Full opinion text
REDACTED OPINION AND ORDER DENISE COTE, District Judge. Table of Contents INTRODUCTION...............................................................209 FINDINGS OF FACT...........................................................211 I.ASCAP and Its Two Competitors..........................................211 II.The Cable Television Industry.............................................212 III. The Creation of a Television Program ......................................214 IV. The Music Video Business and NDMAs.....................................215 V. Mobi...................................................................216 A. Early Years and Growth..............................................216 B. Mobi’s Product Lineup...............................................217 C. The Economics of Mobi’s Business.....................................219 D. Mobi’s SESAC License: Its First PRO License..........................221 VI.ASCAP Licenses.........................................................222 A. ASCAP’s Post -Turner Licenses........................................222 B. The Terms of the Post-Turner Licenses ................................223 C. Application of the Post-Turner Licenses to Wireless Distribution Systems..........................................................224 D. ASCAP Licenses with Cable System Operators..........................226 E. Audio-Only Programming ............................................226 CONCLUSIONS OF LAW.......................................................227 I. The Non-Dramatic Performance Right.....................................227 II. The Consent Decree......................................................228 A. Origins of the Consent Decree.........................................228 B. The 1990s 2%mer Litigation ..........................................228 C. The Negotiation of AFJ2’s TTTA License Provision......................229 D. Other Provisions of AFJ2.............................................231 III. Fair Market Value.......................................................232 A. Music Choice: Retail or Wholesale Price as a Superior Indicator of Fair Market Value?................................................233 B. AOL Rate Court Ruling..............................................235 IV. A Reasonable Rate.......................................................236 A. ASCAP Rate Proposal................................................236 B. Mobi’s Fee Proposal .................................................244 C. Adoption of a Reasonable Rate........................................246 CONCLUSION.................................................................255 INTRODUCTION It is hard to overstate the importance of music in most of our lives. Every concert we attend, every song we listen to, virtually every entertainment we enjoy reinforces that lesson. The task at hand is to determine the fair market value of a blanket license for the public performance of music. The challenges of that task include discerning a rate that will give composers an economic incentive to keep enriching our lives with music, that avoids compensating composers for contributions made by others either to the creative work or to the delivery of that work to the public, and that does not create distorting incentives in the marketplace that will improperly affect the choices made by composers, inventors, investors, consumers and other economic players. This Opinion addresses these decades-old issues in the context of a relatively new phenomenon: the delivery of television programming to mobile telephones (“handsets”), an innovation made possible by the digital revolution. MobiTV (“Mobi”) is a middleman between the cable television networks that create programming and the wireless carriers to which consumers subscribe to obtain wireless service on their handsets. Mobi does principally three things: it provides the back-end technology that permits television program content to be delivered seamlessly to handsets, it licenses cable television program content from the networks and provides it to the wireless carriers, and it programs music video channels that it provides to wireless carriers. Mobi has asked for a through-to-the-audience (“TTTA”) license from the American Society of Composers, Authors and Publishers (“ASCAP”), an organization representing almost half of American composers and music publishers in their negotiations of public performance rights, to cover the programming content that Mobi provides to wireless carriers. The parties have been unable to reach agreement on the terms of a TTTA license, and, pursuant to an antitrust consent judgment, they now request that this Court set a rate for that license. The parties dispute, among other things, whether the revenue base for the calculated fee should be the retail revenue received by the wireless carriers or the amounts Mobi pays to content providers, and the rates that should be applied to that revenue base. Their fee proposals differ by tens of millions of dollars. ASCAP applied to the Court to set a reasonable rate on May 5, 2008. A bench trial was held from April 12 to 26, 2010, to determine a reasonable rate pursuant to Mobi’s license application to ASCAP and ASCAP’s application to this Court. This Opinion constitutes the Court’s findings of fact and conclusions of law following that trial. The factual findings are principally set forth in the first section of this Opinion, but appear as well in the final section. With the parties’ consent, the trial was conducted in accordance with the Court’s Individual Practices. On March 18, the direct testimony of the witnesses was presented through affidavit and submitted with the joint pretrial order, along with the parties’ trial exhibits and proposed findings of fact and conclusions of law. ASCAP presented affidavits constituting the direct testimony from four of its employees, two experts and two composers. Its employee-witnesses were Christopher Amenita, Senior Vice President for Broadcast Operations and New Media Licensing (“Amenita”); Matthew DeFilippis, Vice President of the New Media and Technology Department (“DeFilippis”); Dr. Peter M. Boyle, Chief Economist (“Boyle”); and Ray Schwind, Vice President and Director of Broadcast Licensing (“Schwind”). AS-CAP’s two experts were Dr. Jennifer Vanderhart, an economist (“Vanderhart”), and Cliff Petrovsky, who reported on his observations about Mobi’s programming (“Petrovsky”). The two composers were David Vanacore (“Vanacore”) and David Wolfert (“Wolfert”), each of whom is an accomplished composer of music for television programming. Mobi presented affidavits constituting the direct testimony from five of its current or former employees and three experts. The Mobi employees were Raymond DeRenzo, Chief Marketing Officer (“DeRenzo”); Terri Falcone, Vice President of Finance and Controller (“Falcone”); Carl Ghoreichi, Principal Research Analyst (“Ghoreichi”); Andrew Missan, currently Vice President and General Counsel of Bytemobile, Inc. and Vice President and General Counsel for Mobi from May 2005 until April 2008 (“Missan”); and Paul Scanlan, Co-Founder and President of Mobi (“Scanlan”). Mobi’s experts were Dr. Roger Noll, an economist (“Noll”); Larry Gerbrandt, an expert on the cable and satellite industries (“Gerbrandt”); and Paul Vidich, an expert on the history, production, and licensing of music videos (“Vidich”). All of the parties’ witnesses appeared at trial and were available for cross-examination with the exception of Wolfert. In addition, the parties designated deposition testimony from many of the trial witnesses and nineteen additional witnesses. The additional witnesses for whom ASCAP offered deposition testimony were Jeff Bartee, Mobi’s Vice President of Content; Kevin Grant, Mobi’s Vice President of Sales; Ellen McDonald, Mobi’s General Counsel; Sarah Walter, Mobi’s Senior Director of Financial Planning and Analysis; William Colitre, an attorney and Director of Business and Legal Affairs of Music Reports, Inc. (“MRI”); Mark Nagel, Manager of Music Products for AT & T Mobility LLC; and Suzanne Hellwig, a Director of Marketing Management for AT & T. The additional witnesses for whom Mobi offered deposition testimony were Vincent Candilora, ASCAP’s Senior Vice President of Licensing; Kevin Gage, ASCAP’s Senior Vice President for Strategic Planning and Digital Development; John LoFrumento, ASCAP’s chief executive officer; Julie Peng, ASCAP’s Manager of New Media Licensing; Richard Conlon, the Vice President of New Media and Strategic Development at Broadcast Music, Inc. (“BMI”); Mark Eisenberg, Executive Vice President, Global Digital Business Group, and head of Business and Legal Affairs at Sony Music Entertainment; and Elliott Peters, head of Digital Legal Affairs at Warner Music Group. The parties each offered designated deposition testimony of John Siu, Vice President of Accounting for U.S. Networks for Discovery Communications, Inc.; Jeff Klaumann, TV Product Manager at Sprint Nextel Corporation; Christopher Lamb, Product Manager for Music Services and Video Services at Verizon Wireless; Patricia Bowes, Marketing Director for AT & T Mobility; and Brandon Shaw, Senior Product Manager of Music Products at AT & T Mobility. FINDINGS OF FACT I. ASCAP and Its Two Competitors ASCAP is almost a century old; it was formed in 1914. It is an unincorporated membership association and performing rights organization created and controlled by music composers, writers, and publishers. It has about 380,000 members and its repertory contains over 8.5 million copyrighted musical works. The members grant ASCAP the non-exclusive right to license non-dramatic public performances of their music. ASCAP’s board of directors is composed of writers and music publishers. ASCAP operates under a consent decree first issued in 1941. The current consent decree, issued in 2001, will be described in some detail below. Among other things, the current consent decree regulates the terms on which ASCAP may offer music users a blanket license to publicly perform music from the ASCAP repertory. A blanket license is a license that gives the music user the right to perform all of the works in the repertory of a performing rights organization (“PRO”) such as AS-CAP, the fee for which does not vary depending on how much of the music from the repertory the user actually uses. AS-CAP negotiates with and collects license fees from entities that perform music publicly. ASCAP then distributes the collected royalties to its members based on a system of performance surveys and credits. Among other things, ASCAP aims to pay the money collected from one medium to the members whose works are performed in that medium. ASCAP competes with two other United States PROs: Broadcast Music, Inc. (“BMI”) and SESAC, Inc. (“SESAC”), each of whom also offers blanket licenses. PROs and their ability to grant blanket licenses covering a large number of compositions create significant economies of scale in negotiating a license and in policing the marketplace to prevent infringement of copyright rights. BMI, which is slightly smaller than ASCAP, operates under a consent decree that is similar to the one that governs ASCAP’s licenses. See United States v. BMI (In re Application of Music Choice), 316 F.3d 189, 190 (2d Cir.2003) (“Music Choice II ”). SESAC does not publicly report its revenue or compositions, but is understood to hold a share of the total number of musical compositions in the single digit range. SESAC is an invitation-only membership organization, aggressively courts composers it identifies as creating “high value,” and is not subject to a consent decree. II. The Cable Television Industry Because the content at issue here is largely cable television programming, and because the rates at which ASCAP licenses the public performance of music over cable television networks are integral to the proposals made by both ASCAP and Mobi in this trial, it is essential to understand the cable television industry. Commercial television was launched in the United States in the late 1940s. Cable television’s roots can be traced back almost that far — to the early 1950s — although it took another twenty years for cable television to emerge in the form we recognize today. In 1972, Home Box Office or HBO, a national cable network, was launched. With the launch of a new generation of geostationary satellites in 1976, television programming could be delivered nationally without leasing telephone lines and there was an explosion in the number of cable programming networks, including the founding of ESPN and CNN. There are two major categories of cable programming: (1) channels made available to cable subscribers on a bundled basis or “basic networks;” and (2) networks sold á la carte for a separate subscription fee, or “pay” and “premium” channels. Basic networks usually carry advertising, while most premium channels do not. Advertising revenue for basic cable networks comes from minutes that are reserved or available for commercials or “avails” each hour, a few minutes of which are reserved for local advertising. The portion not reserved for local avails can be sold to national advertisers or used for internal program promotions or public service announcements. The content assembled by networks is distributed by cable, satellite, telephone lines, and more recently and of special importance in this case, by wireless distributors and operators. Cable operators receive programming from cable networks via satellite systems and then transmit the signals through the cable network that passes to the households in its franchised region. Similarly, satellite systems allow individual subscribers to view hundreds of cable program channels using receiving dishes and are particularly important in sparsely populated areas. More recently, telephone companies, such as AT & T and Verizon, have entered the television delivery business and deliver programming in a number of ways, one example being IPTV, which is Internet Protocol Television. Very recently, in October 2009, United States broadcasters adopted a standard for mobile television service. As of now, about seventy television stations have announced that they will be offering service that conforms to that standard. Along with the evolution of technologies that distribute television programming, there have been major improvements in the quality of the television signal as well. Color television was introduced in the 1950s. More recently, digital television and high-definition television (“HDTV”) have been adopted. Similarly, the quality of the audio portion of the transmission has improved. Stereo television, the addition of a second audio program (which is often a Spanish-language feed), closed captioning, and Dolby Digital 5.1 are among the principal improvements. Despite the changes in the modes of delivering television programming, the method by which cable television networks obtain revenue has remained the same. The networks license the rights to distribute their programming through affiliation agreements with distributors under financial terms generally premised on the number of subscribers served. These affiliate fees, along with revenue from advertising, are the primary sources of revenue that cable networks use to cover their expenses of acquiring, creating and delivering programming. Affiliate fees reflect both a cable television network’s cost structure and the perceived value of its programming. For example, ESPN’s popularity permits it to demand a comparatively high affiliate fee. It is noteworthy for the discussion that follows that affiliate fees w¬ tied to the retail prices that the cable system operator charges its subscribers. Instead, networks simply license as many distributors of their programming as they can to reach as many viewers as possible in order to maximize their return. In contrast, the retail price that a distributor charges its subscribers is based primarily on the competitive factors in that business, such as its cost of technology, service enhancements associated with the delivery platform and the composition of its channel lineups. The invention and adoption of digital technology has had at least two significant impacts on the cable system transmission architecture: cable operators have expanded their channel capacity dramatically and subscribers have increased control over the viewing experience. Video-on-demand or VOD is an example of the latter phenomenon. In contrast to linear programming, which requires a viewer to watch a program at its scheduled time, VOD permits subscribers to select a program from a menu and pause, rewind or fast-forward. Some cable operators also allow subscribers to watch a limited number of program episodes during a window of time after the initial airing on the cable network. As Gerbrandt testified, despite the evolution of content delivery over a variety of distribution systems, “the viewing experience for the consumer — watching television on a screen — has remained fundamentally the same.” And notwithstanding the evolution in delivery systems, networks typically still create and acquire content which they schedule into a linear lineup, and license third-party distributors through affiliation agreements premised on the payment of monthly per-subscriber fees to distribute that content via linear or VOD delivery methods to consumers. And despite the revolutions in the quality of the video and audio presentation of content delivered over cable television networks, the networks still derive their revenue principally from advertising revenues and from the number of subscriptions. To the extent that improvements in technology have increased the number of cable television subscribers, those improvements have been captured in the increased revenues earned by the cable networks from affiliate fees and advertising. This revolution in digital transmission has blurred the distinctions among communications technologies and services. For example, while telephone networks were once devoted exclusively to point-to-point voice communications, and over-the-air and cable transmissions were dedicated to delivering television programs, digital technology has enabled telephone networks to support not just the traditional two-person telephone conversation, but has allowed it to deliver as well access to the internet, television programming, computing and a host of other services. Thus, wireless carriers and television stations increasingly compete in the delivery of mobile video entertainment to consumers. With the advancements in mobile telephone technology, there has been an explosion in the number of wireless telephone subscribers. As of June 2009, it is estimated that there were over 277 million wireless telephone subscribers in the United States. In contrast, the number of land-line telephones peaked in 2000, and has been falling ever since. Using another yardstick, the monthly minutes of use of handsets has risen from about ten billion in 1999 to almost 200 billion in 2009. III. The Creation of a Television Program Another component of the evidence at trial was testimony that described the creation of television programming and the role of music in that programming. Of course, each television program may be comprised of many pieces of intellectual property, from scripts to scores, and of work by many individuals, from writers, directors, actors and musicians to composers. Generally, program content contributors are compensated with up-front fees and with a percentage of revenue received by the owner of the audiovisual work from the exploitation of the program, including through returns in syndication or re-run markets. These creative contributors do not customarily receive compensation tied to the advertising or affiliate license fee revenues that cable television networks generate or to the down-the-line revenues that cable operators or satellite or telephone companies generate from subscriptions to their television distribution services. Moreover, the compensation to the contributors generally does not vary based on the technical means by which the program content reaches the consumer. Vanacore, one of the two main composers for the television show Survivor, and a contributor to many other successful television shows, testified about his experience in composing music for a television program or series. Generally, he is hired on a composer-for-hire basis, which means that he does not own the musical work that he creates. To compensate him for his work, he is paid something “up front,” which may be a relatively small payment, and is granted back what he characterizes as “the ‘writer’s share’ of the publishing rights, including, most significantly, the right to collect public performance royalties directly” from the PRO of his choice. This gives him the right to a 50% share of public performance royalties for compositions for which he is the sole writer; the remainder goes to the music publisher. In television, the publishing company is usually owned by the program producer itself. IV. The Music Video Business and NDMAs Mobi distributes not only cable television programming but also procures rights to music videos and creates music video channels that it then distributes to wireless carriers. Therefore, before describing Mobi, it is useful to describe the music video business, in particular its financial structure. Music videos are essentially short-form films. They are copyrighted works that involve video production, direction, writing, choreography and editing, as well as the acting and visual performance of the recording artist. They are designed to create a visual connection between recording artists, their songs and their fans. The music video art form was born in the early 1980s when MTV and later other cable television channels created outlets for the broadcast of the format. One of the ground-breaking music videos was Michael Jackson’s “Thriller,” released in 1988. The video lasted fourteen minutes (more than twice as long as the underlying sound recording), was co-written and directed by a successful movie director, and included intricate costumes and vivid special effects. Soon thereafter, young directors were starting their careers by making music videos before moving on to direct films and television shows. While music videos promote sales of sound recordings, the record label companies (“record labels”) that produce the music videos seek an independent stream of revenue by licensing the music videos themselves. A record label’s license for distribution of a music video conveys a bundle of rights, including the copyright in the integrated audiovisual work. As part of the production process, the record label also secures and pays for any choreography and script copyright rights that may be involved. Thus, a license of a music video generally conveys not just the right to reproduce, distribute and transmit the audiovisual work, but also warrants that other rights associated with the video have been “cleared” or secured by the record company. The license also typically authorizes the reproduction and transmission of the sound recording as part of the audiovisual work. The license for the distribution of a music video will also generally convey rights in the composition embodied in the music video. These rights include the right to reproduce the composition embodied in the music video, known as the synchronization or “sync” right. (On occasion, the license may provide that the record label has secured the sync right.) It is the custom for the record labels to secure the sync rights either directly from recording artist-songwriters incident to those artists’ recording agreement with the companies or to secure them separately from music publishers. If the record label obtains the sync right from music publishers, the record labels get either a sync license for a single composition or a catalog-wide license such as the New Digital Media Agreement (“NDMA”). NDMAs have been entered between [REDACTED]. NDMAs allow record labels to pass through certain rights in the compositions to the companies that transmit or sell the licensed products to consumers. There is one right, though, that licenses for music videos do not convey. They do not typically convey the public performance right in the composition embodied in the music video. Frequently, the licensee must procure such rights separately. Thus, in this litigation, ASCAP seeks a fee for the public performance of music in music videos distributed by Mobi. V. Mobi Mobi is a privately held company located in California. It was founded in 1999 with six employees and has grown since then to employ nearly 200 individuals. A. Early Years and Growth Mobi concentrated in its early years on creating and then licensing technology that would allow for the efficient transfer of data across wireless networks. By 2002, Mobi shifted its business to the recreation of the cable television experience over wireless networks. Mobi describes itself today as a leading provider and platform for content delivery over wireless networks. Mobi’s technology is essentially directed to the transfer of large amounts of data in a fluid manner over wireless networks, whether Mobi has a role in assembling the content or not. The transfer is enabled through Mobi software which was either pre-loaded in the handset or downloaded into the handset by the consumer. Mobi also aggregates television and radio channel content from third parties, programs its own music video channels and other specialty channels, and assembles this content into a product for delivery to wireless carriers through Mobi’s technology platform. As a content provider, Mobi tries to assemble a broad range of programming with a mix of brand-name content and specialty content and offer a mix of live, clip-linear, and VOD content. The range of programming includes a mix of channels in categories such as news, finance, sports, music, comedy, cartoon/kids, entertainment, women and weather. News has been particularly important to Mobi, with news channels among its most frequently viewed channels. Mobi distributed the world’s first live mobile television product when it distributed programming on the Sprint network in November 200B under the brand name MobiTV. This service delivered continuously streamed, linear television channels to handsets, including television channels such as CNBC, Discovery, College Sports Television, and MSNBC. While Mobi began by offering fewer than twenty channels in a single package, it may offer as many sixty different channels of programming in a single package today. To replicate the cable or satellite television channel guides with which consumers are generally familiar, Mobi signed a patent license agreement with Gemstar-TV Guide in 2007. By 2009, Mobi was touting that it had passed the seven million subscriber mark. B. Mobi’s Product Lineup Mobi refers to the subscription television and radio services that it distributes through wireless carriers as “products.” A product is a package of television and/or radio channels that it or the wireless carriers license from cable television networks or other content providers. The products that are branded with Mobi’s name include MobiTV, MobiRadio, and MobiVJ. Other products are branded with the wireless carriers’ names, for instance, Sprint TV and AT & T XM Radio. What follows is a description of some of Mobi’s products, presented roughly in the chronological order in which they appeared. Throughout its brief history, though, the majority of Mobi’s revenue has been earned from products appearing on the Sprint network. 1. MobiTV MobiTV is known as an á la carte product because subscriptions to it are sold separately by the wireless carriers and not as part of a bundle that includes other products. As of today, MobiTV includes roughly 60 television channels distributed over half a dozen or so wireless carrier networks. The channels distributed over any particular wireless carrier’s network vary slightly. Some of the most-watched channels that are distributed to every wireless carrier are Animal Planet, CNBC, Discovery, The Mic HipHop, The Weather Channel, Toon World TV Classics, and V40 Top Hits. After beginning with the distribution of MobiTV over the Sprint network in November 2003, Mobi began in January 2005 to distribute MobiTV through Cingular and the Midwest Wireless Networks in January 2005. Later in 2005, MobiTV began to be distributed over the Alltel, now Verizon, network. 2.MobiRadio Mobi’s radio product, MobiRadio, was first distributed on the Cingular wireless network in November 2005. It consisted of 40 channels of commercial-free digital music supplied by Music Choice. In July 2006, Mobi added other stations such as ESPN Radio, The NPR Program Stream, and The Weather Channel Radio Network. In late 2007, the radio channels offered by DMX, Inc. replaced the Music Choice channels. 3.Music Videos In January 2006, Mobi began to program its own music video channels by licensing music videos from two or three of the four major record labels. In the years since then, the number of record labels supplying music videos to Mobi has decreased. Over time, Mobi has created several different music video channels which it has inserted into many of its product offerings. 4.Sprint TV Less than a year after Sprint began to offer MobiTV to its customers, it changed the name of the product to Sprint TV. Sprint TV was launched in August 2004, and is delivered to Sprint customers as a component of a Sprint “bundle,” that is, a subscription service that provides the data necessary to use the internet, text messaging, and email services, as well as the Sprint TV programming, or, for customers who have already paid for data plans, as a stand-alone product for an additional monthly subscription fee. In May 2006, Mobi released a Spanish-language live television service called Sprint TV En Vivo. It consists of fifteen channels. As of mid-2009, this service is Mobi’s fifth largest á la carte television product, measured in terms of revenues. While Sprint relies on Mobi’s back-end technological services to provide content over its wireless network, it has become less dependent on Mobi to acquire the rights to that content. After beginning to acquire a small amount of its own content in late 2005, by the Spring of 2007, Sprint had independently acquired a large proportion of its television programming content directly from cable television networks. Mobi and Sprint cooperated on this transition, which significantly reduced Mobi’s role as a supplier of television programming content to Sprint. Mobi, however, still provides the programming content for the Sprint TV Extra and Sprint TV en Vivo products on the Sprint network. Mobi also provided Sprint with Mobiprogrammed music video channels for Sprint to include in a bundled offering called Music Pack. Music Pack also includes web browsing, navigation and television and radio content that Sprint independently licenses from others, including from cable television networks and other content providers. The agreement under which Mobi supplied four music video channels to the Music Pack expired in March 2009. 5.AT & T (formerly Cingular) In May 2006, Mobi announced the launch of a live television package available to laptop users over AT & T’s WiFi network. The product included fifteen channels on either a per month or 24-hour session rate. Later that same year, Mobi released AT & T Broadband TV, a twenty channel subscription live television service available on PCs for a monthly fee. These laptop/PC products were discontinued in 2009. In the Fall of 2006, Mobi began providing back-end technology services for Cingular’s XM Radio product, which consisted of up to 25 channels of programming. Cingular was responsible for securing all necessary rights directly from XM Radio. In October 2007, Mobi launched its MobiVJ product on AT & T handsets. It features Mobi-programmed music video channels, but also includes radio and television content such as Access Hollywood and Fashion TV, to give two examples. 6.MobiUBIZ In September 2008, Mobi announced the creation of Mobi4BIZ, which as its name suggests, includes programming of business or financial news such as Bloomberg Television, CNBC, and TheStreet.com. A subscriber can customize Mobi4BIZ to follow certain companies or stocks in a ticker at the bottom of the screen. 7.Apple In March 2009, Mobi released its first application (“app”) for the Apple iPhone, the NCAA March Madness on Demand product. This product permits purchasers to watch live video of all sixty-three games of the NCAA men’s college basketball championship tournament. In 2009, in partnership with NBC Sports, it added all of Notre Dame’s home football games as the Notre Dame Central app. C. The Economics of Mobi’s Business Most of Mobi’s á la carte television products are offered by wireless carriers at retail for roughly $10 per subscriber per month. The wireless carriers pay [REDACTED] to Mobi for the content rights and the technical services that underlie the wireless delivery of the Mobi á la carte offerings. Mobi tries to spend about [REDACTED] of the [REDACTED] on the purchase of content, but on occasion spends more than that. When Mobi’s aggregated programming is bundled with other products offered by wireless carriers, Mobi receives a flat dollar figure per subscriber per month based on the relative value of the Mobi service to the bundle. This flat fee can be significantly less than [REDACTED] per subscriber per month. If. the product is sold as part of a bundled package, the wireless carrier does not supply Mobi with an accounting of how much the carrier received from the customer for that sale. The payments to Mobi from the carriers are not affected by whether a subscriber actually watches any Mobi-supplied content. Mobi gives wireless carriers a report that ranks the channels in a product in terms of minutes viewed, minutes per subscriber, megabytes consumed, usage per type of handset, etc. The carriers use this data to monitor usage trends and the load on their networks. The audio-only products that Mobi delivers consume only about one-quarter of the data per minute that audiovisual content consumes. Mobi markets itself to the wireless carriers as a way to increase the number of consumers that subscribe to unlimited data plans and to increase purchases of more expensive handsets to play Mobi content. It portrays itself as a synergistic partner to the wireless carriers, helping drive demand for data packages that are lucrative to the carriers. To obtain content, Mobi negotiates with executives at cable television networks, broadcast networks and others, such as executives at major sports leagues. Mobi argues in these negotiations that its service provides another stream of revenue (in the form of licensing fees from Mobi) and a growing subscriber base for the programming. The rates negotiated by Mobi depend on factors such as the number of subscribers or the popularity of the channel as compared to other Mobi channels. Mobi pays almost all of its content providers a monthly per-subscriber fee for the right to distribute their content. Mobi gives content providers a monthly report showing total usage in minutes per day aggregated across all products in which the channel is supplied. It does not show the content provider a breakdown by wireless earner. This structure for Mobi’s affiliation agreements with the content providers is similar to the affiliation agreements that cable television networks typically enter when distributing their content. These per-subscriber affiliate fees, combined with whatever advertising the television network is able to sell, provide the television network with the compensation that it will receive for distribution of its product. All of the licenses between Mobi and content providers provide that the content providers will secure and pay for every copyright right and other payment z-ight associated with every person or entity that contributes to the cz-eation of the programming with a single exception. Every content license separately and explicitly addresses the obligation to secure the public performance license for musical compositions embedded in the programming. Many content providers have assumed the obligation to secure such licenses; othei’S have not. Another aspect of Mobi’s business is the music video channels that it programs and sells to carzúers. Mobi pays the major record labels at [REDACTED]. Mobi has sold these programmed channels to carriers either as a stand-alone product for a per-subscriber fee or in an undifferentiated bundle that includes the music video programming, other channels, and fees for back-end technology services. Finally, Mobi earns revenue by supplying the technology services that permit wireless carriers to deliver content that the carriers themselves have licensed directly from content providers. Providing such back-end technology services can earn Mobi less than [REDACTED] per subscriber per month. The contracts in such situations require the wireless carrier to secure all of the rights associated with the content. While Mobi’s revenue has grown every year, [REDACTED]. Mobi projects that it will [REDACTED], Mobi’s income statement for the 2008 fiscal year illustrates the flow of its revenue and its impact on Mobi’s financial condition. In fiscal year 2008, Mobi earned just over [REDACTED] in revenue, with over [REDACTED] of this figure being attributed to subscription revenue, whether from the supply of back-end technology services to wireless carriers or to the provision of content as well as that technology. Sixty-two percent of Mobi’s subscription revenue is attributable to products in which Mobi secured the content that was distributed over the handsets. In fiscal year 2008, net advertising revenue totaled about [REDACTED]. Mobi’s cost of revenue, which amounted to just over [REDACTED], includes content-provider fees of over [REDACTED]. D. Mobi’s SESAC License: Its First PRO License Initially, Mobi used MRI to help it obtain licenses for the public performance of music. Pursuant to MRI’s advice, Mobi requested blanket licenses from both AS-CAP and BMI in 2003. On February 15, 2005, SESAC accused Mobi of being a willful copyright infringer; Mobi had not yet requested or obtained a SESAC license. During the ensuing negotiations, SE-SAC represented that it controlled approximately 10% of the market for public performance rights in compositions used in U.S. television content. Expecting to have to pay roughly 1% of revenue to the three United States PROs, and understanding that SESAC should receive about 10% of that figure, Mobi offered a fee roughly equivalent to 0.1% of Mobi’s revenue. Ultimately, the parties agreed in a June 25, 2007 agreement that Mobi would pay more than that. The settlement agreement, which included a release of any copyright infringement claims related to Mobi’s prior public performance of SESAC music, required Mobi to pay SESAC a lump sum for prior years “in full satisfaction and settlement of any and all SESAC claims ... for such period,” a lump sum for 2007, and on a going-forward basis for 2008, the greater of (i) a set figure or (ii) [REDACTED] of Mobi’s gross revenues. This gross revenue calculation excluded revenues that Mobi received for its [REDACTED], The license contains the following limitation: [REDACTED] Even if SESAC could be shown to control 10% of the public performance rights in the programming at issue here, Mobi paid SESAC a fee that is proportionately higher than the fee it contends that it should pay ASCAP (or BMI). For the reasons that will be explained below, Mobi’s payment to SESAC is a poor yardstick to measure the fairness of any fee to ASCAP and has limited relevance to this proceeding. VI. ASCAP Licenses A. ASCAP’s Post-Turner Licenses Shortly after the turn of the new century, and after lengthy litigation known as the Turner litigation, ASCAP and the cable television networks settled their disputes over the valuation of a public performance TTTA license and agreed on a three-tiered rate structure to be calculated as a percentage of cable television network revenue. The tiers depended on the music intensity of the programming offered by the network, specifically whether the programmed network was “music intensive,” “general entertainment,” or “news and sports,” with licensing rates, respectively, of 0.9%, 0.375%, and 0.1375% (“Post-Twner Licenses”). The first set of PostTumer Licenses, executed in 2002, included both backward-looking settlements, usually a lump-sum payment covering a span of years, and forward-looking fee provisions adopting one of the three rates. By 2004, ASCAP had adopted three form license agreements, one for each of the three rates. More than 100 Post-Turner Licenses have been issued by ASCAP, with the most recent having been executed in 2009. A dozen or so of the Post-Turner Licenses will expire during 2012 ASCAP’s “music intensive” license generally covers channels that feature music videos, music-focused feature films, and music variety shows. Examples of music intensive networks licensed at the rate of 0.9% under the form Post-Turner License are the Gospel Music Channel Network, Fuse Network, and Artists & Fans Network. An example of a general entertainment cable television network is Turner Broadcasting’s TNT Network, whose [REDACTED] license had the rate of 0.375%. Examples of networks that have been licensed on the ASCAP sports and news form license, at a rate of 0.1375%, are the Fox Sports and the Fox News networks. Beginning in late 2007, ASCAP began to issue interim fee agreements with cable television networks, rather than renewing or executing new Post-Turner Licenses. ASCAP apparently intends to enter into a new round of negotiations with the cable television network industry regarding the licensing of ASCAP rights. B. The Terms of the Post -Turner Licenses Because of their importance to the analysis that follows, it is helpful to describe in detail some of the terms of the Post-2Vrner Licenses. In brief, while the three-tiered Post-Turner Licenses distinguish among networks based on the content of their programming, they do not distinguish among them based on the manner in which that content is delivered. For example, they do not distinguish among the various kinds of distribution mechanisms through which a network may arrange to transmit its programming to the public and they do not distinguish between content that is delivered in a linear versus a VOD format. ASCAP’s form Post -Turner License, which is entitled the ASCAP Cable Television Programming Service Blanket License Agreement, classifies music videos and motion pictures and films in the musical genre as non-dramatic performances covered by the license. Its all-encompassing definition of a Distribution System includes: a cable television system, MMDS, SMATV, TVRO, satellite direct to home system, direct broadcast satellite system, Internet, broad band or any other means or method which is or hereafter may be used to transmit or receive a “Programming Service” (including transmission or reception on a video-on-demand, or near-video-on-demand, subscription video-on-demand pay-per-view or pay-per-period basis) except that Distribution System shall exclude free over-the-air broadcast television, and any transmission via the Internet or other online service that is not at least one of: (i) broadcasts, transmissions or retransmissions of substantially the same program content as that of a “Programming Service” transmitted or received via a cable television system, MMDS, SMATV, TVRO, satellite direct to home system or direct broadcast satellite system (or other similar system as may hereafter be used for similar purposes); or (ii) an Internet site, or musical compositions broadcast, transmitted or retransmitted on an Internet site, used primarily to promote any “Programming Service” and/or the exhibition of any “Program.” (Emphasis supplied.) The definition of a Distribution System, as just shown, depends in part on the definition of a Programming Service. The “Programming Service” refers to the network to which the license applies, and a Program is defined as any show, motion picture or film (including motion pictures or films in the “musical” genre), music video, television program, sports and sports related program, commercial advertisement (of any duration), • promotional announcement, interstitial program, public service announcement or other type of audiovisual material transmitted as part of any Programming Service. (Emphasis supplied.) The all-encompassing nature of the license is reflected as well in the description of the TTTA license itself. The license defines a “Through-To-The-Viewer License” as “a license which authorizes the transmission or retransmission of the Programming Service to LICENSEE’S Distribution Systems and the simultaneous retransmission of the Programming Service by any of LICENSEE’S Distribution Systems by whatever means to subscribers or viewers.” (Emphasis supplied.) The fee from these licenses is based upon the network’s gross revenues, and the license makes no mention of the subscription revenue generated by any affiliate that is responsible for the direct distribution of the content to the consumer. Gross revenues are thus defined in pertinent part to comprise (i) monies or other consideration received by LICENSEE from Distribution Systems and directly from subscribers to LICENSEE’S Programming Service; (ii) advertising revenues or other monies received by LICENSEE from sponsors if any .... (Emphasis supplied.) Gross revenues exclude “payments to Distribution Systems for LICENSEE’S Programming Service.” (Emphasis supplied). Thus, and to underscore this point again, the Post -Turner License does not require that the network pay ASCAP any portion of the revenues collected at the retail level by the network affiliates. In terms of the scope of the license, the license forbids the licensee from granting others the right to publicly perform ASCAP music “except that nothing in this paragraph shall limit or curtail the effect of the Through-to-the-Viewer License granted by this Agreement.” C. Application of the Post-2%mer Licenses to Wireless Distribution Systems The parties hotly contest whether AS-CAP, after its adoption of the form PostTumer Licenses, ever acted to include the distribution of programming content over a wireless distribution system as a method of delivery encompassed within the license. Despite contrary testimony from ASCAP’s witnesses, the documentary record establishes that it was ASCAP’s practice until recently to try to collect licensing fees from cable television networks based on revenues from wireless distribution services. That this is true is unsurprising given the sweeping definitions in the PostTumer Licenses of a Distribution System and other terms. Thus, as early as 2006, ASCAP confirmed in correspondence with licensee [REDACTED] that its Post-Turner License would encompass wireless distribution activities. In its October 2, 2006 letter to [REDACTED] during their licensing negotiations, ASCAP represented that their “mutual understanding” of their Post-Turner License was that “The Definition of ‘Distribution System’ ” in the accompanying signed Agreement includes “wireless networks and any other forms of video programming distribution (now or hereafter devised) and any Internet site operated by LICENSEE.” (Emphasis supplied.) And because [REDACTED] license was a TTTA license, ASCAP acknowledged that it “would not be entitled to license separately performances contained in Programs transmitted as part of any Programming Service licensed under the Agreement by any ‘Distribution System.’ ” Then, in a series of audits of its PostTumer licensees that ASCAP initiated as recently as 2008 and 2009, ASCAP asked its licensees for revenue information for wireless distribution systems. In at least five such instances, ASCAP’s audit request referred specifically to Mobi. In audits in 2008 and 2009 of Comedy Central, the Bravo Network, USA Networks and SciFi Channel, and Discovery, ASCAP demanded to see revenues that these cable television networks received from Mobi. In these demands, ASCAP consistently characterized Mobi as a “Distribution System,” as that term is defined in its Post-2%mer Licenses. In July 2008, for example, the audit notice that ASCAP’s outside auditor sent to the USA Network and Sci-Fi Channel stated: “In conformity with USA’s and Sci-Fi’s license agreements with ASCAP authorizing the examination, we will require the following information .... 9) Access to all contracts between USA and Sci-Fi and the following Distribution Systems!)] Comcast Cable!,] Time Warner Cable!,] ... Dish Network!,] • • • Mobi TV[,] Verizon VCast, ATT[,] Sprint .... ” AS-CAP had given its auditor this list of Distribution Systems. In a January 2009 “Draft Report” of the audit results for both the Bravo Network and the Sci-Fi and USA Networks, the auditor stated: “The examination was performed within the scope of the License Agreements, the relevant provisions of which were the same in both License Agreements.” The draft then copies the definitions of “Distribution Systems,” “Programming Service,” and “Gross Revenues” from Bravo’s License Agreement. lt continues: “Accordingly, our examination endeavored to determine the royalties to be paid during the Examination Period by the three Networks using such definitions and focused on performances of the Programming Services via three different Distribution System areas: (1) MSOs (i.e. eable/satellite systems); Internet web sites; and (3) wireless services.” (Emphasis supplied.) ASCAP’s Schwind wrote to Comedy Central in September 2008, demanding the right to audit revenue from “non-linear platforms,” and Mobi specifically. He stated: I assume that by ‘non-linear platforms’ you mean such businesses as Apple iTunes, MobiTV or Sprint, as well as various Internet distributors. I refer you to the provisions of the License Agreement, a copy of which is enclosed for your convenience, that define both ‘Distribution System’ (Section XVIII(4)) and ‘Gross Revenues’ (Section XVIII(9)). Stated simply, these provisions entitle ASCAP to verify that the gross revenues reported to ASCAP by Comedy Central include revenues, or the value of other consideration, Comedy Central has received from, among others, all of such ‘non-linear’ distribution systems .... (Emphasis supplied.) Similarly, a March 17, 2009 letter from an ASCAP auditor to Discovery stated: “Pursuant to the audit notification letter dated January 22, 2009, ... we will require the following information in order to complete our examination .... Access to all statements from and contracts between Discovery and it’s [sic] distribution systerns, including but not limited to” a list that included “Mobi TV.” At some point after the commencement of this litigation, probably by mid-2008, and certainly by May of 2009, ASCAP made a decision that it no longer wanted to construe the Post-Turner Licenses as including the requirement that licensees pay ASCAP based on wireless distribution revenue. In late 2008, ASCAP made a change to the language in its Post-Turner License with [REDACTED] to exclude content delivered through a wireless service from the TTTA license. Thus, AS-CAP’s November 18, 2008 blanket license agreement with [REDACTED] added to the list of exclusions from the definition of Distribution System: “any wireless service, system or carriers.” Then, in the Spring of 2009, ASCAP even went so far as to return a small payment made by Discovery due to Discovery’s determination that it had underpaid ASCAP for the revenues received from wireless distribution activities. D. ASCAP Licenses with Cable System Operators Because the Post-7%raer Licenses do not cover all uses of music in television programming, ASCAP also directly licenses cable system operators. Cable operators are licensed under a form agreement that resulted from negotiations with an industry trade association and that currently requires payments at an annual per-subscriber rate of $0.099. These agreements cover content that is not covered by any other ASCAP license, such as locally originated programming and the advertising that runs with it, programming on leased access channels, advertising material that is inserted at a local level into other programming, VOD programming that is not otherwise licensed, and some local or regional news and sports programming. E. Audio-Only Programming Mobi not only provides audio-visual programming over handsets, but also provides audio-only products. MobiRadio is Mobi’s audio-only product, for which Mobi licenses music from DMX (and in prior years, from Music Choice). Mobi also provides back-end technology services for XM Satellite Radio, Inc. (“XM Radio”) and Sirius Satellite Radio, Inc. (“Sirius”) products. ASCAP has licensed audio-only channels programmed by Music Choice, [REDACTED]. Music Choice provides nearly fifty music channels to televisions via cable and satellite and to computers over the internet. The ASCAP licensing agreement with Music Choice [REDACTED] requires Music Choice to pay ASCAP a licensing fee of 2.5% of its gross revenue. The 2.5% rate of gross revenue applies as well to the licenses currently in effect between ASCAP and [REDACTED] for them programmed all-music channels that are provided over a [REDACTED] service to subscribers’ homes. ASCAP also has a different license with [REDACTED] for its subscription-based [REDACTED]. This service is a mix of roughly half-music and half-talk radio channels, and is licensed at a rate of 1.44% of gross revenue. CONCLUSIONS OF LAW On November 11, 2003, Mobi applied for an ASCAP TTTA license “only to the extent required” for its “service that allows mobile handset users to access television and other content by aggregating television and other audiovisual content for transmission over telecommunications networks.” After the parties failed to reach agreement on the terms of such a license, ASCAP filed this lawsuit on May 5, 2008 in order for the rate court to determine “a reasonable fee retroactive to the date of the written request for a license.” AFJ2 § IX. ASCAP contends that Mobi owes $41.3 million for the period November 11, 2003 through the end of 2011. Mobi contends that it owes only a fraction of that amount, specifically $301,257.99 for the period from December 2003 through July 2009. These conclusions of law will begin with a description of the Copyright Act section at issue in this litigation, the origin of the consent decree, the ASCAP rate court litigation in the 1990s that addressed the rate that would apply to licenses in the cable television industry (the Turner litigation), and the amendment of the consent decree in the antitrust litigation that created AFJ2 in 2001, before proceeding to describe the jurisprudence addressed to the aspects of a TTTA license in dispute here. After these principles are described, the governing legal standard will be applied to ASCAP’s proposal for a reasonable rate, and then to Mobi’s proposal. Throughout this determination, the burden rests on ASCAP to demonstrate “the reasonableness of the fee it seeks.” AFJ § IX(B). Scattered throughout this discussion will be additional findings of fact. I. The Non-Dramatic Performance Right This dispute arises from one of the rights created by the Copyright Act that may be owned and conveyed by composers of music. See United States v. ASCAP (In re Application of Cellco P’ship d/b/a/ Verizon Wireless), 663 F.Supp.2d 363, 368-69 (S.D.N.Y.2009); 17 U.S.C. §§ 106, 201. That right is the right to publicly perform the musical work. 17 U.S.C. § 106(4). Most of the music that is used in the type of television programming at issue in this dispute is created under composer-for-hire agreements with the producers of the television programs. Under the Copyright Act, “[i]n the case of a work made for hire, the employer or other person for whom the work was prepared is considered the author ..., and, unless the parties have expressly agreed otherwise ..., owns all of the rights comprised in the copyright.” 17 U.S.C. § 201(b). By historical practice, however, the producer retains all of the rights comprised in the copyright except the public performance right, which is granted back to the composer and/or a music publishing company with whom the composer has a contract. See Buffalo Broad. Co., Inc. v. ASCAP, 744 F.2d 917, 921 (2d Cir.1984) (“Buffalo Broadcasting ”). See also Alden-Rochelle, Inc. v. ASCAP, 80 F.Supp. 888, 892 (S.D.N.Y.1948) (explaining the origin of this assignment practice in the film industry). The result is that a broadcaster who transmits programming that contains copyrighted musical works without a license from the copyright holder faces liability for copyright infringement. ASCAP exists to efficiently license these public performance rights of its composer and publisher members. II. The Consent Decree A. Origins of the Consent Decree Because ASCAP collectively licenses its members’ songs, which enhances their market power in negotiating with music users, it attracted the attention of the United States Department of Justice’s antitrust division (“DOJ”). DOJ sued AS-CAP in 1941 for alleged violations of the Sherman Antitrust Act related to ASCAP’s licensing of the public performance right to copyrighted music within ASCAP’s repertory. The lawsuit resulted in a 1941 consent decree. In 1948, a court decision of importance to the development of the TTTA license was issued. The court entered an injunction restraining ASCAP’s members from refusing to grant to motion picture producers the right to publicly perform music through the exhibition of motion pictures. Alden-Rochelle, 80 F.Supp. at 900. The court rejected the contention that this requirement that ASCAP’s members offer a license to the upstream distributor of the works would not result in any payment by the exhibitors for the downstream public performance: But that in some way the value of the performing rights would be claimed by the copyright owner and eventually would be passed on to the exhibitor, I have no doubt at all. The ultimate result would be that the exhibitor would not be separately charged for the performance rights, as he is now through Ascap, but he would be charged for those rights in the total rental he would pay for the film. Id. at 896. In response to this injunction and the increased popularity of television, the 1941 consent decree was amended substantially. The Amended Final Judgment was entered in 1950 (“the AFJ”). The AFJ prohibited ASCAP from acquiring exclusive music performing rights and from limiting, restricting, or interfering with the right of any member to issue to any user a nonexclusive license. Additionally, the AFJ required ASCAP to grant a license to any applicant who requested one and created the rate court to resolve disputes in the event the parties were unable to agree on reasonable fees. Buffalo Broadcasting, 744 F.2d at 922-23. The AFJ was amended in 2001 to create the Second Amended Final Judgment (“the AFJ2” or “Consent Decree”). The Consent Decree currently regulates how ASCAP may participate in the music industry and gives this Court exclusive jurisdiction to oversee the implementation of AFJ2. This context explains why “rate-setting courts must take seriously the fact that they exist as a result of monopolists exercising disproportionate power over the market for music rights.” United States v. BMI (In re Application of Music Choice), 426 F.3