolidates royalty years 1998 and 
1999, all claims to 1998 royalties have been resolved, and the funds 
have been distributed. IPG's appeal of the order approving 
distribution of 1998 royalties was dismissed for lack of 
jurisdiction. Ind. Producers Group v. Librarian of Congress, 759 
F.3d 100 (D.C. Cir. 2014).
    \2\ The 1999 cable royalty deposits equaled approximately $118.8 
million at the outset. The Judges authorized partial distributions 
that the Copyright Licensing Office made on October 31, 2001, March 
27, 2003, April 19, 2007, June 7, 2007, and February 28, 2013. 
Authorized distributions equaled in the aggregate approximately 
$126.9 million, including accrued interest, leaving a balance 
available for distribution of $827,842.
    \3\ See infra note 18, and accompanying text. The Devotional 
Claimants category has been defined by agreements of the Phase I 
participants as ``Syndicated programs of a primarily religious 
theme, not limited to those produced by or for religious 
institutions.''
    \4\ The Settling Devotional Claimants are: The Christian 
Broadcasting Network, Inc., Coral Ridge Ministries Media, Inc., 
Crystal Cathedral Ministries, Inc., In Touch Ministries, Inc., and 
Oral Roberts Evangelistic Association, Inc. The SDC previously 
reached a confidential settlement with devotional program claimants 
represented by the National Association of Broadcasters, Liberty 
Broadcasting Network, Inc., and Family Worship Center Church, Inc. 
The programming giving rise to the latter groups' claims is not 
included in the Judges' analysis in this proceeding.
    \5\ From prior partial distributions, the SDC have received over 
$693,000. The SDC alone is responsible to make adjustments, if any, 
to comply with the conclusions of this Determination and to comply 
with confidential settlements it reached with former participants.
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II. Background

A. Statement of Facts

    In the present proceeding, IPG represents the interests of four 
entities \6\ owning copyrights in 10 distinct programs. The SDC 
represent five entities \7\ owning copyrights in 20 distinct programs. 
CSOs remotely retransmitted IPG-claimed titles 11,041 times and the 
SDC-claimed titles 6,684 times during 1999. See IPG PFF at 6; SDC PFF 
at 1-2.
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    \6\ IPG represents Benny Hinn Ministries, Creflo A. Dollar 
Ministries, Eagle Mountain International Church aka Kenneth Copeland 
Ministries, and Life Outreach International.
    \7\ See supra, n.4.
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B. Statement of the Case

    On January 30, 2008, the Judges commenced a proceeding to determine 
the Phase II distribution of 1998 and 1999 royalties deposited by CSOs 
for the cable statutory license.\8\ Beginning in July 2008, the Judges 
stayed the proceeding pending the outcome of California state court 
litigation initiated by IPG regarding the validity and interpretation 
of settlement agreements by and between IPG, the Motion Picture 
Association of America as representative of certain program suppliers 
(MPAA), and the Librarian of Congress.\9\ In a September 2012 filing, 
IPG acknowledged that the California proceedings had been resolved in 
favor of MPAA. See Opposition of Independent Producers group to Motion 
for Final Distribution of 1998 and 1999 Cable Royalty Funds at 4, 
Docket No. 2008-1 CRB CD 98-99 (September 5, 2012). IPG continued to 
assert claims to 1999 royalties allocated to the Devotional Claimants 
category. In July 2013, the Judges issued an order establishing the 
schedule and order of proceedings for the present matter.\10\
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    \8\ See 73 FR 5596 (Jan. 30, 2008). Before the effective date of 
the Copyright Royalty and Distribution Reform Act of 2004, Public 
Law 108-419, 118 Stat. 2341 (Nov. 30, 2004), the Copyright Office, 
with oversight by the Librarian of Congress, managed distribution of 
cable retransmission royalties. To resolve controversies regarding 
the appropriate distribution of royalties, the Librarian would order 
appointment of a Copyright Arbitration Royalty Panel (CARP). In 
2001, the Library of Congress initiated Phase I proceedings to 
determine distribution of, inter alia, royalties for distant 
retransmission by cable in 1999 of broadcast television programming. 
In November 2003, all claimants to funds in the 1998 Devotional 
Claimants category reached agreement regarding distribution of those 
funds and the Register of Copyrights ordered final distribution of 
1998 Devotional Claimants royalties by order dated November 19, 
2003. By Order dated April 3, 2007, the Register finalized the Phase 
I allocation of uncontroverted funds for 1998 and 1999 cable 
retransmissions among the claimant categories. After enactment of 
the current statute, the Register terminated the CARP proceeding 
relating to the 1998-99 funds. See 72 FR 45071 (Aug. 10, 2007). The 
Judges have managed all subsequent proceedings relating to the 1998 
and 1999 cable royalties fund.
    \9\ Order Granting Motions to Stay, Docket No. 2008-1 CRB CD 98-
99 (July 23, 2008). The Judges granted eight continuations of the 
original stay order, entering the last continuation order on July 
27, 2012. See Eighth Order Continuing Stay of Proceedings (July 27, 
2012).
    \10\ Order Setting Deadline for Filing Written Direct 
Statements, Announcing Discovery Period, and Requiring Settlement 
Conference (Jul 25, 2013).
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    On May 5 and 6, 2014, the Judges held a Preliminary Hearing to 
adjudicate disputes regarding the validity of claims asserted by each 
party. At the conclusion of the Preliminary Hearing, the Judges 
dismissed two claims asserted by IPG. See Ruling and Order Regarding 
Claims (June 18, 2014). Beginning September 2, 2014, the Judges 
presided over three and a half days of hearings at which IPG presented 
two witnesses and the SDC presented three live witnesses and designated 
testimony of seven witnesses from prior proceedings.\11\ The Judges 
admitted 35 paper and electronic exhibits into evidence. On September 
23, 2014, the parties filed their proposed findings of fact and 
conclusions of law.
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    \11\ Because of the delay of the present proceeding occasioned 
by outside litigation, the Judges concluded their determination of 
distributions of cable retransmission royalties for the period 2000 
to 2003, inclusive, before completing the instant proceeding 
regarding 1999 funds. The participants in the 2000-03 proceeding 
presented many of the same issues relevant to the present 
proceeding; thus, one of the ``prior proceedings'' from which 
participants could designate testimony is a proceeding involving 
funds deposited after the relevant period at issue in the present 
proceeding.
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III. IPG's Motion in Limine

A. Issues Presented

    On August 26, 2014, IPG filed with the Judges a motion in limine 
(Motion) to exclude the SDC's Nielsen Household Devotional Viewing 
Report sponsored by SDC witness, Alan Whitt.\12\ IPG contends that the 
SDC failed to include in its exhibit list foundational data for the 
methodology used in the report and failed to produce all foundational 
data and electronic files underlying the report. Motion at 1. IPG 
requests that the Judges strike any evidence relying on or referring to 
the report that the SDC presented.
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    \12\ The SDC, whose witness introduced the report, sometimes 
refer to it as the Household Viewing Hours Report or ``HHVH 
Report.''
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    The SDC oppose IPG's request, arguing, among other things, that IPG 
has failed to present any competent evidence that the purportedly 
missing data either were in the SDC's custody, possession, or control, 
or were not publicly available. SDC Opposition at 1 (September 2, 
2014). The SDC also contend that IPG's motion in limine merely attempts 
to revisit issues the Judges resolved in their May 2, 2014, Order 
Denying IPG's Motion to Strike Portions of SDC Written Direct Statement 
(``May 2, 2014, Order''). The SDC contend that IPG has presented no new 
evidence that would justify revisiting that decision. SDC Opposition at 
3 & n.1.
    Moreover, the SDC contend that IPG's arguments go to the weight 
rather than to the admissibility of the proffered report. SDC 
Opposition at 2, citing U.S. v. H & R Block, Inc., 831 F.Supp.2d 27, 34 
(D.D.C. 2011) (denying motion in limine ``because [defendant's 
proffered] survey [was] not so unreliable as to be deemed 
inadmissible.'') and Graves v. D.C., 850 F.Supp.2d 6, 13 (D.D.C. 2011) 
(``[M]otions in limine are designed to address discrete evidentiary 
issues related to trial and are not a vehicle for resolving factual 
disputes or testing the sufficiency of the plaintiff's evidence.'').
    Finally, the SDC argue that even if the Judges were inclined to 
believe that the unavailability of data underlying the proffered report 
was relevant in an admissibility determination, this fact would not 
warrant a prehearing exclusion of the evidence. According to the SDC, 
the facts and data underlying an expert's opinion need not be 
admissible for the opinion or reference to be admitted if the facts or 
data are of a type reasonably relied upon by experts in the field. SDC 
Opposition at 4, citing Rule 703 of the Federal Rules of Evidence. On 
this point, the SDC refer to the written direct testimony of the SDC's 
witness, John S. Sanders, who, according to the SDC, determined that 
``Mr. Whitt's report is sufficiently reliable to render his opinion 
concerning the relative market value of the SDC and IPG programs.'' SDC 
Opposition at 5.
    The Judges heard oral argument on the Motion on September 2, 2014, 
and deferred ruling until the end of the proceeding. For the reasons 
discussed below, the Judges deny the Motion and admit the proffered 
report.

[[Page 13425]]

B. The Judges' May 2, 2014, Discovery Order

    The dispute between IPG and the SDC began with a discovery request 
from IPG in which it requested from the SDC ``evidentiary support for a 
report by the SDC's expert witness, Mr. Whitt, setting forth viewership 
levels for Devotional programming.'' See May 2, 2014, Order at 1. In 
the motion to compel discovery that gave rise to the Judges' May 2, 
2014, Order, IPG sought an order striking Mr. Whitt's report and the 
SDC's reliance on that report. According to IPG, the SDC failed to meet 
its discovery obligations by failing to provide electronic files or 
computer codes that Mr. Whitt purportedly used to (1) merge viewership 
data sets compiled by Tribune Media Services and the Nielsen Company 
and (2) cull claimed devotional titles from numerous program titles in 
the merged data sets (referred to in the May 2, 2014, Order as ``Merger 
Information''). Id. at 3.
    The Judges determined that the discovery dispute could not be 
resolved without an evidentiary hearing, and scheduled one for April 8, 
2014. During the hearing, the Judges heard testimony from the SDC's 
witnesses, Mr. Whitt and Dr. Erkan Erdem, as well as from Dr. Laura 
Robinson, who testified for IPG.
    Mr. Whitt testified that he did not have access to the files and 
codes he had used that contained the Merger Information because he had 
done most of the work in question when he was employed with an 
independent company that was a contractor for MPAA. Mr. Whitt completed 
his MPAA assignment several years prior to the current proceeding. 04/
08/14 Tr. at 105 (Whitt). Therefore, according to Mr. Whitt, neither 
Mr. Whitt nor the SDC could provide the requested information to IPG. 
Id. at 121-22. Dr. Robinson testified that, based on discovery that the 
SDC provided, she was unable to replicate the results that Mr. Whitt 
had reached, although she admitted that she could have merged the 
Tribune and Nielsen data sets. Id. at 35-6, 66 (Robinson). Finally, Dr. 
Erdem testified that, based on discovery the SDC had provided to IPG, 
and certain other publicly available information, Dr. Erdem was able to 
closely approximate, although not duplicate, Mr. Whitt's results. Id. 
at 162 (Erdem).
    The Judges found that nothing in the record allowed them to 
conclude that SDC violated its duties under the applicable procedural 
rule governing discovery by not producing the Merger Information. See 
May 2, 2014, Order at 9. The Judges further concluded that the SDC's 
discovery responses were sufficient for IPG to ``test'' the process Mr. 
Whitt used in compiling the report. The Judges noted that the purpose 
of an earlier discovery order addressing IPG's discovery request was to

allow IPG sufficient discovery to allow it to confirm either that 
Mr. Whitt had performed his work correctly . . . or that Mr. Whitt 
had performed his work incorrectly or inaccurately. In that latter 
case, IPG would be able to: (a) file a Written Rebuttal Statement 
contradicting Mr. Whitt's work and/or (b) cross-examine Mr. Whitt at 
the hearing on the merits regarding claimed errors or inaccuracies 
in his work.

Id. (emphasis in original).
    The Judges concluded that they ``would not--and did not--assert 
that discovery regarding expert testimony must result in a consensus 
between adverse participants as to the correctness of the result (or 
the amount) calculated by the expert.'' Id. at 11. Specifically, the 
Judges concluded

with the discovery [the SDC provided to IPG, Dr. Robinson] could 
test Mr. Whitt's computational process by producing her own merger 
of the Tribune Data and the Nielsen Data. However, Dr. Robinson also 
testified that her merger and the concomitant results might differ 
from (i.e., falsify) rather than replicate Mr. Whitt's results. 
Likewise, [Dr. Erdem] produced a merger of the Tribune Data and the 
Nielsen Data that was quite proximate to Mr. Whitt's results, albeit 
not a complete replication. Thus, it is clear that Mr. Whitt's 
computational processes can be tested and subject to meaningful 
cross-examination and rebuttal.

Id. Based on this conclusion the Judges denied IPG's motion to strike 
portions of the SDC's written direct statement on grounds that the SDC 
violated its discovery obligations.
    In its discovery motion, IPG also asked the Judges to strike any 
reliance on or reference to the distant rating study presented by the 
SDC as inadmissible. See [IPG] Motion to Strike Portions of [SDC] 
Direct Statement at 10-11 (February 20, 2014). The Judges declined to 
consider these issues at that stage of the proceeding reasoning that:

[a]n order regarding these issues would essentially constitute a 
premature in limine ruling based on SDC's non-production of the 
Merger Information in discovery. Given that SDC introduced new 
testimony and new exhibits at the April 8, 2014, discovery hearing, 
the Judges decline to rule without a formal motion in limine, 
addressing these issues in the context of the new hearing exhibits 
and the hearing testimony, should IPG decide to renew these 
arguments.

May 2, 2014, Order at 11. IPG filed that motion in limine on August 26, 
2014, viz., the Motion at issue here.

C. Substance of IPG's Motion

    In the present Motion, IPG asserts that ``Merger Information 
existed and was not produced to IPG, including sweeps period data, a 
sweeps period algorithm, a file that prepared the Tribune data for 
merger, a process to reconcile Nielsen and Tribune data, and another 
`quality control process' performed by Mr. Whitt.'' Motion at 2. IPG 
further asserts that ``SDC's witness [Dr. Erdem] approximated Mr. 
Whitt's results only after utilization of data and information that had 
not been produced to IPG, and that the SDC's attempted replication of 
the Merger Information occurred months after both the discovery 
deadline and the deadline for filing amended direct statements.'' Id. 
According to IPG, the ``SDC neither produced the original Merger 
Information, nor attempted to replicate it until March 28, 2014, all 
the while knowing the evidentiary requirements for the introduction of 
the study. . . .'' Id. at 3.
    IPG continues:

    Alan Whitt asserts that his analysis relied, inter alia, (i) on 
a sample of television stations selected by Marsha Kessler [an MPAA 
witness in past cable distribution proceedings, including the 2000-
2003 proceeding and the Phase I proceeding for the instant royalty 
year], and (ii) household diaries of distant program viewing for 
those programs from Nielsen's six ``sweep'' months. [Yet, l]iterally 
no information or data regarding the station sampling process 
exists, nor information or data that explains the methodological 
processes utilized in connection with the produced Nielsen data.

Id. at 3 (internal quotations omitted).
    IPG asserts that:

stations selected by Ms. Kessler for inclusion in the 1999 MPAA/
Nielsen study were altogether different than those appearing in data 
produced by the SDC. . . . [Therefore,] Mr. Whitt's statement that 
the SDC-produced data was derived from a sample of stations selected 
by Marsha Kessler is simply inaccurate or, at minimum, without 
evidentiary foundation [but] IPG has been denied any ability to 
investigate that determination because of the SDC's failure to 
produce underlying documents substantiating such assertion.

Id. at 4.
    IPG further asserts that, in prior proceedings, Nielsen and the 
MPAA have used a wide variety of sampling methodologies and methods of 
data collection. IPG contends that with respect to the Nielsen data 
produced by the SDC in the current proceeding, however, the SDC 
provided none of those methodological details. Consequently, IPG 
asserts that it has ``no means of determining the method by which the 
stations on which the Whitt

[[Page 13426]]

analysis relies were selected, and no means to determine what Nielsen 
data was collected, how it was collected, the limitations on the data, 
the scope and meaning of the data, the possible alternatives that were 
employed, etc.'' Id. at 5-6. As a result, IPG requests that the Judges 
strike any evidence relying on or referring to Mr. Whitt's HHVH report. 
Id. at 8.

D. Judges' Analysis and Ruling on the Motion

    Much of IPG's Motion rehashes discovery issues that the Judges 
addressed fully in the May 2, 2014, Order. The Judges will not revisit 
those discovery-related issues. The Judges now consider only whether to 
grant or deny IPG's Motion, which requests that the Judges preclude the 
SDC from relying on or referring to the HHVH report on grounds of 
admissibility.
    IPG's arguments for excluding the HHVH report are that the SDC 
failed to: (1) Retain or produce to IPG input data from the HHVH 
report, (2) produce information relating to the sampling processes that 
were followed for the selection of stations included as part of the 
Whitt analysis, and (3) produce the methodological processes followed 
by Nielsen in the creation of the Nielsen data that were referred to in 
the HHVH report. See Motion at 7-8.
    At oral argument on the motion, IPG's counsel contended that even 
if the SDC did not have the underlying documents that IPG sought, the 
SDC was required to create such documents and produce them to IPG. 09/
02/14 Tr. at 14-15. As a preliminary matter, the Judges view this 
argument as yet another attempt by IPG to resurrect its complaint that 
the SDC failed to meet its discovery obligations. The Judges already 
addressed this issue in the May 2, 2014, Order.\13\
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    \13\ Even if the Judges had not addressed the issue in the May 
2, 2014, Order, they would nonetheless reject IPG's assertion that 
the SDC was obligated to create documents to comply with a discovery 
request. The Judges have consistently held that ``[t]he limited 
discovery permitted in proceedings before the Judges should permit 
the parties to test admissible evidence, but not create an extensive 
burden of time and expense.'' Order Granting In Part and Denying In 
Part the Motion of SoundExchange to Compel XM Satellite Radio Inc., 
Sirius Satellite Radio Inc., and Music Choice to Produce Surveys and 
Supporting Documents, Docket No. 2006-1 CRB DSTRA (May 15, 2007). In 
the May 2, 2014, Order, the Judges ruled that the SDC had provided 
IPG with sufficient discovery to enable IPG to test the HHVH report. 
IPG points to no provision in the CRB rules that requires a party to 
create documents in response to a discovery request. The Judges see 
no reason in this instance to impose such a requirement by order.
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    IPG also asserts that the SDC's failure to create a document in 
response to IPG's discovery requests somehow violated a statutory 
provision dealing with written direct statements. At the hearing, IPG's 
counsel contended that the SDC ``never put this information or alluded 
to it or referenced or incorporated it by reference in an Amended 
Written Direct Statement. Therefore, for the record, it does not exist. 
It is not before [the Judges]. And as such, the SDC study is hopelessly 
missing a piece, and therefore, it should not be heard. It should be 
excluded.'' 09/02/14 Tr. at 15 (Att'y Boydston).
    The requirement to file written direct statements is codified in 
section 803(b)(6)(C) of the Copyright Act. That section circuitously 
requires the Judges to issue regulations that require the parties to 
file written direct statements and written rebuttal statements by a 
date specified by the Judges. 17 U.S.C. 803(b)(6)(C)(i). The statutory 
provision does not address the content of written direct statements. 
Moreover, the regulation the Judges promulgated under that provision 
does not impose the content requirements that IPG suggests.\14\ 
Therefore, the Judges reject IPG's assertion that the SDC violated the 
statutory provisions dealing with the filing of written direct 
statements. The HHVH report was properly before the Judges.\15\ On 
balance, the Judges find that the SDC's written direct statement was 
adequate to satisfy the requirements of the Act and applicable rules. 
IPG's complaints about the completeness or persuasiveness of that 
testimony go to the weight rather than the admissibility of the 
testimony.
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    \14\ The rule states: ``[t]he written direct statement shall 
include all testimony, including each witness's background and 
qualifications, along with all the exhibits.'' 37 CFR 351.4(b). The 
SDC's written direct statement included Mr. Whitt's testimony as 
well as that of Mr. Sanders. The SDC included in its rebuttal 
statement the testimony of Dr. Erdem. The SDC's written direct 
statement may not have been exquisitely complete. Indeed, the SDC's 
counsel concedes that Mr. Whitt's written testimony did not describe 
a ``quality control'' process that he conducted to eliminate 
duplicative entries and to fix errors in program titles. 09/02/14 
Tr. at 37 (Att'y MacLean). The SDC contends, however, that Mr. 
Whitt's process resulted in the elimination of a handful of program 
titles, none of which was claimed by either party in this 
proceeding. Id. at 37-8. The Judges find no persuasive evidence in 
the record to contradict the SDC's contention, rendering the SDC's 
omission harmless. Moreover, the Judges note that the dates for 
Nielsen sweeps weeks, used by Dr. Erdem in his analysis to replicate 
Mr. Whitt's report, either were produced to IPG or were otherwise 
publicly available. See 04/08/14 Tr. at 23-24, 204 (Att'y MacLean). 
The SDC satisfied its discovery obligations with respect to this 
information.
    \15\ IPG raised similar objections in the 2000-03 distribution 
proceeding. Docket No. 2008-2 CRB CD 2000-03. In that proceeding, 
the Judges excluded Mr. Whitt's testimony, which relied on data 
similar to that which the SDC proffer in the current proceeding. The 
Judges' decision not to consider Mr. Whitt's testimony in the 2000-
2003 proceeding, however, was based the SDC's failure to provide Mr. 
Whitt's testimony until its rebuttal case, three weeks before the 
hearing. In that context, the Judges found the SDC's delay 
``deprived IPG of the opportunity to review the work undertaken by 
Mr. Whitt.'' 78 FR 64984, 65004 (Oct. 30, 2013)
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    IPG also objects to the purported lack of clarity surrounding the 
way in which the television stations analyzed in the HHVH report were 
selected. Mr. Whitt stated in his written direct testimony that the 
television stations he studied in the report were based on a list of 
stations compiled by Ms. Kessler. Ex. SDC-D-001 at 3. IPG, evidently 
assuming that the list referred to by Mr. Whitt was the list of 
stations that was attached to Ms. Kessler's written direct testimony in 
Phase I of this proceeding,\16\ contends that it compared the selection 
of stations in the Whitt HHVH report with Ms. Kessler's list and found 
that the two do not correspond. IPG states that of Mr. Whitt's 72 
stations, only half of them can be found in Ms. Kessler's list. 09/02/
14 Tr. at 16. IPG contends that it does not know where the other 36 
stations that Mr. Whitt studied came from. Id.
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    \16\ Ms. Kessler's written direct testimony was included in the 
prior testimony designated by the SDC for consideration in this 
proceeding under 37 CFR 351.4(b)(2).
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    The SDC reply that the Kessler list that IPG compared with the 
Whitt list was not the basis for the HHVH report. The SDC represent 
that the Kessler list of stations that Mr. Whitt used for his report 
was based on the Nielsen data that Ms. Kessler ordered for the study 
that she prepared for the 2000-03 proceeding. 09/02/14 Tr. at 28-30 
(Att'y MacLean). Mr. Whitt addressed this issue in his testimony in the 
April hearing on IPG's discovery motion. 04/08/14 Tr. at 113-15 
(Whitt). That being said, the SDC are unsure how Ms. Kessler determined 
what Nielsen data to order. 09/04/14 Tr. at 29 (Att'y MacLean). 
Nevertheless, the SDC's witness, Mr. Sanders, testified that the list 
upon which the Whitt report was compiled was ``sufficiently 
representative for the purpose that it is being put forth.'' Id. at 31. 
The SDC further assert, based on an analysis by Dr. Erdem, that the 
SDC's Nielsen sample, which was based on the Nielsen information that 
was ordered by Ms. Kessler, ``does not have a bias in terms of coverage 
of quarter-hours of IPG versus SDC programs. Or, if it does have a 
bias, the same bias is in all of the data that IPG is using as well, 
whatever bias there is.'' Id. at 32. Finally, the SDC state that they 
``had absolutely nothing to do with choosing this [station] sample--it 
was chosen years before we ever purchased it from MPAA--there

[[Page 13427]]

was absolutely zero incentive for everybody to intentional [sic] bias 
the data in any way.'' Id. at 33.
    For purposes of ruling on the Motion, the Judges do not examine the 
weight, if any, they might place on the proffered evidence. Rather, the 
Judges must examine whether the SDC offered the evidence in a manner 
that was consistent with the applicable rules for offering this type of 
evidence.
    The Judges' procedural rules address evidence in proceedings before 
the Judges. Rule 351.10(a) addresses admissibility of evidence. Under 
the rule, evidence that is relevant and not unduly repetitious or 
privileged is admissible. Proponents must authenticate or identify 
written testimony and exhibits for them to be admissible. See 37 CFR 
351.10(a). The admissibility requirements of authentication or 
identification are satisfied by evidence sufficient to support a 
finding that the matter in question is what its proponent claims. Id.
    IPG does not contend that the SDC violated any provision of Rule 
351.10(a); that is, that the Whitt report is irrelevant, unduly 
repetitious, or privileged. Rather, IPG focuses on Rule 351.10(e). That 
provision of the rule provides if studies or analyses are offered in 
evidence, they must state clearly ``the study plan, the principles and 
methods underlying the study, all relevant assumptions, all variables 
considered in the analysis, the techniques of data collection, the 
techniques of estimation and testing, and the results of the study's 
actual estimates and tests.'' 37 CFR 351.10(e). This information must 
be presented in a ``format commonly accepted within the relevant field 
of expertise implicated by the study.'' Id. Facts and judgments upon 
which conclusions are based must be ``stated clearly, together with any 
alternative courses of action that were considered.'' Id. The party 
offering the study into evidence must retain summaries and tabulations 
of input data and the input data themselves. Id.
    IPG asserts that by not explaining precisely how the Whitt report 
was created, the SDC failed to provide an adequate foundation for the 
report. In considering whether there was an adequate foundation for 
admitting the Whitt report into evidence, the Judges must consider not 
only the exhibit that contains the report but also any written or live 
testimony offered to explain how the exhibit was created. In his 
written direct statement, Mr. Whitt included the household viewing 
report that he had prepared and discussed the sources of the data and a 
description of how he prepared the report. In the April 8, 2014, 
hearing on IPG's motion to strike portions of the SDC's written direct 
statement, Mr. Whitt provided additional details about he created the 
report, including the sources of the data, the processes he followed to 
merge Nielsen and Tribune data files, and the ``quality control'' 
process he used to eliminate erroneous program titles.
    IPG's counsel and the Judges had ample opportunity to question Mr. 
Whitt on all elements of the report. After noting IPG's objection, the 
Judges admitted provisionally Mr. Whitt's written testimony during the 
hearing on September 3, 2014. 09/03/14 Tr. at 416. IPG's counsel then 
had another opportunity to cross-examine Mr. Whitt on the processes he 
used to construct the report. On both occasions, Mr. Whitt was open and 
forthright about how he prepared the report, including the manner in 
which he used a list of stations based on a set of Nielsen data ordered 
by Ms. Kessler for MPAA in a separate proceeding. See, e.g., 09/03/14 
Tr. at 422 (Whitt) (``I just accepted whatever stations they sent 
me.''). Mr. Whitt made no efforts to gloss over the potential 
weaknesses in the preparation of the report. Indeed, the SDC's counsel 
correctly identified Mr. Whitt as more akin to a fact witness than an 
expert witness. 09/02/14 Tr. at 35 (Whitt).
    In the end, the Judges are satisfied that the SDC provided an 
adequate foundation for the admission of Mr. Whitt's written direct 
statement into the record. That is not to say that there are not issues 
with respect to how the HHVH report was created. The SDC concede as 
much. See 09/02/14 Tr. at 24 (Att'y MacLean) (``[I]t is not that any of 
the specific problems that the parties raised were invalid or that they 
shouldn't be raised. . . .''). Not the least of these issues is the 
fact that the Whitt report relies on a list of stations selected 
according to criteria that were seemingly unknown even to Ms. Kessler 
who purportedly selected the stations. These issues go to the weight, 
not to the admissibility, of the report. For the foregoing reasons, the 
Judges DENY IPG's Motion and admit Exhibit SDC-D-001 (Written Direct 
Testimony of Whitt with Exhibits) for all purposes in this proceeding.

IV. Applicable Law and Precedent

    Twice each year, CSOs deposit with the Copyright Office royalties 
accrued for the retransmission of over-the-air television programming 
outside the originating station's local broadcast area. The amount of 
fee deposits is statutory. See 17 U.S.C. 111(d)(1). Every July, 
copyright owners file claims for the funds on deposit for the preceding 
calendar year's retransmissions. On motion of a claimant or sua sponte, 
the Judges publish notice of the commencement of proceedings to 
distribute those royalty funds.
    By convention, claimants and claimants' representatives begin each 
proceeding with an allocation process that has come to be called 
``Phase I.'' \17\ Traditionally, the claimants divide themselves into 
eight Phase I categories based upon the nature of the programs in which 
they claim copyright.\18\ If the participants do not agree to an 
allocation of deposited royalties among the Phase I categories, they 
submit their controversy to the Judges for adjudication. Once the 
allocation is decided, the claimants in each category seek 
distribution. If the claimants within each category do not agree to the 
distribution scheme among themselves, the Judges adjudicate disputes 
and make a determination of the appropriate distribution among 
claimants within each category. This process has become known as 
``Phase II'' of the distribution proceeding.
---------------------------------------------------------------------------

    \17\ The Copyright Royalty Tribunal (CRT), a predecessor to the 
CRB, began bifurcation of the distribution proceedings to mitigate 
what it perceived to be an unwieldy process. See 1979 Cable Royalty 
Distribution Determination, 47 FR 9879 (Mar. 8, 1982). Bifurcation 
of distribution proceedings is not mandated by statute or 
regulation, but is acknowledged in the Judges' current regulations 
at 37 CFR 351.1(b)(2).
    \18\ The program categories are: Program Suppliers (syndicated 
programming and movies); Joint Sports Claimants (live college and 
professional team sports); Commercial Television (programs produced 
by local commercial TV stations); Public Broadcasting; Devotional 
Claimants; and Canadian Claimants. Two additional categories 
represent non-TV interests: Music Claimants (copyright owners of 
musical works carried on broadcast TV signals); and National Public 
Radio (copyright owners of all non-music content broadcast on NPR 
stations)
---------------------------------------------------------------------------

A. The Relevant Statutory Language

    The Copyright Act (Act) does not mandate (or even suggest) a 
formula for royalty distribution.\19\ As the Librarian \20\ has stated:
---------------------------------------------------------------------------

    \19\ Section 111(d)(4) of the Act merely provides that, in the 
event of a controversy concerning the distribution of royalties, 
``the Copyright Royalty Judges shall, pursuant to Chapter 8 of 
[title 17], conduct a proceeding to determine the distribution of 
royalty fees.''

    \20\ The Librarian was responsible for administering the 
Copyright Arbitration Royalty Panel (CARP) process for distributing 
cable royalties from 1993, when Congress abolished the CRT, a 
predecessor adjudicative body, until 2005, when Congress established 
the Copyright Royalty Judges program. The Librarian had the 
obligation of reviewing CARP decisions and, on recommendation of the 
Register, adopting, modifying, or rejecting them.
---------------------------------------------------------------------------

    Section 111 does not prescribe the standards or guidelines for 
distributing royalties collected from cable operators

[[Page 13428]]

under the statutory license. Instead, Congress decided to let the 
Copyright Royalty Tribunal ``consider all pertinent data and 
considerations presented by the claimants'' in determining how to 
---------------------------------------------------------------------------
divide the royalties.

Distribution of 1993, 1994, 1995, 1996 and 1997 Cable Royalty Funds, 
Order, in Docket No. 2000-2 CARP CD 93-97, 66 FR 66433, 66444 (Dec. 26, 
2001) (quoting H.R. Rep. No. 1476, at 97 (1976)) (1993-1997 Librarian 
Order).\21\
---------------------------------------------------------------------------

    \21\ The 1993-1997 Librarian Order was vacated as moot after the 
parties settled their appeals. Distribution of 1993, 1994, 1995, 
1996 and 1997 Cable Royalty Funds, Notice of termination of 
proceeding, Docket No. 2000-2 CARP CD 93-97, 69 FR 23821 (Apr. 30, 
2004). The settlement and vacatur of the 1993-1997 Librarian Order 
did not disturb the reasoning articulated therein. Id. at 23822.
---------------------------------------------------------------------------

    The Act does require, however, that the Judges act in accordance 
with prior determinations and interpretations of the Copyright Royalty 
Tribunal, the Librarian, the Register of Copyrights (Register), 
Copyright Arbitration Royalty Panels, to the extent that precedent is 
consistent with the Register's opinions on questions of copyright law, 
and decisions of the Court of Appeals relating to distribution 
proceedings. See 17 U.S.C. 803(a)(1).
    Determining the proper distribution of cable royalties among 
claimants requires a determination of the ``relative marketplace 
value'' of the respective claimants' programs. See, e.g., Program 
Suppliers v. Librarian of Congress, 409 F.3d 395, 401 (D.C. Cir. 2005); 
1993-1997 Librarian Order, 66 FR at 66445. The Judges defined 
``relative marketplace value'' in detail in a previous Determination. 
See Determination of the Distribution of the 2000-03 Cable Royalty 
Funds, Docket No. 2008-2, CRB CD 2000-2003, 78 FR 64984, 64985-6 nn. 8 
and 9 (October 30, 2013) (2000-03 Determination). In the present 
Determination, the Judges adopt and restate the ``relative market 
value'' standard they described in the 2000-03 Determination, and 
provide further detail consistent with that standard, including detail 
presented through the expert economic testimony in the present 
proceeding.
    To assess relative marketplace value, the Judges previously have 
looked to hypothetical, simulated, or analogous markets, as Congress 
has imposed the compulsory license regime in lieu of an unfettered free 
market for cable retransmission of broadcast television programs. 2000-
03 Determination, 78 FR at 64986; see also 1993-97 Librarian Order, 66 
FR at 66445; 1987 Music Determination, 55 FR at 11993. Consistent with 
precedent, in the current proceeding the Judges look to the evidence 
presented by the parties, if any, to identify the parameters of a 
hypothetical market that would exist but for the compulsory license 
regime.\22\
---------------------------------------------------------------------------

    \22\ ``Simulations aim at imitating an economically relevant 
real or possible system by creating societies of artificial agents 
and . . . institutional structure. . . .'' A. Lehtinen and J. 
Kuorikoski, Computing the Perfect Model: Why Do Economists Shun 
Simulations?, 74 Phil. of Sci. 304, 307 (2007) (emphasis in 
original). However, the parties to this proceeding did not proffer 
evidence of any simulations. Further, the parties did not provide 
evidence or testimony from sellers/licensors and buyers/licensees in 
``analogous'' markets, such as perhaps the markets for cable 
programming or syndication rights (nor the results of any surveys of 
such market participants) that the Judges might use as benchmarks to 
establish a distribution methodology in the present proceeding. The 
SDC did provide, however, evidence of ratings from the local markets 
in which the SDC and IPG programs aired.
---------------------------------------------------------------------------

B. The Economic Standard: ``Relative Market Value''

    As explained in the 2000-03 Determination, to construct the 
hypothetical market, it is important at the outset to appreciate the 
reason for the statutory license and the concomitant distribution 
proceedings. Statutory licenses substitute for free market negotiations 
because of a perceived intractable ``market failure'' inherent in the 
licensing of copyrights--particularly the assumed prohibitively high 
``transaction costs'' of negotiating a multitude of bilateral contracts 
between potential sellers and buyers. See, e.g., R. Picker, Copyright 
as Entry Policy: The Case of Digital Distribution, 47 Antitrust Bull. 
423, 464 (2002) (``The modern structure of . . . validating or 
conferring rights in copyright holders yet coupling those rights with 
statutory licenses has the virtue of mitigating the exercise of 
monopoly power and minimizing the transaction costs of 
negotiations.''); S. Willard, A New Method of Calculating Copyright 
Liability for Cable Rebroadcasting of Distant Television Signals, 94 
Yale L.J. 1512, 1519 (1985) (``One important reason for compulsory 
licensing . . . was to avoid the `prohibitive' transaction costs of 
negotiating rebroadcast consent.''); S. Besen, W. Manning & B. 
Mitchell, Copyright Liability for Cable Television: Compulsory 
Licensing and the Coase Theorem, 21 J.L. & Econ. 67, 87 (1978) 
(``Compulsory licensing . . . has lower negotiating costs than a system 
based on full copyright liability. . . .''). Thus, the hypothetical 
market that the Judges must construct must be a market that would be 
unencumbered by either transaction costs or the restrictions imposed by 
the statutory license.
1. ``Relative'' Market Value
    The Judges begin, as they did in the 2000-03 Determination, parsing 
the phrase ``relative market value'' by first considering the import of 
the word ``relative.'' The word ``relative'' denotes that the value of 
any retransmitted program is to be determined in relation to the value 
of all other programs within the bounds of the respective Phase I 
category definitions, and thus can be expressed as a percentage of 
total ``market value.''
2. Relative ``Market Value''
    In turn, ``market value'' is traditionally stated in decisional and 
administrative law more fully as ``fair market value.'' The Supreme 
Court has stated the traditional definition of ``fair market value'' as 
``the price at which the property would change hands between a willing 
buyer and a willing seller, neither being under any compulsion to buy 
or sell and both having reasonable knowledge of relevant facts.'' U.S. 
v. Cartwright, 411 U.S. 546, 551 (1973). It is necessary to further 
define the various terms that comprise the foregoing definition of 
relative market value.
a. The Hypothetical ``Willing Sellers'' (the Copyright Owners)
    Copyright Owners seek to maximize profit from licensing their 
programs for retransmission by CSOs. Copyright Owners' marginal costs 
are low and approach zero. Most of the costs incurred in creating the 
work are sunk, fixed costs. Even so, Copyright Owners seek to maximize 
the revenue they receive from CSOs. Given the minimal marginal costs, 
Copyright Owners, as the hypothetical willing sellers, will always have 
an incentive to sell at some positive price, but will likely engage in 
bargaining whereby a Copyright Owner might threaten to deny the license 
unless the CSO offers the Copyright Owner's (undisclosed) reservation 
price. See Besen, et al, supra, at 81.
b. The Hypothetical ``Willing Buyers'' (the CSOs)
    For CSOs, the economics are less straightforward. CSO revenues are 
derived from the sale of cable bundles (commonly described as 
``packages'' or ``tiers'') to subscribers, i.e., the ultimate 
consumers. In turn, many variables affect the number of consumers that 
subscribe to a particular CSO's service, including the retransmitted 
broadcasts that the CSO includes as part of its subscription 
package.\23\
---------------------------------------------------------------------------

    \23\ The compulsory license regime requires CSOs to license a 
station's signal in its entirety, 17 U.S.C. 111(d)(1)(B), and to 
retransmit the programs (including advertisements) without 
alteration. 17 U.S.C. 111(c)(3). Therefore, retransmitting CSOs 
cannot sell advertising on retransmitted broadcast channels in the 
actual market under the compulsory license regime. However, in the 
hypothetical market, where the limiting provisions of the compulsory 
license regime would not apply, retransmitting CSOs arguably could 
sell local replacement advertising, which would render viewership an 
important metric of relative market value. However, this point was 
not presented by either of the parties in the present proceeding.

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[[Page 13429]]

    To CSOs, the programs offered by the Copyright Owners are inputs--
factors of production--utilized to create the products that the CSOs 
sell to their customers, viz., the various subscription bundles of 
cable channels. In a hypothetical program market, CSOs would buy the 
rights to retransmit programs as they would purchase any factor of 
production, up to the level at which that ``factor price'' equals the 
``Marginal Revenue Product'' (MRP) of that program. In simple terms, a 
CSO in a competitive factor market would only pay for a license to 
retransmit a program if the revenue the CSO could earn on the next 
(marginal) sale of the final product were at least equal to that 
price.\24\ In practical terms, why would a CSO pay $50,000 to 
retransmit a program that the CSO estimates would add only $40,000 to 
the CSO's subscriber revenue? See Besen, et al., supra, at 80 (``To the 
cable system the value of carrying the signal is equal to the revenue 
from the extra subscribers that the programming will attract and any 
higher subscriber fees it can charge less the additional costs of 
importing the program.'').\25\
---------------------------------------------------------------------------

    \24\ A focus on marginal costs and benefits is not only 
efficient for the hypothetical buyers and sellers, but also for the 
consuming public: ``Optimal program diversity will result if cable 
operators and the public they serve pay to copyright owners the 
marginal value derived from viewing syndicated programming.'' 
Willard, supra, at 1518.
    \25\ If the CSO, as a program licensee, had some degree of 
monopsony power in the factor market, it could pay less than a price 
equal to MRP, but still would pay to license programs in a quantity 
at which MRP would equal the marginal cost to license an additional 
program.
---------------------------------------------------------------------------

c. ``Neither Being Under Any Compulsion to Buy or Sell''
    In the actual (i.e., non-hypothetical) market, terrestrial 
broadcast stations create the program lineup, which is only available 
for purchase by CSOs as a pre-bundled signal. The CSOs cannot 
selectively license for retransmission some programs broadcast on the 
retransmitted station and decline to license others; rather, the signal 
must be purchased in toto. 17 U.S.C. 111(d)(1)(B) (statutory license 
royalty computed based on number of ``distant signal equivalents'').
    Is this required bundling a form of ``compulsion'' upon CSOs? In 
the actual market, they are compelled to take every program pre-bundled 
on the retransmitted distant station, despite the fact that the various 
pre-bundled programs would each add different monetary value (or zero 
value) in the form of new subscriber volume, subscriber retention, or 
higher subscription fees. Indeed, some programs on the retransmitted 
station may have so few viewers that CSOs--if they had the right--would 
decide not to purchase such low viewership programs but for the 
requirements of the compulsory license regime.
    Further, certain programs may have more substantial viewership, but 
that viewership might merely duplicate viewership of another program 
that generates the same sub-set of subscribers. To restate the example 
offered in the 2000-03 Determination, the viewers of reruns of the 
situation comedy ``Bewitched'' may all be the same as the viewers of 
reruns of ``I Dream of Jeannie,'' a similar supernatural-themed 
situation comedy. However, ``Bewitched'' may have fewer viewers than 
``I Dream of Jeannie.''
    In the hypothetical market in which the compulsory licensing regime 
did not exist, a rational profit-maximizing CSO that had already paid 
for a license to retransmit ``I Dream of Jeannie'' would not also pay 
for ``Bewitched'' in this hypothetical marketplace, because it fails to 
add marginal subscriber revenue for the CSO. Rather, the rational CSO 
would seek to license and retransmit a show that marginally increased 
subscriber revenue (or volume, if market share was more important than 
profit maximization), even if that program had lower total viewership 
than ``Bewitched.''
    Alternately stated, why should CSOs in the hypothetical market be 
compelled to pay for a program based on its higher viewership, even 
though it adds less value than another show with lower viewership? 
Simply put, the hypothetical, rational profit-maximizing CSOs would not 
pay Copyright Owners based solely on levels of viewership. Rather, the 
hypothetical CSOs would (1) utilize viewership principally as a tool to 
estimate how the addition of any given program might change the CSO's 
subscriber revenue, (2) attempt to factor in the economics of various 
bundles; and (3) pay for a program license (or eschew purchasing that 
license) based on that analysis.
    Thus, the Judges consider the hypothetical market to be free of the 
compulsion that arises from the pre-bundling that exists in the actual 
market.
    On the other side of the coin, are the sellers, i.e., the Copyright 
Owners, under any ``compulsion'' to sell? In the actual market, one in 
which the terrestrial station signal is acquired in a single specific 
bundle by a CSO, the answer appears to be yes, there is ``compulsion.'' 
Copyright Owners cannot carve out their respective programs and seek to 
maximize their values to CSOs independent of the prepackaged station 
bundles in which they exist.
    Of course, in the ``hypothetical market'' that the Judges are 
charged with constructing, it would be inappropriate not to acknowledge 
the inherent bundling that would occur. That is, the bundling decision 
is a ``feature'' rather than a ``bug'' in even a hypothetical market 
for distant retransmissions in which the statutory license framework 
does not exist. Thus, while Copyright Owners could offer to supply 
their respective programs at given prices, the equilibrium market price 
at which supply and demand would intersect would reflect the CSOs' 
demand schedules, which are based in part upon the fact that the 
buyers, i.e., the CSOs, would pay only a price that is equal to (or 
less than) the MRP of that program in a bundle to be purchased by 
subscribers.
3. The Optimal Economic Approach to Determining ``Relative Market 
Value''
    In the present proceeding, the Judges considered the general 
interrelationship among bundling, subscribership, and viewership, and 
their impact on ``relative market value,'' in more detail than in prior 
proceedings. Specifically, the Judges inquired as to whether the 
parties' experts had considered utilizing a method of valuation known 
as the ``Shapley value'' methodology \26\ to determine their respective 
allocations.
---------------------------------------------------------------------------

    \26\ See L. Shapley, A Value for n-person Games, in H. Kuhn and 
A. Tucker, Contributions to the Theory of Games (1953). A definition 
and an example of a Shapley valuation are set forth in the text, 
infra. For the statistical formula for a Shapley value, see 9/8/14 
Tr. at 1075-79 (Erdem); see also SDC Proposed Findings of Fact (PFF) 
] 64.
---------------------------------------------------------------------------

    Broadly stated, ``the Shapley value gives each player his `average 
marginal contribution to the players that precede him,' where averages 
are taken with respect to all potential orders of the players.'' U. 
Rothblum, Combinatorial Representations of the Shapley Value Based on 
Average Relative Payoffs, in The Shapley Value: Essays in Honor of 
Lloyd S. Shapley 121 (A. Roth ed. 1988) (hereinafter, ``Roth'') 
(quoting Shapley, supra). A Shapley valuation in the

[[Page 13430]]

present context is best understood through the following example: \27\
---------------------------------------------------------------------------

    \27\ This example is inspired by a similar example set forth by 
Professor Richard Watt, Managing Editor of the Review of Economic 
Research on Copyright Issues and a past president of The Society for 
Economic Research on Copyright Issues. See R. Watt, Fair Copyright 
Remuneration: The Case of Music Radio, 7 Rev. of Econ. Res. on 
Copyright Issues 21, 25-26 (2010).
---------------------------------------------------------------------------

     Assume there is only one CSO (C), and there are two 
program owners (P1 and P2) with programs available for retransmission.
    In a hypothetical market, the Shapley model defines the values of 
C, P1, and P2 under all of the possible orderings of arrival of the 
three entities to negotiations and at each point of arrival.
    For C, P1, and P2, there are the following 6 (that is 3 factorial, 
or 3!) possible orderings by which each arrives in the market:

(1) C, P1, P2
(2) C, P2, P1
(3) P1, C, P2
(4) P1, P2, C
(5) P2, C, P1
(6) P2, P1, C

     Assume the following.
    (a) An entity (C, P1, or P2)--alone in the market--generates $0 in 
retransmission value regardless of who that player is (because a cable 
system without programming or a program without a CSO will not be 
viewed and thus has no value);
    (b) regardless of the order in which the respective owners of P1and 
P2 arrive in the market to attempt to license their respective 
programs, both of their respective programs generate $0 in 
retransmission value without a CSO (because programs without a CSO 
cannot be retransmitted and therefore provide no value);
    (c) if C is present, it generates $6 by retransmitting P1 alone and 
$5 by retransmitting P2 alone;
    (d) if all three players are present, then the retransmission of P1 
and P2 by C generates an assumed synergistic value of $12.
     The Shapley value of P1 in each of the six possible 
orderings is thus:
$6 in ordering (1) (because P1 increases the value from $0 to $6);
$7 in ordering (2) (because P1 increases the value from $5 to the 
synergistic $12);
$0 in ordering (3) (because P1 adds no value when it arrives first to 
the market);
$0 in ordering (4) (because P1 adds no value when it arrives first to 
the market);
$7 in ordering (5) (because P1 increases the value from $5 to the 
synergistic $12); and
$0 in ordering (6) (because P1 does not add value if there is no CSO in 
the market).
    The Shapley value of P1 is the average value of P1 over all 
possible arrival sequences, or
[GRAPHIC] [TIFF OMITTED] TN13MR15.005

    By a similar calculation, the Shapley value of P2 is $2.83. 
(Similarly, the Shapley value of C, the CSO, is $5.83.) The sum of the 
values each provides is approximately $12, which equals the synergistic 
business value generated when all three entities are present in the 
market.
    Shapley valuations constitute ``the unique efficient solution'' 
because they ``valu[e] each player['s] direct marginal contribution to 
[a] grand coalition.'' S. Hart and A. Mas-Colell, ``The Potential of 
the Shapley Value,'' in Roth, supra, at 127-28. The Shapley value 
analysis not only enriches the development of the relative market value 
standard, but it also would allow the Judges in this proceeding to 
carry out their statutory mandate to distribute the deposited royalties 
by comparing the parties' respective valuation methodologies to that 
optimal standard, to determine which of their methodologies more 
closely reflects the optimal hypothetical market.
    To summarize, as in the 2000-03 Determination, the Judges will 
apply in this Determination a hypothetical market that contains the 
following participants and elements: (1) The hypothetical sellers are 
the owners of the copyrighted programs; (2) the hypothetical buyers are 
the CSOs that acquire the programs as part of their hypothetical 
bundles of programs; and (3) the requirement of an absence of 
compulsion dictates that the terrestrial stations' initial bundling of 
programs does not affect the marginal profit-maximizing decisions of 
the hypothetical buyers and sellers.\28\
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    \28\ The construction of the hypothetical market is of 
particular importance in this proceeding. As explained infra, IPG 
mistakenly argues that the preexisting bundling of programs on the 
retransmitted stations in the actual market renders ratings 
irrelevant to a CSO that must purchase and retransmit the actual 
bundle in toto. IPG confuses the actual market with the hypothetical 
market the Judges are obligated to construct. The actual market is 
distorted by the existence of the compulsory statutory license, and 
the Judges are required to determine the values of the copyrighted 
programs by hypothesizing an unregulated market in which such 
statutory compulsion does not exist.
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V. Description and Analysis of the Parties' Proposals for Distribution

A. The SDC Methodology

1. The Details of the SDC Methodology
    The SDC's calculation of relative market value (SDC Methodology) is 
based upon the analyses of two expert witnesses who testified on behalf 
of the SDC in their direct case and upon certain designated testimony 
from prior proceedings.\29\ The first live witness upon whom the SDC 
relied was Mr. Whitt, a systems analyst, programmer and database 
analyst, who had worked for a company he founded, IT Processing LLC (IT 
Processing). 9/3/14 Tr. at 418 (Whitt).\30\ Mr. Whitt had formed IT 
Processing to engage in ``massive data projects'' that required 
``millions of unique items of data to be accurately and efficiently 
entered and

[[Page 13431]]

analyzed.'' Whitt WDT at 2; Ex. SDC-D-001 at 2.
---------------------------------------------------------------------------

    \29\ The SDC designated the following testimony from the 1998-99 
Phase I Proceeding (Distribution of 1998 and 1999 Cable Royalty 
Funds, Docket No. 2001-8 CARP CD 98-99) from the following 
witnesses: (a) Marsha Kessler (a retired MPAA vice president, 
responsible for retransmission royalties): June 2, 2003 (pp. 6347-
6454); June 3, 2003 (pp. 6456-6613); July 14, 2003 (pp. 9478-9491); 
and July 15, 2003 (pp. 9724-9753); (b) Paul Lindstrom (a Nielsen 
employee): June 9, 2003 (7175-7445); and (c) Paul Donato (a Nielsen 
employee) June 9, 2003 (pp. 7445-7520). From the 2000-2003 Phase II 
Proceeding (In the Matter of Distribution of 2000, 2001, 2002, and 
2003 Cable Royalty Funds, Docket No. 2008-2 CRB CD 2000-2003), the 
SDC designated testimony from the following witnesses: (a) Ms. 
Kessler: June 3, 2013 (pp. 101-218); (b) Paul Lindstrom: June 3, 
2013 (pp. 280-324); and June 4, 2013 (pp. 368-433); (c) Dr. William 
Brown: June 6, 2013 (pp. 1364-1420); (d) Jonda Martin: June 3, 2013 
(pp. 219-236); (e) Kelvin Patterson: June 3, 2013 (pp. 237-280); and 
(f) Mr. Whitt: June 6, 2013 (pp. 1346-1363).
    \30\ The SDC proffered Mr. Whitt's testimony from a prior 
hearing in this proceeding (discussed in Part III, supra) conducted 
on April 8, 2014, in lieu of eliciting his testimony during the 
September hearing. IPG consented to this procedure (subject to its 
foundational challenge as set forth in its Motion in Limine 
discussed supra) and the Judges incorporated by reference Mr. 
Whitt's April 8, 2014, testimony as part of the present record. 9/3/
14 Tr. at 413-15. IPG also cross-examined Mr. Whitt during the 
September 2014 hearings, and the SDC then conducted redirect 
examination of Mr. Whitt.
---------------------------------------------------------------------------

    Mr. Whitt's work on behalf of the SDC was derivative of earlier 
work he had undertaken on behalf of MPAA. More particularly, Mr. Whitt 
had been engaged by MPAA ``to process large data files consisting of 
cable and satellite copyright programming and viewing associated with 
claims filed with the Copyright Royalty Arbitration Panels . . . and 
[the] Copyright Royalty Board.'' Id. at 3.
    According to Mr. Whitt, he was contacted by the SDC in 2006 to 
assist in preparing their case in this proceeding. 4/8/14 Tr. at 106 
(Whitt). The SDC engaged Mr. Whitt to utilize his prior work and data 
from his MPAA assignment to prepare the HHVH Report for 1999, relating 
to the retransmission of certain Devotional programming on broadcast 
television stations that were distantly retransmitted to other markets. 
Whitt WDT at 3 and Ex. 1 thereto; Ex. SDC-D-001 at 3 and Ex. 1 thereto; 
4/8/14 Tr. at 106 (Whitt).
    Mr. Whitt's 1999 HHVH Report was based on following three data 
sources:
    (1) Programs on a sample of television stations whose signals were 
distantly transmitted on cable that Mr. Whitt believed Ms. Kessler, a 
former employee of the MPAA, chose based on whether the signals were 
``distant'' for cable copyright purposes;
    (2) distant program viewing data from Nielsen, presented on a 
quarter-hour basis, for programs from Nielsen's six ``sweeps'' months 
of diary data (January, February, May, July, October and November) 
(Nielsen Data); \31\ and
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    \31\ Nielsen ratings estimate the number of homes tuned to a 
program based upon a sample of television households selected from 
all television households. The findings within the sample are 
``projected'' to national totals. Although there was no evidence or 
testimony regarding how Nielsen conducted its data collection for 
sweeps weeks in 1999, Mr. Lindstrom described the general process in 
his testimony in the 2000-03 proceeding, which the SDC designated in 
this proceeding. In that regard, Mr. Lindstrom testified that diary 
data is collected in Nielsen's diary markets during November, 
February, May, July, and in some cases October and March, which are 
also known as the ``sweeps'' ratings periods (Nielsen Diary Data). 
(Diaries are paper booklets in which each person in the household 
manually records viewing information.) Nielsen mails seven-day 
diaries to homes randomly selected by Nielsen to keep a tally of 
when each television in the household was on, what it was tuned to, 
and who in the household was watching. Over the course of a four-
week sweeps period, Nielsen mails diaries to a new panel of randomly 
selected homes each week. At the end of each sweeps period, all of 
the viewing data from the individual weeks are aggregated into 
Nielsen's database. Each sweeps period yielded a sample of 
approximately 100,000--aggregating to 400,000 households over the 
course of a year. 2000-03 Determination, 78 FR at 6993; 6/3/13 Tr. 
at 290, 296-98, 312 (Lindstrom) (SDC Designated Testimony).
---------------------------------------------------------------------------

    (3) program data from Tribune Media Services (``TMS'') (including 
station, date, time, title and program category) (TMS Data).

Id. at 3.
    Mr. Whitt then matched the Nielsen Data with the TMS Data in order 
to merge the Nielsen Data for reported quarter-hour segments with the 
titles of the programs and other program information in the TMS Data. 
Id. at 4; 4/8/14 Tr. at 108 (Whitt).\32\ In addition, Mr. Whitt 
identified what he described as ``character strings'' from program 
titles (44 in total) that he discretionally determined were devotional 
in nature but had not been captured in the merging of the Nielsen Data 
and the TMS Data. Id. at 4-6. Mr. Whitt also used his discretion to 
delete certain programs that he concluded were not in fact devotional, 
although their titles initially suggested that they were devotional in 
nature. 4/8/14 Tr. at 126-28 (Whitt).
---------------------------------------------------------------------------

    \32\ More precisely, Mr. Whitt had performed this merger on 
behalf of the MPAA. Then, after being retained by the SDC, he 
derived his 1999 HHVH Report for Devotional programming by narrowing 
that prior work on behalf of the MPAA to isolate the Devotional 
programming. 4/8/14 Tr. at 108-10 (Whitt).
---------------------------------------------------------------------------

    Mr. Whitt completed his analysis by ``aggregat[ing] by title and 
station summing the adjusted household viewing hours from [the] Nielsen 
[data].'' Whitt WDT at 6; Ex. SDC-D-001 at 3. Thus, Mr. Whitt was able 
to identify the potentially compensable broadcasts of the programs 
claimed by SDC and IPG that aired on the sample stations. Whitt WDT at 
3; Ex. SDC-D-001 at 3.
    The SDC also presented John Sanders as an expert ``to make a fair 
determination of the relative market values of particular devotional 
television programs claimed by the parties'' using Mr. Whitt's report. 
Ex. SDC-D-002 at 2. Mr. Sanders previously had ``actively participated 
in the appraisal of more than 3,000 communications and media 
businesses,'' and his work has focused on, inter alia, ``the television 
and cable industries and the appraisal of . . . subscribership-based 
assets . . . .'' Id. at 3. In the course of that work, since 1982, Mr. 
Sanders has frequently engaged in the valuation of television programs 
for both buyers and sellers, and the valuation of cable systems, in 
connection with market transactions (as contrasted with valuations as 
an expert witness). 9/3/14 Tr. at 461-62 (Sanders). Accordingly, and 
without objection, Mr. Sanders was qualified as an expert in the 
valuation of media assets, including television programs. 9/3/14 Tr. at 
463-64.
    Mr. Sanders testified that if he were representing a buyer or a 
seller of a license to retransmit a program into a distant market, the 
first step in his analysis of value would be to ``measure the audience 
that is being generated by the various programs in question . . . .'' 
9/3/14 Tr. at 476-79 (Sanders). Mr. Sanders testified that the reason 
for this initial emphasis on audience viewership is as follows:

[I]n terms of a cable system, the objective is to have categories of 
programming that will attract subscribers. But, within those 
categories, to have individual program titles that viewers will 
actually be interested in watching. And those that show greater 
evidence of viewership will obviously attract more subscribers and, 
[as a] consequence, would have greater value.

9/3/14 Tr. at 478-79 (Sanders).
    Accordingly, Mr. Sanders based his relative valuation estimate 
primarily on Mr. Whitt's 1999 HHVH Report. Sanders WDT at 4; Ex. SDC-D-
002 at 4. He relied on that measure of viewing for the following 
reasons:

    To allocate reasonably the available funds between [the] SDC and 
IPG in this proceeding, it is my opinion that audience measurements 
relying on surveys conducted by Nielsen Media Research are the best 
available tools to allocate shares. . . .
    . . .
    Within the category of devotional programming, all of the 
programs claimed by [the] SDC and IPG appear to be directed 
predominantly to a Christian audience, and can therefore be thought 
of as homogeneous in terms of the subscriber base to which they are 
likely to appeal. Where programs are homogeneous, the most salient 
factor to distinguish them in terms of subscribership is the size of 
the audience. A religious program with a larger audience is more 
likely to attract and retain more subscribers or [sic] the [CSO], 
and is therefore of proportionately higher value.

Sanders WDT at 5-6; Ex. SDC-D-002 at 5-6. To ascertain the size of a 
program's audience, Mr. Sanders relied upon Nielsen ratings because he 
understood such ratings to be ``the currency of the broadcast and cable 
industry, and . . . generally regarded as the most reliable available 
measure of audience size.'' Id. As Mr. Sanders elaborated in his oral 
testimony:

    Ultimately, the valuation will be based upon the benefit that it 
brings to the holder of the programming. And most commonly, the 
measurement of that value is based upon the audience that that 
programming is able to generate. . . . Nielsen audience measurement 
data . . . is the most ubiquitous and authoritative source of 
audience measurement data in the broadcasting and cable fields.

9/3/14 Tr. at 465-66 (Sanders).

[[Page 13432]]

    Accordingly, Mr. Sanders added the household viewing hours for the 
distantly retransmitted compensable programming for each party. This 
calculation totaled 1,237,396 viewing hours for the SDC and 280,063 for 
IPG. Sanders WDT at 9; Ex. SDC-D-002 at 9; see also id. at Appendix E. 
In percentage terms, SDC-compensable programming accounted for 81.5% of 
the devotional viewing of the two parties' programs, and IPG-
compensable programming accounted for 18.5%.
    Based on his analysis, Mr. Sanders calculated the viewership (and 
distribution) shares of the SDC and IPG programming as follows.

SDC: 81.5%
IPG: 18.5%

    Mr. Sanders was unable to provide any confidence interval for these 
allocations, given that the statistical bases for the analysis were not 
random in nature. However, Mr. Sanders testified that he was able to 
confirm the overall ``reasonableness'' of his analysis by comparing the 
results with an analysis of local Nielsen viewing data for the same IPG 
and SDC programs in the February 1999 sweeps period. Mr. Sanders 
testified that he believed the Nielsen analysis was performed through a 
random sampling of viewers and constituted the ``granular'' or 
``niche'' type of report that Mr. Sanders understood to be necessary in 
order to rely with greater certainty on the results of the analysis. 9/
3/14 Tr. at 512 (Sanders).
    That analysis revealed the following distribution of viewers:

SDC: 71.3%
IPG: 28.7%

Mr. Sanders also noted that there was a ``correlation coefficient for 
the HHVH shares relative to the Nielsen shares [of] approximately 0.75, 
which ``signifies that 75% of the variance between HHVH results for 
different programs is connected with the variance between local ratings 
for those programs.'' Sanders WDT at 10; Ex. SDC-D-002 at 10. The 
Judges understand Mr. Sanders's testimony to mean that the 
``connected'' or correlated nature of the two sets of viewership data 
demonstrates that each data set is a form of confirmation as to the 
reasonableness of the other data set.
    Indeed, Mr. Sanders testified that, in his expert opinion, this 
71.3%:28.7% ratio should be ``characterized as a reasonableness check'' 
on his analysis. 9/3/14 Tr. at 501. See also 9/3/14 Tr. at 510 
(Sanders) (restating his ``reasonableness'' conclusion). Mr. Sanders 
emphasized the importance of his ``reasonableness check,'' stating that 
the ``body of data'' that led to a 71.3%:28.7% distribution ``is very 
relevant and, in my opinion, should not be ignored.'' 9/3/14 Tr. at 503 
(Sanders) (emphasis added). In that regard, Mr. Sanders further noted 
that, had his primary analysis resulted in a 71.3%:28.7% distribution 
and, had his ``reasonableness'' check resulted in an 81.5%:18.5% 
distribution, he would have proposed the 71.3%:28.7% distribution. 9/3/
14 Tr. at 509-10 (Sanders).
2. Evaluation of the SDC Methodology
    IPG sets forth several criticisms of the SDC Methodology. First, 
IPG claims that the SDC Methodology incorrectly assumes that household 
viewing constitutes an appropriate measure of relative market value. 
Assuming arguendo viewership can be a basis for value, IPG asserts, 
second, that the SDC did not provide a sufficient evidentiary 
foundation for the Nielsen Data and, therefore, for the 1999 HHVH 
Report. Third, again assuming, arguendo, that viewership is probative 
of value IPG argues that the incidence of ``zero viewing'' sample 
points in the Nielsen Data utilized to create the 1999 HHVH Report 
invalidates the Nielsen Data as a reliable source of viewership 
information. Fourth, IPG asserts again assuming, arguendo, the 
probative nature of viewership, that the SDC could have provided better 
data to support the SDC Methodology. Fifth, IPG argues that the SDC's 
own reasonableness test demonstrates that IPG programming has a 
significantly higher value than the 18.5% allocation proposed by the 
SDC.
a. Viewership Is an Acceptable ``Second-Best'' Measure of Value, Even 
Though It Is Not the Optimal Metric
    IPG opposes a relative market value assessment based solely on 
viewership because: (1) A CSO primarily benefits from attracting 
subscribers rather than viewers; (2) retransmitting a program with more 
viewers will not necessarily increase aggregate subscribership for a 
CSO; and (3) retransmitting a program with fewer viewers might increase 
a CSO's aggregate subscribership. Robinson WRT at 8.
    The Judges agree that a relative market value assessment based 
solely on viewership is less than optimal. In reaching this conclusion, 
the Judges refer to their earlier discussion of the Shapley valuation 
approach. In the present context, the Judges believe that the optimal 
approach to determining relative market value would have been to 
compare the SDC programs with those of IPG using Shapley or Shapley-
approximate valuations. Such an approach was not possible on the record 
before the Judges in the current proceeding because of the non-
existence, unavailability, or, from the parties' perspective, 
prohibitive development cost of the necessary evidence upon which such 
a comparison could be made.
    The SDC's expert economic witness, Dr. Erkan Erdem, agreed that, in 
theory, a Shapley valuation would be a more precise way to measure 
relative value in this proceeding. 9/8/14 Tr. at 1084 (Erdem). However, 
as Dr. Erdem noted, there was no evidence in the record (or apparently 
otherwise available) by which one could calculate the Shapley values in 
this proceeding. Tr. 9/8/14 at 1084-85 (Erdem).\33\ Indeed, no expert 
attempted to utilize a Shapley methodology to determine relative market 
value of the SDC and IPG programs.
---------------------------------------------------------------------------

    \33\ Professor Watt recognized this practical problem. See Watt, 
supra note 27, at 27 (``The Shapley model provides a reasonable 
working solution for regulators . . . . However, it does suffer from 
a particularly pressing problem--that of data availability.'').
---------------------------------------------------------------------------

    Dr. Erdem did acknowledge, however, that, as an alternative, a CSO 
could utilize the general principles of a Shapley valuation to rank 
ordinally the shows available for retransmission in a hypothetical 
market, and thus create heuristic Shapley values. 9/8/14 Tr. at 1100-01 
(Erdem). Such a ranking by CSOs in the present case could have served 
as a basis for benchmarking the ``relative marketplace values.'' 
However, neither of the parties proffered a witness who had experience 
in creating a roster of television programs.
    Thus, the Judges have no evidence or testimony by which to 
establish the relative marketplace values of the SDC and IPG programs 
in the optimal theoretical manner or in a manner that uses ``Shapley-
approximate'' values. This evidentiary constraint places the Judges in 
a ``second best'' situation. In that situation, it is not necessarily 
optimal to attempt to satisfy other efficient conditions, because to do 
so would further worsen the already sub-optimal situation. See R.G. 
Lipsey and K. Lancaster, The General Theory of Second Best, 24 Rev. 
Econ. Stud. 11 (1956). Colloquially stated, the theory of the second 
best may generally be defined as ``not letting the perfect be the enemy 
of the good.'' When the parties have not proffered evidence or 
testimony to permit Shapley-type valuations, it would not be efficient 
also to reject valuations based predominantly on viewing data.

[[Page 13433]]

    To reject viewing-centric valuations would require the Judges 
instead either to adopt a less probative or seriously deficient 
methodology,\34\ or figuratively to throw up their hands and refuse to 
make any allocation or distribution.\35\ The Judges will not compound 
the problem of the absence of the most theoretically probative evidence 
by rejecting the SDC's viewer-centric valuations, notwithstanding the 
limitations in using those valuations. \36\
---------------------------------------------------------------------------

    \34\ The only other methodology presented in this proceeding is 
the IPG Methodology. For the reasons set forth infra, the Judges 
have concluded that the IPG Methodology is seriously deficient and 
far less probative than the SDC Methodology. Thus, even if the 
Judges had not analyzed and considered a Shapley-type valuation, 
they would have analysis or consideration by the Judges, they would 
have given far more weight to the viewer-centric SDC Methodology 
than the seriously deficient IPG Methodology.
    \35\ The Judges had considered whether they could decline to 
make any distribution determination in light of the imperfections of 
the parties' evidence, and asked counsel for the parties to provide 
guidance as to that alternative. Cf. Final Determination, 1993-1997 
Cable Proceedings (Phase II), 66 FR 66433, 66454 (Dec. 26, 2001) 
(the Librarian accepted the Register's recommendation to reject a 
CARP Report distributing royalties because ``the record . . . is 
insufficient on which to base a distribution determination.''). Both 
counsel in the present proceeding urged the Judges not to render a 
determination that declined to distribute the royalties if a 
determination that made an allocation could be based upon adequate 
evidence and would not be arbitrary or capricious. 9/8/14 Tr. at 
1172-75 (counsel for the SDC); 9/8/14 Tr. at 1176-79 (counsel for 
IPG). The Judges are confident that this Determination satisfies 
those standards.
    \36\ The limitations might inure to IPG's benefit. As Dr. Erdem 
explained, when there is an overlap in viewership between programs, 
a purely viewership-based valuation, such as that proffered by the 
SDC, might understate the relative value of programs with higher 
viewership (i.e., the SDC programs) and overstate the IPG 
distribution percentage compared to a Shapley valuation. 9/8/14 Tr. 
at 1082-83 (Erdem). The Judges also note that in the hypothetical 
market, several CSOs might be competing for the right to retransmit 
programs. Thus, to use a prior example, if a CSO has purchased a 
license to retransmit I Dream of Jeannie, rather than Bewitched, 
because the former has more viewers and its viewers overlap 
significantly with the latter's viewers, a competing retransmitter 
might then find the total viewership for Bewitched so valuable 
(given that the retransmission rights to I Dream of Jeannie were no 
longer available) that Bewitched is that competing retransmitter's 
first choice even under a Shapley-type valuation. Therefore, in a 
competitive market, absolute viewership would be particularly 
probative of program value.
---------------------------------------------------------------------------

    The Judges' decision to issue a determination based on the extant 
evidence, rather than to reject all evidence because it is less than 
optimal, is consistent with D.C. Circuit precedent. Specifically, the 
D.C. Circuit has held that, in making distributions under Section 111 
of the Copyright Act, mathematical precision is not required. See 
National Ass'n of Broadcasters v. Librarian of Congress, 146 F.3d 907, 
929, 932 (D.C. Cir. 1998); Nat'l Cable Television Ass'n v. Copyright 
Royalty Tribunal, 724 F.2d 176, 187 (D.C. Cir. 1983). Rather, the 
Judges may render a determination premised on ``the only'' evidence 
presented by the parties, notwithstanding that ``the character of the 
evidence presented'' may fall short of more precise evidence that the 
parties did not or could not present. See Nat'l Cable Television, 724 
F.2d at 187.
    Applying a viewership-based model of valuation in deciding 
distribution allocations also is consistent with Library precedent. 
Specifically, in an analogous context in a Phase I proceeding, the 
Librarian held that a measure of ``relative market value'' could be 
made by reliance on viewership information when a more optimal 
valuation tool was not available. Distribution of 1998 and 1999 Cable 
Royalty Funds, Docket No. 2001-8 CARP CD 98-99, 69 FR 3606, 3614 
(January 26, 2004) (noting that survey evidence may be superior to 
viewing evidence but, in the absence of that superior evidence, viewing 
information can properly be relied upon by the factfinder in a 
distribution proceeding).
    IPG's own witness acknowledges the importance of viewership data 
generally in assessing the value of programming. In her oral testimony, 
Dr. Robinson conceded that viewership is an important metric in the 
determination of relative market value. 9/2/14 Tr. at 175; 9/4/14 Tr. 
at 784. (Robinson). Additionally, Dr. Robinson acknowledged that 
viewership is important to a CSO in order to retain subscribers, 9/4/14 
Tr. at 777-78 (Robinson), confirming the common sense idea that 
subscribers would not continue to subscribe if they did not watch the 
offered programming.
    The Judges are also confident that, generally, Nielsen-derived 
viewership data presents a useful measurement of actual viewership. 
They base this conclusion on, among other things, the fact that the 
television industry relies on Nielsen data for a wide range of business 
decisions. The SDC's expert industry witness, Mr. Sanders, testified 
that those in the television industry consider viewership data, as 
compiled by Nielsen, to be the best and most comprehensive measure of 
viewership. 9/3/14 Tr. at 480-81 (Sanders). Mr. Sanders acknowledged 
that the Nielsen Data are not perfect, but that their status as the 
best and most comprehensive measure of viewership has caused the 
television industry to utilize Nielsen data as a ``convention'' for 
``economic decision makers.'' Id. IPG did not present any evidence to 
rebut either of these points.
    If the Judges were to discount the Nielsen Data in this proceeding 
simply on the basis that Nielsen data are imperfect, the Judges would 
in essence be substituting their own opinion of the Nielsen yardstick 
for the collective opinion of the ``economic decision makers'' in the 
market. The Judges will not engage in such substitution; it is their 
job to develop a hypothetical market by eliminating the impact of the 
compulsory licensing regime--but otherwise to hew as closely as is 
reasonably appropriate to the conduct, performance, customs and 
standards of the actual market.
    Despite the Judges' conclusion that viewership is a type of metric 
that the Judges may consider, the Judges must consider whether the 
particular viewership analysis undertaken by the SDC contains 
imperfections, as noted by IPG, or otherwise. See, e.g., 1987 
Devotional Determination, 55 FR at 5650; 1986 Determination, 54 FR at 
16153-54 (noting that viewing measurements might not be perfect and 
must be appropriately adjusted if claimants are able to prove that 
their programs have not been measured properly or may be significantly 
undermeasured). Accordingly, the Judges must analyze the SDC's 
particular viewership evidence and address the issues raised by IPG in 
that regard.
b. The Evidentiary Foundation for the SDC Methodology
(1) ``Replication'' and ``Testing'' of the SDC's HHVH Report
    The SDC's viewership evidence consisted largely of the HHVH Report 
presented by SDC's witness, Mr. Whitt. IPG asserts that the SDC did not 
provide sufficient underlying data to allow IPG's expert, Dr. Robinson, 
to test the accuracy of the SDC's HHVH Report for 1999. 9/4/14 Tr. at 
755-56, 765-68 (Robinson). However, the Judges disagree with IPG's 
assertion, based upon Dr. Robinson's own testimony. Specifically, Dr. 
Robinson testified that she indeed ``merged the underlying data and ran 
the search terms for devotional programming [and] reached substantially 
the same results [as the SDC] in all material respects.'' Id. at 850-61 
(Robinson). In her prior testimony on IPG's Motion to Strike, Dr. 
Robinson had presaged her subsequent successful replication of the HHVH 
Report by admitting that she was able to merge the Nielsen Data and the 
TMS Data, run Mr. Whitt's search terms and test the accuracy of his 
results. 4/8/14 Tr. 68-69 (Robinson); Order Denying Motion to Strike at 
6. Based on Dr.

[[Page 13434]]

Robinson's testimony, the Judges conclude that the HHVH Report was 
replicable and that the results were capable of being tested. As a 
result, the Judges conclude that the report should carry at least some 
weight in assessing the relative market value of the SDC and IPG 
programs.
(2) Issues Regarding the Kessler Sample
    IPG also criticizes the HHVH Report because the SDC (1) did not 
produce a witness with ``firsthand knowledge of the method or basis for 
the station sample selection'' used to create the Kessler sampling of 
stations, (2) presented no evidence directly establishing that Ms. 
Kessler selected the stations appearing in the Nielsen Data, and (3) 
presented ``[n]o information or data regarding the station sampling 
process.'' See IPG PFF at 26-29.
    There is some validity to IPG's criticisms. The SDC did not call 
Ms. Kessler as a witness to explain how she selected her 1999 sample of 
stations. Further, Mr. Whitt acknowledged that he had not participated 
in the selection of the Kessler Sample of stations, so he had no 
knowledge of the method by which those stations were selected. 4/8/14 
Tr. at 112 (Whitt). The extent of Mr. Whitt's knowledge in this regard 
was limited to his recollection that ``the MPAA conducted a detailed 
study of what stations to select[,] . . . and then I was given a list 
of those stations[,] and then that's what I used to combine the two 
files. . . . So, all the Nielsen stations should have represented the 
complete list of the Kessler stations.'' 4/8/14 Tr. at 113 (Whitt); 9/
3/14 Tr. at 444 (Whitt).\37\
---------------------------------------------------------------------------

    \37\ Although the SDC provided an example of such a Kessler 
Sample to IPG in discovery (from the Phase I 1999 proceeding), the 
SDC did not represent that this earlier sample constituted the 
sample used to select the stations identified in the Nielsen Data. 
See 4/8/14 Tr. at 229 (SDC counsel ``stipulat[ing]'' that ``Ms. 
Kessler's list from Phase I is not the list of stations that was 
ordered from Nielsen'').
---------------------------------------------------------------------------

    Further, the SDC's expert witness, Mr. Sanders, admitted that the 
Kessler Sample and, derivatively, the HHVH Report and his own report 
are subject to valid criticism because the Kessler Sample--upon which 
both reports rely--was created by a non-random selection of stations. 
9/3/14 Tr. at 496 (Sanders).\38\
---------------------------------------------------------------------------

    \38\ In the 2000-03 proceeding, Ms. Kessler testified that her 
sampling was not (and was not intended to be) a random sample. See 
6/3/13 Tr. at 122-25 (Kessler).
---------------------------------------------------------------------------

    IPG properly takes the SDC to task for relying on only a small 
portion (72 of 800, or 9%) of distantly retransmitted stations.\39\ See 
9/4/14 Tr. at 626 (Sanders) (confirming that Mr. Whitt's analysis 
covered 72 stations.) \40\ As IPG noted, in 1986 the CRT found that a 
study of 18.8% of 622 total stations to be not sufficiently large to be 
``perfectly projected to other stations. . . .'' IPG PFF at 50 
(emphasis added) (citing 1983 Cable Royalty Distribution Proceeding, 
Docket No. CRT 84-1 83CD, 51 FR 12792, 12794 (April 15, 1986)).\41\
---------------------------------------------------------------------------

    \39\ All things being equal, the larger the sample size, the 
more likely it is that the sample will be representative of the 
population the sample purports to measure. Although sampling 100% of 
the population is ideal, it is typically not cost effective or 
practicable to sample an entire population. The smaller the sample 
size, however, the greater the margin of error. See H. Zeisel, . . . 
And Then There Were None: The Diminution of the Federal Jury, 38 U. 
Chi. L. Rev. 710, 718 (1971).
    \40\ IPG also asserts that there is an inconsistency between the 
number of stations (123) in the Kessler Sample and the number of 
stations (72) in the sample analyzed by Mr. Whitt. See IPG Proposed 
Findings of Fact at 28. That claimed inconsistency is a red herring, 
however, because the sample that IPG claims may be the ``Kessler 
Sample'' was a Phase I sample she had selected--one that the SDC 
acknowledged was not the sample from which Mr. Whitt identified 
stations with Devotional programming in this Phase II proceeding. 
See, e.g., 4/8/14 Tr. at 113-15, 229.
    \41\ Dr. Robinson also pointed out that the Kessler Sample's 
apparent exclusion of Canadian stations suggests that the sample was 
unrepresentative. By comparison, Dr. Robinson's own station 
selection contains only a single Canadian station on which programs 
claimed in this proceeding were broadcast; that station broadcasted 
both an IPG program and an SDC program. 9/8/14 Tr. 1092 (Erdem). The 
Judges find no persuasive evidence in the record that the exclusion 
of Canadian stations from the HHVH Report materially affects the 
results as to either side in this case. Therefore, the Judges 
conclude that the probative value of the HHVH Report is not 
diminished by the absence of Canadian stations. Accord Distribution 
of the 2000-03 Cable Royalty Funds, 78 FR at 64998 (``The Judges 
conclude that, while the exclusion of the Canadian stations was an 
error, it did not have a significant effect on the relative shares 
computed by MPAA'').
---------------------------------------------------------------------------

    The Judges acknowledge that the Kessler Sample was non-random.\42\ 
That being said, the manner in which the sample was chosen will 
influence the weight the Judges place on the station sample, and by 
extension, on the HHVH Report. For example, the presence of a clear 
bias either in favor of or against a particular participant in the 
current proceeding would render the report all but useless. Therefore, 
for the Judges to give any weight to the SDC Methodology, the Judges 
must analyze the origination of and the purposes for creating the 
Kessler Sample.
---------------------------------------------------------------------------

    \42\ Given this analysis, it is perhaps inaccurate to continue 
referring to the SDC's sample of stations as the ``Kessler Sample.'' 
However, because the parties have identified the sample in this 
manner, for ease of reference the Judges have continued with that 
short-hand identifier in this Determination.
---------------------------------------------------------------------------

    The SDC argues that the Judges can and should rely on the Kessler 
Sample notwithstanding the aforementioned defects. Mr. Sanders opined 
that the non-random nature of the Kessler sample, and its uncertain 
genesis, do not pose a problem because:
     The Kessler Sample ``employs viewing results from the most 
distantly retransmitted broadcast stations as reported by Form 3 cable 
systems.'' \43\
---------------------------------------------------------------------------

    \43\ ``Form 3 cable systems'' are cable systems whose semiannual 
gross receipts for secondary transmissions total $527,600 or more, 
and are thus required to file statements of account on Copyright 
Office form SA3. See 37 CFR 201.17(d)(2)(ii).
---------------------------------------------------------------------------

     Although the Kessler Sample is non-random, it is ``close 
to a census,'' because ``the most important and relevant titles [of] 
the principal programs of all SDC- and IPG-represented claimants appear 
in the survey.'' (Emphasis added).\44\
---------------------------------------------------------------------------

    \44\ When questioned by the Judges, Mr. Sanders acknowledged 
that he would have no basis for also asserting that the ``Kessler 
Sample'' approximates a ``census'' of all retransmitted stations or 
of all broadcasts of IPG and SDC programs. 9/4/14 Tr. at 637-39 
(Sanders). Moreover, IPG takes the SDC to task for relying on a 
sample of only 123 stations (about 17.5%) of the approximately 700 
stations distantly retransmitted by Form 3 cable systems.
---------------------------------------------------------------------------

     The Kessler Sample comprises many of the regions 
identified by Nielsen as ``Designated Market Areas (DMAs),'' \45\ and 
the first 10 stations in the Kessler Sample covered approximately 30-
40% of the population of the country, thereby covering some of the 
largest stations.
---------------------------------------------------------------------------

    \45\ The term ``DMA'' is used by Nielsen to identify an 
exclusive geographic area of counties in which the home market 
television stations hold a dominance of total hours viewed. See 
www.nielsenmedia.com/glossary/terms/D/ (last visited December 3, 
2014).
---------------------------------------------------------------------------

     There is no evidence ``to suggest that the sample was 
chosen to benefit or prejudice either party in this proceeding [and] . 
. . it is neutral on that score.''

Sanders WDT at 2; Ex. SDC-D-002 at 7; 9/4/14 Tr. at 627 (Sanders). Mr. 
Whitt likewise defended the use of the Kessler Sample, observing that 
``it appeared that the stations were national, geographically scattered 
around the country[, a]nd they included several large stations, but 
also a few small stations.'' 9/3/14 Tr. at 420 (Whitt).
    Under cross-examination, however, Mr. Sanders did acknowledge that 
many large metropolitan areas were not represented in the Kessler 
Sample of stations. He noted the ``possibility'' that there was no 
measurable viewing of the SDC and IPG programs in those areas or that 
the programs were not retransmitted in those areas. 9/4/14 Tr. at 631-
33 (Sanders). Of course, those speculative ``possibilities'' are 
precisely the sort of concerns that a truly random sample would address 
objectively. The non-random nature of the Kessler Sample leaves 
unanswered the question

[[Page 13435]]

of why those metropolitan areas were not represented.
    Mr. Sanders concluded that, on balance, he could nonetheless give 
some weight to this non-random selection of stations. 9/3/14 Tr. at 
498-500. It is noteworthy that IPG's expert, Dr. Robinson, likewise 
acknowledged that even a non-random sample can be representative and 
therefore probative of facts concerning an entire population. 9/3/14 
Tr. at 234-35 (Robinson). In fact, Dr. Robinson testified that the 
results of her own non-random sample were representative of the 
population she was measuring (subscriber fees paid to CSOs) because, 
``as a practical matter . . . in terms of understanding the population 
that we care about, if we have the majority of the data, then at least 
we know the truth for the majority of the data. . . .'' 9/2/14 Tr. at 
156 (Robinson).
    Non-random (a.k.a. ``nonprobability'') sampling, although inferior 
to random sampling, can be of some limited use. As explained in a 
treatise on the subject:

[N]onprobability samples cannot depend upon the rationale of 
probability theory. At least with a probabilistic sample, you know 
the odds or probability that you have represented the population 
well. You can estimate the confidence intervals for the statistic. 
With nonprobability samples, you may or may not represent the 
population well . . . . In general, researchers prefer probabilistic 
or random sampling methods over nonprobabilistic ones, and consider 
them to be more accurate and rigorous. However, in some 
circumstances in applied social research there may be circumstances 
where it is not feasible, practical or theoretically sensible to do 
random sampling.

W. Trochim and J. Donnelly, Research Methods, The Concise Knowledge 
Base at 41 (2005) (emphasis added).
    In the present case, ``feasibility'' was certainly a constraint 
because, as Mr. Sanders explained, it was cost-prohibitive for the SDC 
to invest additional money into the development of evidence. The 
costliness of undertaking random sampling can render an analysis 
unfeasible. As one survey organization has noted, ``costs are important 
and must be considered in a practical sense'' and therefore a ``broader 
framework'' is needed to assess the results of nonrandom sampling in 
terms of ``fitness for purpose.'' Rep. of the Am. Ass'n of Pub. Opinion 
Res. Task Force on NonProbability Sampling at 96 (2013).
    To summarize, had the HHVH Report been based on a random sample of 
stations, it would have been more probative. Nevertheless, the Kessler 
Sample was not prepared in anticipation of the current proceeding and 
contained no discernible bias either in favor of or against the 
programs that are at issue in this proceeding. Cost is a reasonable 
factor for the parties to consider in preparing evidence for a 
proceeding and, given the relatively modest amount of royalties 
involved in the current proceeding, it likely would not have been cost 
effective for the SDC to conduct an entirely new study based on a 
random sample of stations, even assuming that one could have been 
prepared so long after the royalty year at issue. Therefore, the Judges 
find that the Kessler Sample is sufficiently robust to allow the Judges 
to afford some weight to the SDC Methodology while remaining mindful of 
its deficiencies.
(3) Imperfections in the Nielsen Data
    Mr. Sanders acknowledged that the particular Nielsen Data utilized 
to prepare the 1999 HHVH Report was not as granular as he would have 
preferred. Specifically, Mr. Sanders explained that the 1999 HHVH 
Report was imperfect because it was based upon a ``very, very thin 
slice'' of the broader broadcasting or programming field. 9/3/14 Tr. at 
519. When such an extremely narrow ``slice'' of the market is the 
subject of the analysis, according to Mr. Sanders, it is preferable to 
obtain a ``niche'' Nielsen report that focuses on the narrow market 
that is the subject of the study. 9/3/14 Tr. at 514-15 (Sanders). In 
this particular case, Mr. Sanders acknowledged therefore that, because 
``it is distant signal viewing that is the actual focus of the project, 
[this] would be an example where a customized report would be done.'' 
9/3/14 Tr. at 485 (Sanders) (emphasis added).
    Furthermore, the SDC did not disclose the margins of error or the 
levels of confidence associated with the data underlying the HHVH 
Report. Without this information, the Judges cannot assess the 
reliability of any statistical sample. The Judges infer that, had the 
SDC possessed such information, or if such information underscored the 
reliability of the Nielsen data, the SDC would have produced it. 
Further, in the 2000-03 proceeding, Paul Lindstrom, one of the two 
Nielsen witnesses whose prior testimony the SDC designated for 
consideration in this proceeding, acknowledged that the size of the 
samples used by Nielsen to measure distant retransmissions are 
relatively small, and therefore do not measure viewership as accurately 
as a larger sample. Accordingly, Mr. Lindstrom acknowledged that 
``[t]he relative error on any given quarter-hour for any given station 
. . . would be very high,'' 6/3/13 Tr. at 303 (Lindstrom). Despite 
these shortcomings, the SDC relied upon Mr. Whitt's HHVH Report, in 
lieu of investing in a ``niche'' Nielsen report, 9/3/14 Tr. at 514 
(Sanders),\46\ and without providing information regarding the levels 
of confidence and margins of error associated with the HHVH Report upon 
which it has relied.
---------------------------------------------------------------------------

    \46\ Mr. Sanders had informed the SDC that any attempt to obtain 
superior data would have been cost-prohibitive, i.e., subjecting the 
SDC to ``hundreds of thousands of dollars of additional costs,'' for 
an amount at stake of ``somewhere north of a million dollars,'' and 
that the SDC agreed not to invest additional sums to acquire more 
data. 9/3/14 Tr. at 469-72 (Sanders). He also speculated that it 
might have been impossible to acquire better data, but the 
anticipated expense apparently foreclosed any attempts to learn if 
superior data could be acquired or developed. Id. In any event, Mr. 
Sanders conceded on cross-examination that he never attempted to 
contact anyone at MPAA (or apparently anyone else) to determine if 
better data could be acquired. 9/3/14 Tr. at 591-92 (Sanders).
---------------------------------------------------------------------------

    In an attempt to minimize the impact of the thinness of this slice 
of data, Mr. Sanders shifted the focus, distinguishing ``fully 
informed'' market participants from ``all-knowing'' participants. In 
his opinion, willing sellers and willing buyers in the marketplace for 
television program copyright licenses would consider themselves ``fully 
informed'' if they had access merely to the information upon which he 
relied, even if they lacked the more granular data of a special 
``niche'' Nielsen report of distant viewing of the devotional 
programming at issue. 9/3/14 Tr. 474-75 (Sanders). As Mr. Sanders 
added, ``fully informed'' in the context of the licensing of television 
programs

simply means having adequate knowledge of the relevant facts and 
circumstances to the issue or the proposed transaction at hand. . . 
. I don't think in any engagement I've ever been involved in . . . 
we have had all the information we would like to have. Typically, a 
valuation exercise is endeavoring to reach a conclusion based upon 
the information that is available.

9/3/14 Tr. 474-75 (Sanders).
    Additionally, in economic terms, Mr. Sanders's testimony is 
consistent with the concept of ``bounded rationality.'' Willing buyers 
and willing sellers in any market \47\ are unlikely to have complete 
information regarding all of the variables that could contribute to the 
setting of a market price. It would be humanly impossible to calculate 
all the relevant economic variables, and it would be economically 
inefficient to expend the time sufficient to make such calculations 
even if they were possible. Thus, economists recognize that willing 
buyers and willing sellers are bounded by the ``external constraint[ ] 
. . . [of] the cost of searching for information in

[[Page 13436]]

the world . . . [and they] attempt to make optimal choices given the 
demands of the world leading to the notion of optimization under 
constraints.'' G. Gigerenzer, Is the Mind Irrational or Ecologically 
Rational? in F. Parisi & V. Smith, The Law and Economics of Irrational 
Behavior at 38 (2005). Thus, ``[t]he focus on the constraints in the 
world has allowed economists to equate bounded rationality with 
optimization under constraints.'' Id. at 40.
---------------------------------------------------------------------------

    \47\ The Judges note that the economic experts for willing 
buyers and willing sellers likewise are subject to inevitable 
constraints.
---------------------------------------------------------------------------

    Finally, IPG leveled a broad criticism of the SDC Methodology, 
asserting that it is ``the product of several degrees of projection.'' 
Robinson AWDT at 7 n.10. That is, the SDC derived its royalty 
distribution by analyzing the viewership of a few sampled individual 
airings projected over the population of a Nielsen Designated Market 
Area during ``sweeps'' weeks, and then projected over the entire year, 
for only a relatively small (nonrandom) set of stations projected to 
represent all retransmitted stations. Id. The Judges recognize the 
validity of this criticism. However, the nature of viewership-type 
estimates is to engage in such sampling and extrapolation. Thus, the 
SDC Methodology may be compromised, but it is not subject to outright 
disqualification.
(4) The Incidence of Zero Viewing
    IPG criticizes the SDC Methodology because it is based on what IPG 
characterizes as a ``disproportionately large number of `0' entries'' 
[i.e., zero viewing sampling points] in the Nielsen data for distant 
viewing.'' IPG PFF at 38. More particularly, IPG notes that the Nielsen 
Data include a recorded ``0'' for 72% of all quarter-hours of 
broadcasts measured by the 1999 Nielsen Data, and recorded a ``0'' for 
91.2% of all quarter-hours of devotional broadcasts. Id.
    Zero viewing sampling points represent the quarter-hour sampling 
points at which no sample households recorded that they were viewing 
that station. See 2000-03 Determination, 78 FR at 64995. IPG criticized 
the incidence of zero viewing sampling points in the 2000-03 
proceeding, and the Judges addressed the issue in their Determination 
in that proceeding.

    [T]he Judges agree with Mr. Lindstrom that these ``zero 
viewing'' sampling points can be considered important elements of 
information, rather than defects in the process. As Mr. Lindstrom 
testified, when doing sampling of counts within a population, it is 
not unusual for a large number of zeros to be recorded, 6/4/13 Tr. 
at 391-93, 410 (Lindstrom), and those ``zero viewing'' sample points 
must be aggregated with the non-zero viewing points. 6/3/13 Tr. at 
323 (Lindstrom).
. . . .
    [A]s Mr. Lindstrom testified, distantly retransmitted stations 
typically have very small levels of viewership in a television 
market fragmented (even in the 2000-2003 period) among a plethora of 
available stations. 6/4/13 Tr. at 393 (Lindstrom). Thus, it would be 
expected, not anomalous, for Nielsen to record some zero viewing for 
any given quarter-hour period within the diary sampling (sweeps) 
period.

Id.\48\
---------------------------------------------------------------------------

    \48\ The SDC designated Mr. Lindstrom's testimony in the 2000-03 
cable distribution proceeding for consideration in this present 
proceeding.
---------------------------------------------------------------------------

    In the present proceeding, Mr. Sanders offered the following 
practical reasons why zero viewing would be recorded for these 
retransmitted programs: (1) There is much less viewing of out-of-market 
signals, (2) the lion's share of viewing in any market is going to be 
viewing of the local stations, (3) stations within a market tend to 
have a long legacy and a history in the market, (4) stations within a 
market have preferred dial positions, and (5) local television stations 
devote incredible resources to promoting themselves. 9/4/14 Tr. at 681-
83 (Sanders). This testimony was not rebutted by any IPG witness.
    Despite these seemingly reasonable and credible explanations of 
``zero viewing'' sampling points, the probative force of these ``zero 
viewing'' data points, as a general matter, is not without doubt. As 
the Judges also noted in the 2000-03 Determination regarding Nielsen 
sampling:

    The sample size is not sufficient to estimate low levels of 
viewership as accurately as a larger sample. Mr. Lindstrom 
acknowledged that ``[t]he relative error on any given quarter-hour 
for any given station . . . would be very high,'' 6/3/13 Tr. at 303 
(Lindstrom).
    Furthermore, Mr. Lindstrom acknowledged that he had not produced 
the margins of error or the levels of confidence associated with the 
Nielsen viewership data, despite the fact that such information 
could be produced. 6/3/13 Tr. at 391-93, 410 (Lindstrom). Without 
this information, the reliability of any statistical sample cannot 
be assessed. (The Judges infer that, had such information 
underscored the reliability of the Nielsen data, it would have been 
produced by MPAA.)

78 FR at 64995. The Judges note that the evidence in the present 
proceeding does not resolve these issues regarding sample size, margins 
of error and levels of confidence.
    Nonetheless, the Judges concluded in the 2000-03 Determination that 
``viewership as measured after the airing of the retransmitted programs 
is a reasonable, though imperfect proxy for the viewership-based value 
of those programs.'' Id. at 64995. IPG has not provided record evidence 
or testimony in this proceeding that would persuade the Judges to 
depart from the conclusion reached in the 2000-03 Determination. In 
light of the reasonable and credible explanations offered by the SDC 
for the ``zero viewing'' sampling points, and the absence of any 
persuasive evidence or testimony to the contrary, the Judges again find 
and conclude that the incidence of such zero viewing points does not 
invalidate a viewership-based valuation study such as utilized in the 
SDC Methodology.
    IPG did introduce in this proceeding evidence that it did not 
introduce in the 2000-03 proceeding regarding the incidence of ``zero 
viewing'' sample points for individual programs (rather than for the 
aggregate of quarter-hours). Compare 2000-03 Determination, 78 FR at 
64995 (finding that IPG had failed to introduce evidence that the 
Nielsen data revealed particular programs with ``zero viewing'') with 
Ex. IPG-R-011 (analyzing zero viewing by title). As the Judges noted in 
the 2000-03 Determination, the distinction between ``zero viewing'' 
overall and ``zero viewing'' for individual programs or titles is 
important because ``under the hypothetical market construct, royalties 
would accrue on a program-by-program basis to individual copyright 
owners, not to the distantly retransmitted stations.'' 2000-03 
Determination, 78 FR at 64995. However, an analysis of the evidence 
upon which IPG relied does not support its assertion that ``zero 
viewing'' for individual programs was particularly pervasive among the 
SDC or IPG programs, or that the incidences of ``zero-viewing'' that 
did occur were disproportionately harmful to IPG.
    First, the incidence of ``zero viewing'' for individual, 
retransmitted SDC and IPG programs was no more than 15.8%, according to 
IPG's own economics expert witness, Dr. Robinson. See Ex. IPG-R-011. 
This 15.8% figure represented only three of the 19 programs believed at 
issue in this proceeding or, alternatively stated, 16 of the 19 
programs (84.2%) did not have ``zero viewing'' throughout the 
sample.\49\
---------------------------------------------------------------------------

    \49\ Before submitting her final recommendation, Dr. Robinson 
amended her program count to conform to the Judges' rulings and to 
capture data that she (apparently inadvertently) omitted in her 
first analysis. See notes 6, 7, supra, and accompanying text; note 
57, infra, and accompanying text.
---------------------------------------------------------------------------

    Second, of the three programs with ``zero viewing'' throughout the 
sample, two were SDC programs (``700 Club Super Sunday'' and ``James 
Kennedy''), whereas only one of the three programs

[[Page 13437]]

(``Creflo A. Dollar Jr. Weekly'') was an IPG program. See Ex. IPG-R-
013. Further, the IPG program was retransmitted only three times and 
represented less than one-tenth of one percent (.097%) of both the 
total quarter-hours and the number of retransmitted broadcasts of IPG 
programs at issue in this proceeding. Id. Similarly, the two SDC 
retransmitted programs with ``zero viewing'' throughout the sample 
represented a de minimis percent of the SDC's total devotional 
programming at issue in this proceeding (for ``700 Club Super Sunday,'' 
four retransmitted broadcasts, representing less than .25% of the total 
SDC quarter-hours and programs retransmitted and, for ``James 
Kennedy,'' approximately 1% of total SDC quarter-hours and programs 
retransmitted). Id. Moreover, the copyrights for all three of the 
above-identified programs with supposed zero viewing throughout the 
sample were owned by respective claimants who also owned the copyrights 
for programs with virtually identical or similar names, viz., ``Creflo 
A. Dollar,'' ``700 Club,'' and ``James Kennedy'', none of which had 
zero viewing sample points for all retransmitted broadcasts of their 
programs. Id. Based on these facts, Dr. Robinson acknowledged at the 
hearing, that, in her view, she ``would not say that for the IPG and 
the SDC titles that we have any that we have 100 percent zero 
viewing.'' 9/4/14 Tr. at 827-28 (Robinson) (emphasis added).\50\
---------------------------------------------------------------------------

    \50\ IPG attempts to deflect attention from the paucity of the 
relevant evidence regarding the programs at issue in this proceeding 
by noting a higher incidence of ``zero viewing'' for programs in 
other categories, such as Alfred Hitchcock Presents and Today's 
Homeowner. Ex. IPG-R-012; IPG PFF at 44. However, data sample points 
in other categories of programming are not relevant because they do 
not address the issues relating to the Devotional category and, 
further, there is no evidence to place such data in an appropriate 
context.
---------------------------------------------------------------------------

    For all of the foregoing reasons, the Judges find and conclude that 
there was not persuasive or sufficient evidence of ``zero viewing'' for 
individual SDC and IPG programs to invalidate any reliance on the SDC 
Methodology.\51\
---------------------------------------------------------------------------

    \51\ IPG notes that the SDC could have improved its analysis to 
attempt to attribute value to the distant ``zero viewing'' data 
points, as performed by experts in prior proceedings. Although such 
improvements might have permitted the Judges to give more weight to 
the HHVH Report, the absence of such improvements did not invalidate 
the HHVH Report.
---------------------------------------------------------------------------

3. Viewership as an Ex Ante or Ex Post Measure of Value
    IPG asserts that viewership and ratings cannot form a measure of 
relative market value because the extent of viewership and the ratings 
measuring viewership are not available until after the programs have 
been retransmitted. Thus, IPG argues, the hypothetical willing buyer 
and willing seller could not utilize this viewership data ex ante to 
negotiate a license. Galaz AWDT at 9; Ex. IPG-D-001 at 9.
    Although IPG's premise is literally correct, it does not preclude 
the use of such viewership data to estimate the value of the 
hypothetical licenses. As Mr. Sanders testified, this problem can be 
overcome--and indeed is overcome in the industry--by the use of a 
``make good'' provision in the contracts between program copyright 
owners and licensees. That is, program copyright licenses in the 
television industry are established based upon an ex ante prediction of 
viewership as measured by ratings. If the ex post ratings reveal that 
the program's measured viewership was less than predicted and set forth 
in the license agreement, the licensor must provide compensatory value 
to the licensee. 9/4/14 Tr. at 685-95 (Sanders).\52\ In this manner, 
such a rational measure of viewership can also be expressly 
incorporated into the bargain in the hypothetical market constructed by 
the Judges.\53\
---------------------------------------------------------------------------

    \52\ Dr. Robinson was unfamiliar with the industry's use of a 
``make good'' provision as a tool to account for viewership levels. 
9/3/14 Tr. at 270 (Robinson).
    \53\ The Judges anticipated the existence of such ``post-viewing 
adjustments'' in their 2013 determination. See 2000-03 
Determination, supra, at 64995, n.48 (``Since it is a hypothetical 
market we are constructing, it also would not be unreasonable to 
hypothesize that the CSO and the Copyright Owner might negotiate a 
license that would contain a provision adjusting the value of the 
license, post-viewing, to reflect actual viewership. . . . In that 
regard, the Judges refer to one of the preconditions for relative 
market value--reasonable knowledge of relevant facts. Actual 
viewership would be a `relevant fact' that could be applied if post-
viewing adjustments to the license fees were hypothetically utilized 
by the bargaining parties.'').
---------------------------------------------------------------------------

    The Judges also agree with Mr. Sanders that the programs within the 
Devotional Claimants category on the surface appear to be more 
homogeneous inter se than they are in comparison with programs in 
either the Sports Programming or the Program Suppliers' claimant 
categories. Sanders WDT at 6. This relative homogeneity suggests that a 
rational CSO would not be as concerned with whether different programs 
would attract different audience segments (compared with more 
heterogeneous programming) and therefore the CSO would rely to a 
greater extent on absolute viewership levels.
    For these reasons, the record testimony supports the conclusion 
that viewership data is a useful metric in determining relative market 
value, in the absence of optimal data that would permit a precise or an 
estimated Shapley value.\54\ Accordingly, the Judges reject IPG's 
argument that household viewing cannot constitute a measure of value in 
this proceeding.
---------------------------------------------------------------------------

    \54\ Interestingly, Dr. Erdem explained that, as between two 
programs with overlapping viewership, the program with higher 
viewership would have a greater proportionate Shapley value than the 
less viewed program; the difference would be even greater than the 
difference between the two programs based strictly on relative 
viewership. 9/8/14 Tr. at 1082-83 (Erdem). Given the relative 
homogeneity of devotional programming (compared to the apparent 
relative heterogeneity between and among other Phase II category 
programs), viewership overlaps between and among the SDC and IPG 
programs are likely. Therefore, because the SDC programs had higher 
overall ratings than IPG programs and because the SDC Methodology is 
based solely on ratings, the SDC's percentage distribution (if 
accurately measured) could in fact understate the SDC percentage and 
overstate the IPG percentage, compared to percentages based on 
potential Shapley values. See supra note 36, and accompanying text.
---------------------------------------------------------------------------

    IPG notes, though, that even assuming arguendo the SDC's viewership 
analysis is probative of value, the SDC's own ``reasonableness'' check 
demonstrates a significant disparity between the results derived from 
the HHVH Report (81.5%:18.5% in favor of the SDC) and the results from 
the ``reasonableness'' check of local viewing for the SDC and IPG 
programs at issue in this proceeding (71.3%:28.7% in favor of the SDC). 
The Judges agree with IPG that this is an important disparity, 
suggesting that IPG may well be entitled to a larger distribution than 
indicated by the SDC's HHVH Report. Because of the importance of this 
point, the Judges discuss its significance in their analysis set forth 
in Part VI, infra, synthesizing and reconciling the parties' positions.

B. The IPG Methodology

1. The Details of the IPG Methodology
    IPG proffered its distribution methodology (the IPG Methodology) 
through its expert witness, Dr. Laura Robinson, whom the Judges 
qualified to testify as an expert in economics, data analysis, and 
valuation. 9/2/14 Tr. at 87 (Robinson).\55\ Through her application

[[Page 13438]]

of the IPG Methodology, Dr. Robinson set forth her opinion of the 
relative market value of the retransmitted broadcasts of the 
compensable copyrighted program titles represented by IPG and the SDC 
and estimated the share attributable to both parties. Robinson AWDT at 
14, 25; Ex. IPG-D-001 at 14, 25.
---------------------------------------------------------------------------

    \55\ IPG initially asked the Judges to qualify Dr. Robinson as a 
testifying expert ``regarding the value of the programming issue in 
this matter for IPG and for the SDC,'' or, as alternatively stated 
by IPG's counsel, as an expert ``valuing the relative value of these 
programs to these royalties.'' 9/2/14 Tr. at 73-74, 80. However, 
SDC's counsel objected, and the Judges then qualified Dr. Robinson 
as an expert in the areas of knowledge listed in the text, supra. 
IPG's counsel did not renew his request that Dr. Robinson be 
qualified as an expert in the areas set forth in this footnote. Even 
if Dr. Robinson had been qualified as an expert in the areas 
originally identified by IPG, that would not have made any 
difference in the Judges' findings and conclusions in this 
determination.
---------------------------------------------------------------------------

    Consistent with the conclusions of the Judges in this and other 
determinations, Dr. Robinson identified the ``willing sellers'' in the 
hypothetical market to be the owners of the copyrights to the programs 
subject to retransmission and the ``willing buyers'' to be the CSOs 
that would acquire the license to retransmit the program. 9/2/14 Tr. at 
92 (Robinson). However, Dr. Robinson defined the hypothetical 
marketplace in a manner different from that of the Judges in this 
proceeding and in the 2000-03 Determination. Dr. Robinson defined the 
hypothetical marketplace as equivalent to the actual marketplace in 
which the CSO is required to acquire the retransmitted programs in the 
same bundle as created by the station that the CSO retransmits. See, 
e.g., 9/4/14 Tr. at 782 (Robinson) (``[I]t is certainly the case that 
when a cable system operator is actually making the decision about 
whether or not to retransmit a broadcast, that comes within their 
decision whether or not to retransmit the station, which is a little 
bit at odds with this whole notion of a hypothetical negotiation over 
an individual broadcast. . . . They don't have the choice to broadcast 
a particular program.'').\56\
---------------------------------------------------------------------------

    \56\ In the hypothetical marketplace the terrestrial stations' 
initial bundling of programs does not affect the marginal profit-
maximizing decisions of the hypothetical buyers and sellers.
---------------------------------------------------------------------------

    Dr. Robinson identified the following ``obtainable data'' that she 
claimed to comprise ``various indicia of value of the retransmitted 
broadcasts'':
     The length of the retransmitted broadcasts.
     The time of day of the retransmitted broadcasts.
     The fees paid by CSOs to retransmit the stations carrying 
the broadcasts.
     The number of persons distantly subscribing to the station 
broadcasting the IPG-claimed program.
Robinson AWDT at 17; Ex. IPG-D-001 at 17.
    Dr. Robinson relied upon four sets of data. First, she utilized 
data from the Cable Data Corporation (CDC). This data included 
information on more than 2,700 cable systems regarding:
     The stations transmitted by each CSO.
     The distant retransmission fees paid by each CSO.
     The number of distant subscribers to each CSO.
    For each station distantly retransmitted by these CSOs, the CDC 
data also included:
     The number of CSOs retransmitting each station.
     The number of distant subscribers to the CSOs 
retransmitting the station.
     The average number of distant subscribers to the CSOs 
retransmitting the station.
     The distant retransmission fees paid by the CSOs to 
retransmit each station.
     The average distant retransmission fees paid by the CSOs 
to retransmit each station.
Id. at 21.
    Second, Dr. Robinson relied on TMS Data (the same source as that 
relied upon by the SDC). The TMS data provided the following 
information for the IPG and the SDC programs represented in this 
proceeding:
     The date and time each broadcast was aired.
     The station call sign.
     The program length in minutes.
     The program type (e.g., Devotional).
     The program title.
Id. at 21-22.
    Third, Dr. Robinson relied upon the following information from 
Nielsen:
     Data reporting 1997 viewing, segregable according to time 
period of the measured broadcast.
     Reports reflecting the long-run stability of day-part 
(time period) viewing patterns.
Id. at 22.
    Applying this data, Dr. Robinson made several computations and 
observations, as summarized in Tables 1 and 2 below:

          Table 1--Data on IPG and Non-IPG Claimed Titles 1999
------------------------------------------------------------------------
                                                IPG             SDC
------------------------------------------------------------------------
Number of distantly retransmitted                 12,017           6,558
 broadcasts of claimed titles...........
Number of hours of distantly                       6,010           5,856
 retransmitted broadcasts of claimed
 titles.................................
Number of quarter-hours of distantly              24,040          23,423
 retransmitted broadcasts of claimed
 titles.................................
------------------------------------------------------------------------

                     Table 2--Relative Market Value
------------------------------------------------------------------------
                                           IPG (percent)   SDC (percent)
------------------------------------------------------------------------
Hours of claimed distantly retransmitted              51              49
 broadcasts.............................
Time of day of distantly retransmitted                46              54
 broadcasts.............................
Fees Paid by CSOs distantly                          >50             3/14 Tr. at 243, 
326, 329, 403 (Robinson); 9/4/14 Tr. at 775 (Robinson). Dr. Robinson 
also testified that this approach was an important method of analysis 
because her multiple valuation methods all tended toward a similar 
result--approximately a 50:50 distribution--despite any weaknesses or 
limitations in any one method. See 9/2/14 Tr. at 90 (Robinson) (``In 
summary, I looked at four different measures of value, of the relative 
value. And the IPG versus SDC are roughly equal.''); 9/3/14 Tr. at 245 
(Robinson) (``since everything came out roughly equal, all the 
indicators pointed to a roughly 50/50 split.''). Based upon these 
calculated percentages, Dr. Robinson concluded

[[Page 13439]]

that the proper allocation of royalties should be in a range from 
54%:46% favoring the SDC to 51%:49% favoring IPG. Id. at 25.
    With regard to the particular factors Dr. Robinson applied, she 
noted that her first measurement--of total broadcast time--was 
essentially identical for both the IPG and the SDC programs when 
measured by quarter-hour segments. 9/2/14 Tr. at 90-91 (Robinson). 
Second, with regard to her ``time of day'' analysis, Dr. Robinson 
testified that ``certain times of days are associated with different 
amounts of viewership [a]nd everything else equal, it would be 
reasonable to think that higher viewership might be associated with a 
higher value.'' 9/2/14 Tr. at 93 (Robinson). Dr. Robinson concluded 
that this time-of-day measurement, like the first measurement (total 
broadcast time) revealed a ``roughly similar'' value measurement for 
the IPG programs and the SDC programs. 9/2/14 Tr. at 94 (Robinson).
    With regard to the third factor--the fees paid by the CSOs to 
distantly retransmit the broadcasts--Dr. Robinson found that ``on 
average, IPG broadcast quarter hours are shown on stations that are 
retransmitted by CSOs who pay relatively more in distant retransmission 
fees than do the CSOs who retransmit the stations with the SDC 
broadcasts.'' Ex. IPG-D-001 at 31. From this metric, Dr. Robinson 
concluded ``the IPG broadcasts have more value than the [SDC] 
broadcasts.'' Id. at 32.
    Finally, with regard to her fourth factor--the number of 
subscribers to the cable systems--Dr. Robinson found that when 
considering the average number of subscribers to the cable systems on 
which the IPG and the SDC programs are retransmitted, ``the IPG 
distantly retransmitted broadcasts are retransmitted by CSOs on 
stations with approximately 6% more distant subscribers than [the SDC] 
distantly retransmitted broadcasts.'' Id. at 33. Based upon this final 
metric, Dr. Robinson opined: ``To the extent the value of the broadcast 
relates to the number of distant subscribers to the CSOs retransmitting 
the station, this metric indicates that IPG-distantly-retransmitted 
broadcasts have more value than [the SDC]-distantly-retransmitted 
broadcasts.'' Id. at 34.
    Dr. Robinson corrected her analyses before and during the hearing 
to reflect changes in the program titles that she could allocate to IPG 
and to the SDC. First, she removed from her analyses the several IPG 
programs that the Judges had concluded at the preliminary claims 
hearing were not properly subject to representation by IPG. 9/2/14 Tr. 
at 146 (Robinson). Second, Dr. Robinson added several program titles 
that were properly subject to representation by the SDC but had not 
been included in her original analyses. 9/2/14 Tr. 181-84 (Robinson). 
See also 9/8/14 Tr. at 1016 (Robinson) (confirming that she made these 
program inclusions and exclusions in her amended analysis). With these 
adjustments, Dr. Robinson modified her conclusions as set forth on 
Table 3 below:

                                                     Table 3
----------------------------------------------------------------------------------------------------------------
                                                                                      Non-IPG          Total
                                                                   IPG (percent)     (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Hours of claimed distantly retransmitted broadcasts.............              48              52             100
Time of day of distantly retransmitted broadcasts...............              46              54             100
Fees paid by CSOs distantly retransmitting devotional broadcasts              41              59             100
Number of distant subscribers to CSOs distantly retransmitting                52              48             100
 devotional broadcasts..........................................
----------------------------------------------------------------------------------------------------------------

Ex. IPG-D-013.
    Dr. Robinson acknowledged that the data available to her was 
incomplete, in that she did not have information regarding all of the 
fees, cable systems and stations that retransmitted the programs of IPG 
and the SDC. Moreover, she acknowledged that the sample of CSOs and, 
derivatively, the sample of stations retransmitted by those CSOs, were 
not random samples. Accordingly, Dr. Robinson undertook what she 
described as a ``sensitivity analysis'' to adjust for the missing data. 
Robinson AWDT at 34-36; Ex. IPG-D-001 at 34-36.
    Specifically, Dr. Robinson noted that she did not have data 
regarding 29% of the total fees paid by all the CSOs that distantly 
retransmit stations. Rather, she had information from CSOs who in the 
aggregate had paid only 71% of the total fees paid in 1999 to distantly 
retransmit stations. Dr. Robinson acknowledged that she also lacked 
full information or a random sampling of CSOs and of stations (in 
addition to her lack of full information or a random sampling of the 
fees paid by CSOs to distantly retransmit stations). However, Dr. 
Robinson did not attempt to adjust her original results to compensate 
for the missing information or the fact that the data set was not 
random.
    Accordingly, in her ``sensitivity analysis,'' Dr. Robinson adjusted 
all of her metrics by assuming that she was missing 29% of the data in 
all of her valuation data categories (even though only one of her 
metrics was calculated based on fees). By this ``sensitivity 
analysis,'' Dr. Robinson first calculated how her allocations would 
change if all of the assumed missing 29% of fees paid by CSOs to 
distantly retransmit stations were allocated (in each of the categories 
in Table 3) to IPG and, conversely, how her allocations would change if 
all of the assumed missing 29% of such fees instead was allocated (in 
each of the categories in Table 3) to the SDC. Id. Dr. Robinson 
initially applied this sensitivity analysis to her original allocations 
and, subsequently (at the request of the Judges), applied this 
sensitivity analysis to her adjusted analyses that took into account 
the (1) removal of certain IPG programs that had been eliminated by the 
Judges in the preliminary hearing and (2) addition of certain SDC 
programs that Dr. Robinson had overlooked in her initial report. Ex. 
IPG-R-16 (revised). The application of this ``sensitivity analysis'' to 
Dr. Robinson's adjusted analyses \57\ resulted in the proposed 
allocations set forth on Table 4 below:
---------------------------------------------------------------------------

    \57\ Because Dr. Robinson's adjusted analyses supersede her 
original analyses (they admittedly included IPG programs that should 
have been excluded and omitted SDC programs that should have been 
included), the Judges choose not to clutter this determination with 
the details of those now irrelevant calculations.

[[Page 13440]]

                                                     Table 4
----------------------------------------------------------------------------------------------------------------
                                                     IPG high         IPG low      Non-IPG high     Non-IPG low
                                                     (percent)       (percent)       (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Hours of claimed distantly retransmitted                      63              34              66              37
 broadcasts.....................................
Time of day of distantly retransmitted                        62              33              67              38
 broadcasts.....................................
Fees paid by CSOs distantly retransmitting                    58              29              71              42
 devotional broadcasts..........................
Number of distant subscribers to CSOs distantly               66              37              63              34
 retransmitting devotional broadcasts...........
----------------------------------------------------------------------------------------------------------------

Ex. IPG-D-014.
2. Evaluation of the IPG Methodology
    The SDC have raised the following specific criticisms of the IPG 
Methodology. First, the SDC critiqued each of the four purported 
measures of value presented by Dr. Robinson. See SDC PFF at ]] 10-13 
(regarding volume); ]] 14-17 (regarding time of day); ]] 18-24 
(regarding fee generation); and ]] 26-27 (regarding subscribership). 
Second, the SDC noted that the sensitivity analysis undertaken by Dr. 
Robinson revealed that SDC programming had an eighteen percentage point 
higher value than IPG programming. SDC PFF at ] 25. Before undertaking 
an analysis of the specific elements of the IPG Methodology or the 
SDC's critiques thereof, it is important to consider several important 
overarching defects in the approach undertaken by IPG.
a. General Deficiencies in the IPG Methodology
    It bears repeating that a fundamental problem with the IPG 
Methodology is that it is based on a decision by Dr. Robinson to 
presume the existence of the compulsion arising from the pre-bundled 
status of the retransmitted programs as it existed in the actual 
compulsory-license market, rather than the compulsion-free hypothetical 
fair market consistently applied by the Judges. See, e.g., Tr. 9/4/14 
at 781-82 (Robinson) (quoted supra); see also 9/2/14 Tr. at 175-76 
(Robinson) (acknowledging that the IPG Methodology does not address the 
relationship between value and bundling).
    A second problem with the IPG Methodology is that, although it 
ostensibly is intended to eschew viewership as a primary measure of 
program value, IPG's Methodology implicitly uses indicia of viewership 
to measure program value. In particular, IPG's Methodology considers 
and values programs based on their indirect contribution to viewership: 
The duration of a program serves as an indicium of value (a program of 
relatively longer duration would be more valuable because of its 
viewership over a longer period), as does the time of day a program is 
aired (there are more viewers at some times of day than others), and 
the number of subscribers (potential viewers) to CSOs retransmitting 
the program. Simply put, IPG's Methodology is not true to its own 
critique of valuing programs based on viewership. Thus, the IPG 
Methodology fails to address either the initial necessity of 
considering absolute viewership or the subsequent necessity of 
undertaking a Shapley type of measurement or estimation in order to 
create a ``bundle'' of programs.
    The Judges also find that Dr. Robinson did not truly undertake her 
own independent inquiry and develop her own methodology, because she 
worked solely with the data IPG, through Mr. Galaz, provided her. See 
9/2/14 Tr. at 110-11 (Robinson); IPG PFF at 11. The type of data that 
Mr. Galaz supplied to Dr. Robinson was the same type he utilized in the 
2000-03 proceeding, when he presented his own methodology on behalf of 
IPG. Mr. Galaz's response to a question from the Judges confirmed this 
point:

    Q. [I]n constructing the methodology that you relied on in the 
2000-2003 proceeding, you used certain data from the CDC, from 
Tribune, or whatever it was called at the time, and so forth. Is 
that--were those types of data essentially the same as the types of 
data that were provided to Dr. Robinson for purposes of this 
proceeding?
    Mr. Galaz: I would say it was essentially the same.

9/8/14 Tr. at 997 (Galaz).
    It is not surprising, therefore, that Dr. Robinson conditioned her 
analysis and conclusions by noting that she was only able to express an 
opinion as to relative market value ``given the data that are available 
in this matter.'' Ex. IPG-D-001 at 20. In fact, Dr. Robinson premised 
her analysis on the fact that it was based upon the limited data 
available to her. See, e.g., 9/2/14 Tr. at 111 (Robinson) (``I looked 
at the data, looked at what I could do with them, and this is what I 
could do.'').
    Indeed, Mr. Galaz's methodology in the 2000-03 proceeding and Dr. 
Robinsons' methodology in the present proceeding overlap. Compare 2000-
03 Determination, 78 FR at 64998 (``The weight that IPG accorded to any 
given compensable broadcast was the product of (x) a `Station Weight 
Factor' [based on subscriber or fee levels], (y) a `Time Period Weight 
Factor,' and (z) the duration of the broadcast . . . .) with Robinson 
AWDT at 28; Ex. IPG-D-001 at 28 (``[T]he indicia of the economic value 
of the retransmitted broadcasts . . . are: The length of the 
retransmitted broadcasts, the time of day of the retransmitted 
broadcast, the fees paid by cable system operators to retransmit the 
stations carrying the devotional broadcasts, and the number of persons 
distantly subscribing [to] the stations broadcasting the devotional 
programs.'').
    Dr. Robinson clearly was straitjacketed in attempting to devise an 
appropriate methodology by the limited data she received from Mr. 
Galaz. In this regard, it is important to note that Mr. Galaz is not an 
economist, statistician, econometrician or an expert in the field of 
valuation of television programs or other media assets, and that he 
therefore had no particular expertise that would permit him to select 
or approve the use of appropriate data, especially when that selection 
dictated the construction of a methodology to establish ``relative 
market value'' in a distribution proceeding.\58\ The Judges therefore

[[Page 13441]]

conclude that the overall IPG Methodology carries no more weight than 
IPG's methodology did in the 2000-03 proceeding. See 2000-03 
Determination, 78 FR at 65002 (while IPG Methodology ``cannot be 
applied to establish the basis for an allocation'' it can be used to 
adjust ``marginally'' an allocation derived from other evidence).
---------------------------------------------------------------------------

    \58\ See 2000-03 Determination, 78 FR at 65000. By contrast, the 
SDC's expert witness, Mr. Sanders, was qualified as ``an expert in 
the valuation of media assets, including television programs.'' 9/3/
14 Tr. at 463-64, and, in that capacity, he testified that the 
broadcast industry relied on Nielsen viewing data as the ``best and 
most comprehensive'' basis for valuing programs, 9/3/14 Tr. at 480-
81 (Sanders). Thus, Mr. Sanders was qualified to testify as to the 
actual commercial use of a viewership-based valuation methodology. 
Mr. Galaz, on the other hand, was not qualified to testify as to the 
appropriateness of the data he selected for use in the IPG 
Methodology and, it should be noted, neither he nor Dr. Robinson 
testified that the factors relied upon in the IPG Methodology had 
ever been relied upon commercially. See Tr. 9/3/14 at 348-49 
(Robinson).
    Not only did Mr. Galaz lack the expertise to approve or select 
the type of data necessary to construct a persuasive methodology, 
his credibility has been seriously compromised by his prior fraud 
and criminal conviction arising from his misrepresentations in prior 
distribution proceedings. See 78 FR at 6500 (``Mr. Galaz was 
previously convicted and incarcerated for fraud in the context of 
copyright royalty proceedings--a fraud that caused financial injury 
to MPAA. In connection with that fraud, Mr. Galaz also admittedly 
lied in a cable distribution proceeding much like the instant 
proceeding. Mr. Galaz's fraud conviction and prior false testimony 
compromises his credibility.'') Further, in the present case, the 
Judges carefully observed that Mr. Galaz testified that ``what we 
gave to Dr. Robinson was everything that we had in our possession 
that we thought might affect . . .'' before catching himself and 
stating instead ``or would--I should say with which [s]he could 
work.'' 9/8/14 Tr. at 996 (Galaz) (emphasis added). In any event, 
the Judges recognize that even a party that does not have such a 
checkered history has an inherent self-interest in selecting the 
types of data for use by its expert that is inconsistent with the 
independence of the expert in identifying his or her own categories 
of data.
---------------------------------------------------------------------------

    Finally, IPG contends that the purpose of the IPG Methodology is to 
compensate every claimant, even if there is no evidence of viewership 
of the claimant's program. See Galaz AWDT at 8; Ex. IPG-D-001 at 8. The 
Judges find no basis for that purpose to guide the methodology. Even if 
viewership as a metric for determining royalties theoretically would be 
subject to adjustment to establish or estimate a Shapley valuation, 
there is certainly no basis to allow for compensation of a program in 
the absence of any evidence of viewership.
b. Specific Deficiencies in the IPG Methodology
    In addition to the foregoing overarching criticisms of the IPG 
Methodology, the Judges note the following more particular deficiencies 
in that methodology.
    As a preliminary matter, Dr. Robinson acknowledged that IPG's 
sample of stations had not been selected in a statistically random 
manner. 9/2/14 Tr. at 155 (Robinson). Thus, the sample upon which Dr. 
Robinson relied suffered from the same infirmity as the Kessler Sample 
relied upon in part by the SDC. Moreover, each prong of the IPG 
Methodology raised its own concerns.
(1) Broadcast Hours
    Dr. Robinson acknowledged that the number of hours of broadcasts is 
not actually a measure of value; rather it is a measure of volume. 9/3/
14 Tr. at 243-51 (Robinson). ``Volume'' fails to capture the key 
measure of whether anyone is actually viewing the retransmitted 
program. See 9/3/14 Tr. at 247 (Robinson); SDC PFF ] 12. Further, 
``volume'' i.e., number of hours of air time, does not even reflect how 
many subscribers have access to the programs. 9/8/14 Tr. at1085-86 
(Erdem).
(2) Time of Day of Retransmitted Broadcasts
    IPG's second measure of value compares the time of day viewership 
of IPG and SDC programs. Using 1997 Nielsen sweeps data produced by the 
MPAA in a previous proceeding, Dr. Robinson estimates the average 
number of total television viewers for each quarter-hour when IPG or 
SDC programs were broadcast according to the Tribune Data analyzed by 
Dr. Robinson. 9/3/14 Tr. at 254-55 (Robinson).
    Dr. Robinson's time-of-day measure does not measure the value of 
the individual programs that are retransmitted. The proper measure of 
value for such individual programs, when considering ratings, would 
hold the time of day constant, and then consider relative ratings 
within the fixed time periods. To do otherwise--as Dr. Robinson 
acknowledged--absurdly would be to give equal value to the Super Bowl 
and any program broadcast at the same time. 9/3/14 Tr. at 264 
(Robinson).
    Further, Dr. Robinson's analysis does not show, as she asserted, 
that the SDC and IPG programs are broadcast at times of day that have 
approximately equal viewership. Rather, her time-of-day analysis 
pointed to a 54%:46% distribution in favor of the SDC.\59\
---------------------------------------------------------------------------

    \59\ When Dr. Robinson adjusted for the proper addition of SDC 
programs and deletion of IPG programs, and then applied her 
sensitivity analysis, she changed this allocation to 67%:33% in 
favor of SDC (not giving IPG any credit for the assumed 29% of the 
data it declined to obtain).
---------------------------------------------------------------------------

    Finally, IPG utilized 1997 data to estimate the level of viewing 
throughout the broadcast day, rather than data that was contemporaneous 
with the 1999 royalty distribution period at issue in this proceeding. 
9/3/14 Tr. at 229, 255 (Robinson).\60\
---------------------------------------------------------------------------

    \60\ Mr. Galaz asserted that information subsequently published 
by Nielsen confirmed that ``there had been virtually no change'' in 
day-part viewing between 1997 and 1999. 9/8/14 Tr. at 984 (Galaz). 
However, IPG presented no evidence to support that assertion.
---------------------------------------------------------------------------

(3) Fees Paid
    Dr. Robinson's third metric is derived from an analysis of fees 
paid by CSOs per broadcast station. That is, several CSOs might pay 
royalty fees to retransmit the same over-the-air station. Dr. Robinson 
testified that stations generating relatively greater fees could be 
presumed to have higher value programs in their respective station 
bundles. 9/3/14 Tr. at 406-07 (Robinson). To measure this factor, Dr. 
Robinson combined CDC data on royalty fees the CSOs paid (on a per-
station basis) and TMS data on broadcast hours by station in order to 
compare the fees paid for retransmission of stations carrying SDC and 
IPG programs. 9/3/14 Tr. at 229, 271 (Robinson).
    In Phase I of this proceeding, the Librarian adopted the use of a 
fees-paid metric for value, where that measure appeared to be the best 
alternative valuation approach. See Distribution of 1998 and 1999 Cable 
Royalty Funds, 69 FR 3606, 3609 (January 24, 2004). The use of a fee-
based attempt at valuation is particularly problematic, however, for a 
niche area such as devotional programming, which constitutes only a 
small fraction of total station broadcasting. See 9/8/14 Tr. at 1087-88 
(Erdem). Because of the tenuous nature of this approach to valuation, a 
royalty allocation based on a fees-paid metric might serve as, at best, 
a ``ceiling'' on a distribution in favor of the party proposing that 
approach. See Distribution of the 2004 and 2005 Cable Royalty Funds, 75 
FR 57063, 57073 (September 17, 2010). That being said, when Dr. 
Robinson adjusted her fees-paid based valuation by applying her 
sensitivity analysis, she calculated a value ratio of 71%:29% in favor 
of the SDC. As the SDC noted, this appears to be ``a fact that Dr. 
Robinson had tried hard to obscure.'' SDC PFF ] 25.
(4) Subscribership Levels
    Dr. Robinson's final metric measures the average number of distant 
subscribers per cable system retransmitting IPG programming versus SDC 
programming. 9/3/14 Tr. at 311-12 (Robinson). This metric measures 
average subscribers per cable system, without taking into account the 
number of cable systems retransmitting a station. Therefore, this 
metric is of no assistance in measuring the total number of distant 
subscribers even receiving a program, let alone the number of distant 
subscribers who watch the program.
    As Dr. Erdem demonstrated--and as Dr. Robinson admitted--this 
subscribership metric can actually increase when a program is 
eliminated, if the program had been retransmitted by a cable system 
with lower than average numbers of subscribers. Erdem WRT at 8-9 
(Redacted); Ex. SDC-R-001 at 8-9 (Redacted); 9/3/14 Tr. at 331-45 
(Robinson). Indeed, this metric actually increased in favor of IPG 
after the dismissal of two of IPG's claimants--Feed the Children and 
Adventist Media Center. Ex. SDC-R-001 at 7-10; 9/3/14

[[Page 13442]]

Tr. at 329-30 (Robinson). Simply put, when a purported measure of 
program value can move inversely to the addition or subtraction of a 
claimant, the measure is, at best, of minimal assistance in determining 
relative market value.
    Dr. Robinson suggests that the Judges nonetheless should rely on 
her opinion as to relative market value because all of her alternative 
measures resulted in similar proportionate valuations. 9/2/14 Tr. at 
102-03 (Robinson) (``[B]y coming at this with four different metrics . 
. . the fact that the estimates all came out quite similarly gives me 
some comfort that the numbers are reasonable.''); see also id. at 170 
(Robinson) (emphasizing that she was ``looking at all of these factors 
in combination''). However, if four measures of value are individually 
untenable or of minimal value, they do not necessarily possess a 
synergism among them that increases their collective probative value.

VI. Judges' Determination of Distribution

A. The Judges' Distribution of Royalties Is Within the Zone of 
Reasonableness

    As the foregoing analysis describes, the evidence submitted by the 
two parties is problematic. First, the optimal measure or approximation 
of relative value in a distribution proceeding--the Shapley valuation 
method--was neither applied nor approximated by either party. Second, 
the methodologies proposed by both parties have significant 
deficiencies.
    As between the parties' competing methodologies, however, the 
Judges conclude that the approach proffered by the SDC is superior to 
that proffered by IPG. The SDC Methodology, consistent with measures of 
value in the television industry, relies on viewership to estimate 
relative market value. The Judges conclude that in constructing a 
hypothetical market to measure the relative market values of distantly 
retransmitted programs viewership would be a fundamental metric used to 
apply a Shapley valuation model. Therefore, a methodology that uses 
viewership as an indicium of program value is reasonable, appropriate, 
and consistent with recent precedent in distribution proceedings.
    IPG's expert, Dr. Robinson, agreed that viewership is relevant to 
the determination of program value. IPG's own methodology uses 
viewership as a valuation proxy, although it does so in a much less 
direct and transparent way than does the SDC Methodology. Further, the 
SDC presented unrebutted testimony that estimating relative market 
value based on viewership data alone when considering homogeneous 
programming, as the Devotional Claimants category, might actually 
understate the value of the more highly viewed programs vis-[agrave]-
vis a Shapley valuation of the same programs. Because the SDC programs 
had higher ratings, the Judges conclude that the SDC Methodology, 
ceteris paribus, may well tend to understate the SDC share of the 
royalties in this proceeding.
    By contrast, the IPG Methodology is reliant on data that does not 
focus on the property right the Judges must value--the license to 
retransmit individual programs in a hypothetical market that is 
unaffected by the statutory license. Moreover, the IPG Methodology 
fails to value the retransmitted programs in the hypothetical market as 
applied by the Judges in this and prior proceedings. Rather, IPG has 
assumed tacitly that the valuation of the individual programs has been 
compromised by the preexisting bundling of the programs in the actual 
market, and therefore all programs must be subject to common 
measurements, based on broadcast hours, time of day, subscriber fees, 
and subscriber levels. The Judges conclude, as they did in the 2000-03 
Determination, that this failure to value programs individually is 
erroneous. Accordingly, at best, as stated in the 2000-03 
Determination, the IPG Methodology can serve as no more than a ``crude 
approximation'' of value that may have some ``marginal'' impact on the 
determination of relative market value. See 2000-03 Determination, 78 
FR at 78002.
    The Judges' preference for the valuation concept of the SDC 
Methodology does not mean that the Judges find the SDC's application of 
that concept to be free of problems or unimpeachably persuasive in its 
own right. The application of the theoretically acceptable SDC 
Methodology is inconsistent as regards its probative value.
    The Judges' task in this and every distribution determination is to 
establish a distribution that falls within a ``zone of 
reasonableness.'' See Asociacion de Compositores y Editores de Musica 
Latino Americana v. Copyright Royalty Tribunal, 854 F.2d 10, 12 (2d 
Cir. 1988); Christian Broadcasting Network, Inc. v. Copyright Royalty 
Tribunal, 720 F.2d 1295, 1304 (D.C. Cir. 1983). Based on the entirety 
of the Judges' analysis in this determination, the Judges find that the 
SDC's proposed royalty distribution of 81.5%:15.5% in favor of the SDC 
can serve only as a guidepost for an upper bound of such a zone of 
reasonableness. The Judges decline to adopt the 81.5%:15.5% split as 
the distribution in this proceeding, however, because the Judges 
conclude that the several defects in the application of the SDC 
Methodology render the 81.5%:15.5% split too uncertain. That is, the 
defects in the application of the SDC Methodology require the Judges to 
examine the record for a basis to establish a distribution that 
acknowledges both the merits and the imperfections in the SDC 
Methodology.
    To that end, the Judges look to the alternative confirmatory 
measure of relative market value utilized by Mr. Sanders in his report 
and testimony. More particularly, the Judges look to his analysis of 
the viewership data for the SDC and IPG programs in the local market, 
one that served as an ``analogous'' market by which to estimate the 
distribution of royalties in this proceeding. The allocation of 
royalties suggested by that confirmatory analysis was a 71.3%:28.7% 
distribution in favor of the SDC.
    On behalf of the SDC, Mr. Sanders testified that this analogous 
body of data ``is potentially very relevant and should not, in my 
opinion, be ignored.'' 9/3/14 Tr. at 503 (Sanders) (emphasis added). 
The Judges agree. That distribution ratio arises from the Nielsen local 
viewership ratings over a three-month period in 1999 and covers all of 
the programs represented in this proceeding. Importantly, that approach 
does not suffer from the uncertainty created by the selection and use 
of the Kessler Sample of stations, nor any of the other serious 
potential or actual deficiencies in the application of the SDC 
Methodology, as discussed in this determination.
    There was no sufficiently probative evidence in the record for the 
Judges to establish a lower bound to a zone of reasonableness. That 
being said, it is noteworthy that even under IPG's Methodology the 
relative market valuations of the SDC and IPG programs would be no more 
favorable to IPG than roughly a 50/50 split. Under at least two prongs 
of IPG's Methodology, Dr. Robinson acknowledged that an adjusted 
allocation would likely be closer to a 67/33 split (based on time of 
day of retransmitted broadcasts) or a 71/29 split (based on fees paid) 
in SDC's favor.
    Further, as IPG correctly argued, the 71.3%:28.7% distribution is 
significantly different (to the benefit of IPG) compared with the 
uncertain results derived by the SDC Methodology. Given that the 
81.5%:18.5% allocation derived by the

[[Page 13443]]

SDC Methodology represents a guidepost to the upper bound of a zone of 
reasonableness, the ``very relevant'' (to use Mr. Sanders's 
characterization) 71.3%:28.7% distribution has the added virtue of 
serving as a rough proxy \61\ for the need to reflect the imperfections 
in the application of the SDC Methodology.
---------------------------------------------------------------------------

    \61\ As noted supra, the Judges may rely on the evidence 
presented by the parties to make a distribution within the zone of 
reasonableness, and, in so doing, mathematical precision is not 
required. See Nat'l Ass'n of Broadcasters, 140 F.3d at 929; Nat'l 
Cable Television Ass'n, 724 F.2d at 182.
---------------------------------------------------------------------------

    Accordingly, the Judges find and conclude that a distribution ratio 
of 71.3%:28.7% in favor of the SDC lies within the zone of 
reasonableness.

B. The Judges' Distribution is Consistent With a Valuation Derived From 
an Application of the IPG Methodology

    The Judges also note a consensus between this 71.3%:28.7% 
distribution and the least deficient of IPG's proposed valuations--the 
``fees-paid'' valuation. More particularly, Dr. Robinson made 
``sensitivity'' adjustments to all her values to account for the 
incompleteness of her data. However, her only adjustment was to 
multiply all her alternative value measures by 71% to adjust for the 
29% of fees paid that her data set did not include. The Judges find and 
conclude that Dr. Robinson could adjust only her fees-paid valuation 
approach in this manner because the ``missing 29%'' only pertained to 
that data set. In the other categories, Dr. Robinson (to put it 
colloquially) was subtracting apples from oranges.
    When Dr. Robinson made her adjustment in the fees-paid category 
(and properly accounted for all programs), she changed her valuation 
and distribution estimate to 71%:29% in favor of the SDC. See Table 4 
supra.\62\ Moreover, Dr. Robinson testified that her sensitivity 
analysis resulted in values that she would characterize as within an 
economic ``zone of reasonableness.'' 9/2/14 Tr. at 158 (Robinson) 
(emphasis added).
---------------------------------------------------------------------------

    \62\ The fact that Dr. Robinson's adjustment was based on 
multiplying her allocations by 71% (to account for the missing 29%) 
and that the adjustment led to a recommended distribution to the SDC 
of 71% is only coincidental.
---------------------------------------------------------------------------

    Thus, not only do the Judges independently find that a 71.3%:28.7% 
distribution in favor of the SDC proximately adjusts the distribution 
within the zone of reasonableness, there is also a virtual overlap 
between what can properly be characterized as the worst case 
distribution scenarios that the parties' own experts respectively 
acknowledge to be ``very relevant'' and falling within a ``zone of 
reasonableness.'' \63\ Accordingly, given that IPG's expert witness 
testified explicitly that a 71%:29% distribution in favor of the SDC 
was within the ``zone of reasonableness'' and that the SDC's expert 
witness testified explicitly that a 71.3%:28.7% distribution in favor 
of the SDC was ``reasonable'' and ``should not . . . be ignored,'' such 
a distribution is also consonant with the parties' understanding of a 
reasonable allocation.
---------------------------------------------------------------------------

    \63\ The Judges' acknowledgement that IPG's worst-case scenario 
(arising out of its fees-paid approach) overlaps with the SDC's 
worst case scenario constitutes the extent to which the Judges 
credit the IPG Methodology.
---------------------------------------------------------------------------

C. The Judges' Distribution Is Consistent With the Parties' Economic 
Decisions Regarding the Development and Presentation of Evidence

    The parties admittedly proffered their respective worst-case 
scenarios because each had chosen not to obtain data that are more 
precise--because each party deemed the cost of acquiring additional 
data to be too high relative to the marginal change in royalties that 
might result from such additional data (and perhaps the overall 
royalties that remain in dispute in the current proceeding). The 
parties' independent yet identical decisions in this regard underscore 
the Judges' reliance on the parties' worst-case scenarios in 
establishing relative market value. When a party acts, or fails to act, 
to cause evidentiary uncertainty as to the quantum of relief, the party 
that created the uncertainty cannot benefit from its own decision in 
that regard. As one commentary notes:

    Factual uncertainty resulting from missing evidence is a salient 
feature of every litigated case. Absolute certainty is unattainable. 
Judicial decisions thus always involve risk of error. This risk 
cannot be totally eliminated. However, it is sought to be minimized 
by increasing the amount of probative evidence that needs to be 
considered by the triers of fact. Missing evidence should therefore 
be perceived as a damaging factor.

A. Porat and A. Stein, Liability for Uncertainty: Making Evidential 
Damage Actionable, 18 Cardozo L. Rev. 1891, 1893 (1997) (emphasis 
added). Alternatively stated, the SDC and IPG have failed to satisfy 
their respective evidentiary burdens to obtain anything above the 
minimum values indicated by their evidence, by failing to obtain random 
samples, full surveys, the testimony of television programmers, or 
other more probative evidence or testimony to support their respective 
arguments for a higher percentage distribution.
    Although the SDC and IPG each had an incentive to procure and 
proffer additional evidence, that incentive existed only if the 
additional evidence would have advanced the offering party's net 
economic position. As the parties acknowledged at the hearing, the 
amount at stake simply did not justify their investment in the 
discovery, development, and presentation of additional evidence.\64\ 
When a party makes the choice to forego the expense of producing more 
precise evidence, that party has implicitly acknowledged that the value 
of any additional evidence is less than the cost of its procurement. As 
Judge Richard Posner has noted: ``The law cannot force the parties to 
search more than the case is worth to them merely because the 
additional search would confer a social benefit.'' R. Posner, An 
Economic Approach to Evidence, 51 Stan. L. Rev. 1477, 1491 (1999).
---------------------------------------------------------------------------

    \64\ As noted previously, IPG criticized the SDC Methodology for 
failing to utilize better data. That criticism applies equally to 
both parties and reflects their respective decisions not to invest 
additional resources to obtain more evidence. See supra notes 46-47 
and accompanying text.
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VII. Conclusion

    Although there is a virtual overlap between the worst-case 
scenarios of both parties, the Judges adopt the SDC's distribution 
proposal, in light of the more fundamental deficiencies in the IPG 
Methodology. Accordingly, based on the analysis set forth in this 
Determination, the Judges conclude that the distribution at issue in 
this proceeding shall be:

SDC: 71.3%
IPG: 28.7%

    This Final Determination determines the distribution of the cable 
royalty funds allocated to the Devotional Claimants category for the 
year 1999, including accrued interest. The Register of Copyrights may 
review the Judges' final determination for legal error in resolving a 
material issue of substantive copyright law. The Librarian shall cause 
the Judges' final determination, and any correction thereto by the 
Register, to be published in the Federal Register no later than the 
conclusion of the Register's 60-day review period.

    January 14, 2015.

    SO ORDERED.

Suzanne M. Barnett,

Chief United States Copyright Royalty Judge.

David R. Strickler,

United States Copyright Royalty Judge.

Jesse M. Feder,

United States Copyright Royalty Judge.

[[Page 13444]]

    Dated: January 14, 2015.
Suzanne M. Barnett,
Chief United States Copyright Royalty Judge.
    Approved by:
James H. Billington,
Librarian of Congress.
[FR Doc. 2015-05777 Filed 3-12-15; 8:45 am]
BILLING CODE 1410-72-P
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