A statutory license, also called a compulsory license, permits the use of copyright-protected material without the express permission of the copyright owner under specific circumstances and provided the licensee meets certain requirements. Three statutory licenses pertaining to the retransmission of broadcast programming are codified in U.S. copyright law. These statutory licenses refer to cable operators, in the Section 111 license, and satellite carriers, in the Sections 119 and 122 licenses. These licenses, as described in figure 1 below, allow cable or satellite operators to retransmit broadcast programming without obtaining permission from the copyright owners of that material. Certain telecommunication companies, such as Verizon and AT&T— which in the past provided telephone service but now offer video services as well—were determined by the U.S. Copyright Office to function as cable operators and allowed to use the statutory licenses. Given this report’s focus on the statutory licenses, we use the term “cable and satellite operators” to refer to all those entities that use the statutory licenses. This term includes telecommunications companies, such as Verizon and AT&T. According to the U.S. Copyright Office, the statutory licenses supported the growth of the cable and satellite industries and facilitated the delivery of local broadcast television stations’ programming on these platforms. The section 111 license was enacted, in part, to reduce the transaction costs that a then nascent cable industry would have faced if cable operators were required to negotiate with every copyright owner whose work was embedded in a local broadcast television station’s signal. The section 119 and 122 licenses were extended to satellite operators to reduce transaction costs and provide the same general efficiencies offered to cable operators under the Section 111 license. Transaction costs are a concern because each television program may contain material from multiple copyright owners. Since a typical day of programming on a local broadcast television station would likely include 20 or more programs, hundreds of copyright owners may have royalty claims on a single day’s worth of programming. Under the statutory licenses, the U.S. Copyright Office collects copyright royalty fees and invests them in government securities until fees are allocated and distributed to copyright owners. Under the Copyright Act, the Copyright Royalty Judges are responsible for determining the distribution of royalties and adjudicating royalty claim disputes. In June 2015, the Copyright Royalty Judges granted a partial distribution of the 2013 cable and satellite royalty funds to the claimant groups listed in table 1. Copyright owners have historically submitted copyright claims through the claimant groups shown in table 1. These groups then allocate their share of the distribution to their group members. Each cable operator’s obligation to carry all stations within its designated market area is dependent upon its total capacity; however, the capacity of most modern cable systems has rendered these distinctions largely meaningless. Except for costs associated with delivering a good quality signal for transmission and increased costs relating to distant signal copyright indemnification. See 47 C.F.R. §76.60. exist. This property right is distinct from the right to perform copyright-protected material embedded in the broadcast signal. Retransmission consent applies only to commercial local broadcast television stations and allows them to grant permission to cable and satellite operators to retransmit their signals, usually in return for a negotiated payment. By opting for retransmission consent, commercial local broadcast television stations give up the guarantee of carriage in exchange for the right to negotiate compensation for carriage of their signal. SNL Kagan, a media research firm, estimates these fees at $6.3 billion in 2015 and projects that they may reach $10.3 billion by 2021. Broadcast Exclusivity Rules: The broadcast exclusivity rules—the syndicated exclusivity rule and the network non-duplication rule—are an administrative mechanism for local broadcast television stations to enforce their exclusive rights obtained through contracts with broadcast networks and syndicators. The syndicated exclusivity rule protects a local broadcast television station’s right to be the exclusive provider of syndicated programming in its market. Similarly, the network non-duplication rule protects a local broadcast television station’s right to be the exclusive provider of network programming in its market. The exclusivity rules—when invoked by local broadcast television stations—require cable and satellite operators to block, in some manner, duplicative content carried by a local broadcast television station in another market (a distant signal) imported into a station’s local market. For example, these rules allow WJZ, the CBS- affiliated local broadcast station in Baltimore, to prohibit cable operators from showing duplicative network content on a CBS- affiliated station from another market (e.g., WUSA, the CBS-affiliated local broadcast station in Washington, D.C.) in the event WUSA was imported into Baltimore. Similarly, the rules would allow WJZ to prohibit cable operators from showing any duplicated syndicated content from any other market’s station that is imported into Baltimore. Video programming, or video content, is the television programs watched by viewers including primetime shows, news, and movies. The flow of this content from development to distribution involves many entities, including those that create the video content, those that aggregate the content into a schedule, and those that distribute the content to viewers (see fig. 2). A single entity in the video marketplace may produce content, aggregate it, and distribute the content. For example, CBS is primarily known as a broadcast network; however, CBS also produces its own video content, through CBS Television Studios. It owns several CBS-affiliated local broadcast television stations. CBS also functions as an online video distributor, such as through its offering of a subscription online streaming service, CBS All Access—which offers live streams of local CBS-affiliated broadcast television stations as well as video content on an on-demand basis. Before video content can be watched by viewers, financial and contractual arrangements between those that produce, aggregate, and distribute video content must be made—through market-based negotiations or under certain circumstances, through the statutory licenses. Market-based negotiations involve private negotiations between copyright owners or licensees and those that want to use their copyrighted content. These negotiations can include a variety of contracted terms covering such items as when the content will be aired, how the content will be promoted, and the price that will be paid for the right to license that content. The price ultimately agreed to for the public performance rights of video content in market-based negotiations depends on a variety of factors, including, the expected ratings and associated advertising revenues for the content. Content producers, such as Paramount Studios and the National Football League, create the video content viewers ultimately will watch. Content producers may license their public performance rights over a variety of distribution platforms that include: Online distribution—video content is streamed online to any Internet- connected device. Requires the licensing of online rights. Primary transmission—the over-the-air broadcast of content by a local broadcast television station. Requires the licensing of primary rights and only applies to content shown by local broadcast television stations. Through-to-viewer distribution—the content on a cable network is distributed by a cable or satellite operator to their subscribers’ television sets. Requires the licensing of through-to-viewer rights. Video-on-demand distribution—cable and satellite operators offer individual programs to their subscribers for free or for a nominal fee to watch at a time of the viewer’s choosing. Requires the licensing of video-on-demand rights. Content producers do not explicitly license secondary transmission rights for broadcast content that is retransmitted by cable and satellite operators to viewers’ television sets. As discussed above, the statutory licenses allow these operators to carry copyrighted programming without licensing those rights from the individual copyright owners of that content. As reported by the U.S. Copyright Office, most types of public performance rights are licensed by private parties through market-based negotiations. Content producers are paid for the public performance rights of their content in several ways. They receive licensing fees from broadcast networks and other “content aggregators” or “content distributors” like online video distributors that license the right to use their content on online platforms. Content producers can also receive licensing fees for selling syndicated programming to local broadcast television stations. Additionally, content producers may receive royalty fees paid by cable and satellite operators to the U.S. Copyright Office through the statutory licenses. Content aggregators—typically broadcast networks, local broadcast television stations, and cable networks, as described in more detail below—are those that purchase the rights to a variety of copyrighted content which they arrange into a schedule for viewers. Content aggregators license the public performance rights for content by paying a fee to the producers of the content. Broadcast networks range from major commercial networks, such as ABC, CBS, FOX, and NBC, to other commercial networks, such as ION Television and Univision. Broadcast networks purchase the rights for programs, arrange programs into a schedule, and then through network-affiliate agreements convey these rights to their affiliates. Broadcast networks receive payments through affiliate fees, as discussed below, and advertising revenues. Commercial local broadcast television stations, network-affiliated and independent stations (e.g., WJLA—an ABC affiliate in Washington, DC, and KUBE—an independent station in Houston, TX) may own the rights to transmit local content (e.g., local news) or license from content producers the rights to transmit syndicated content (e.g., Seinfeld reruns) in their local markets. They receive revenue from selling advertising spots and from cable and satellite operators via retransmission consent fees, if elected. Network-affiliated local broadcast television stations pay affiliate fees to broadcast networks in exchange for the right to air broadcast network content. Cable networks (e.g., ESPN and HBO), similar to broadcast networks, can obtain video content for their networks from content producers through market-based negotiations. However, instead of licensing their network content to an affiliate, cable networks license their signal to a cable or satellite operator for transmission.