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United States v. American Society of Composers

June 18, 2008

UNITED STATES OF AMERICA, PLAINTIFF,
v.
AMERICAN SOCIETY OF COMPOSERS, AUTHORS AND PUBLISHERS, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Conner, Sr. D. J.

OPINION AND ORDER

In the Matter of the Application of AMERICA ONLINE, INC., Applicant,

: for the Determination of Reasonable License Fees

In the Matter of the Application of REALNETWORKS, INC., Applicant,

: for the Determination of Reasonable License Fees.

In the Matter of the Application of YAHOO! INC., Applicant,

: for the Determination of Reasonable License Fees.

On April 30, 2008, this Court, in its capacity as the "rate court" under Section IX of the Second Amended Final Judgment in United States v. ASCAP, 2001 WL 1589999 (S.D.N.Y. 2001), rendered a 153-page Opinion and Order determining reasonable fees for blanket licenses for the unlimited performance of all the ASCAP-repertory music by three internet proprietors, AOL LLC ("AOL"), Real Networks, Inc. ("Real Networks") and Yahoo! Inc. ("Yahoo!") (collectively "Applicants") on their respective internet websites. The Court set, for each of the three Applicants, a fee determined by multiplying the total revenue of the licensed business unit, less customary deductions for advertising sales commissions and traffic acquisition costs, by a music-use-adjustment fraction whose numerator is the total number of hours music is streamed to users by the licensee (as measured by the Applicant itself and conceded to be accurate) and whose denominator is the total number of hours of use of the licensee's website (as measured by comScore or other means approved by the Court) and applying to the resulting music-use-adjusted revenue a fee rate of 2.5%.

The Court found that, although comScore tracks total site hours by a different method than Applicants use for tracking music streaming hours, the comScore metric is the most accurate available measure of total hours of site use and, because comScore's reported site-hour figures are substantially greater than those of its rival media metrics service, Neilsen, use of the comScore data is conservative and would result in substantially lower license fees (Opinion and Order at 149, n.10). However, in recognition of the possibility that a more accurate measure of total site hours might be, or might later become, available, the Court added: "If Applicants can establish in a supplemental rate proceeding that such a figure is available, it may be used in computing the license fees." (Id. at 146).

At a court conference on May 12, 2008, Applicants informally requested a supplemental rate proceeding to establish that they already had available, although they had not previously mentioned, a more accurate measure of total site hours than that provided by comScore, which should be used in the denominator of the music-use-adjustment fraction. The Court granted Applicants leave to file a motion for a supplemental rate proceeding but stressed that the motion should present a detailed offer of proof: "I want you to tell me what you would expect to prove at the supplemental rate proceeding and how you expect to prove it." (Tr. at 36).

Applicants' motion was filed May 27, 2008 and was fully briefed by June 12, 2008. In their motion, Applicants offer to prove the following facts (condensed to essentials, followed by the Court's comments on the significance of each fact):

1. comScore collects data not from every user of the website but from a "representative" sample of users or "panels" and extrapolates therefrom to the universe of users. This is a commonly accepted statistical practice and, although Applicants were aware that it was being employed by comScore, it did not cause them to cease paying substantial fees for the comScore metrics, praising their accuracy and using them in computing advertising rates.Until Applicants are willing to pay the higher cost of collecting data from every user,thecomScore metrics are the most accurate measure of total site time known to the Court.

2. comScore stops counting the time of user engagement with a webpage when another page or window is opened over that webpage. This assertion is doubly specious. First, when another page or window is opened on top of a webpage, the user's attention is obviously focused on the overlying page; indeed it is likely that only the outer margins of the original page remain visible.

To count page time not only for the original page but also for each of the overlying pages would be a ridiculous example of double or multiple counting. Second, and even more important, the music-use-adjustment fraction employed by ...


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