[00:00:00] Speaker 07:
Case number 24-1259 et al.

[00:00:04] Speaker 07:
Office of the Commissioner of Baseball et al.

[00:00:06] Speaker 07:
Appellants vs. Librarian of Congress et al.

[00:00:09] Speaker 07:
Ms.

[00:00:09] Speaker 07:
Theodore Ford-Ballant's Office of the Commissioner of Baseball et al.

[00:00:14] Speaker 07:
Mr. Dove Ford-Ballant Public Broadcasting Service.

[00:00:17] Speaker 07:
Ms.

[00:00:17] Speaker 07:
Carson for the Appellees.

[00:00:18] Speaker 07:
Mr. McClain for the Intervenors.

[00:00:20] Speaker 03:
Good morning, Council.

[00:00:22] Speaker 03:
Ms.

[00:00:22] Speaker 03:
Theodore, please proceed when you're ready.

[00:00:24] Speaker 08:
Good morning.

[00:00:24] Speaker 08:
Elizabeth Theodore on behalf of the Joint Sports Claimants.

[00:00:27] Speaker 08:
I'd like to save five minutes for rebuttal if possible.

[00:00:30] Speaker 08:
The board's allocation decision must be vacated for three independent reasons.

[00:00:34] Speaker 08:
First, the board relied on an arbitrary regression that produced absurd results.

[00:00:39] Speaker 08:
Second, the board applied an arbitrary adjustment to the survey that it admitted lacked any rationale.

[00:00:46] Speaker 08:
And third, the board synthesized the regression in the survey in an arbitrary way, resulting in an allocation for sports in 2014 that inexplicably fell below sports' share under either method the board purported to be crediting.

[00:01:00] Speaker 08:
So let me start with the regression, which absurdly concluded that live sports games that cable systems pay tens of millions of dollars to air on the open market were the least valuable content category.

[00:01:12] Speaker 08:
The regression was so imprecise that the board had to resort to the 55% confidence level.

[00:01:17] Speaker 08:
And even then, it couldn't exclude the possibility that sports has a negative value.

[00:01:22] Speaker 08:
This is at J511, that airing live NFL games reduces the value of your channel to cable systems.

[00:01:30] Speaker 08:
And that's just totally outside the range of acceptable scientific evidence.

[00:01:34] Speaker 08:
When this court approved reliance on a regression previously in the 2020 program supplier's decision, it said it was non-arbitrary because the regression produced narrow confidence intervals at 95% confidence.

[00:01:46] Speaker 08:
Here at 95% confidence, the regression can't tell you whether commercial television should get 6% or 20% in 2016, also at J511.

[00:01:56] Speaker 08:
And that commercial television, that's one of the categories that the board says that the regression does accurately measure.

[00:02:03] Speaker 08:
The board itself found that the regression could not accurately measure half of the claimant groups.

[00:02:08] Speaker 08:
So that's sports, Canadian and devotional, which amount to between 35% and 42.9% of the royalty pool.

[00:02:17] Speaker 10:
And this issue was presented to the board on rehearing.

[00:02:24] Speaker 08:
So there were certain issues presented to the board on rehearing relating to the acceptance of the Tyler above minimum fee regression, which was a regression that nobody had proposed.

[00:02:39] Speaker 08:
But I think the board did not respond to any of these absurdities and neither has notably neither has the government in its brief.

[00:02:46] Speaker 10:
And what I'm getting at is

[00:02:52] Speaker 10:
Motions for reconsideration were requested, were filed, excuse me, and granted.

[00:03:01] Speaker 10:
And there was briefing.

[00:03:02] Speaker 10:
And the board made decisions and indicated, A, you don't get a second bite of the apple, but B, said that you have to show clear error or manifest injustice, all right, for it to take up an issue.

[00:03:21] Speaker 10:
So what's your response to what the board did in that context?

[00:03:27] Speaker 10:
Because before us, it's both a legal decision and the decision on rehearing.

[00:03:33] Speaker 08:
I don't think that the standard the board applied on reconsideration with respect to sort of clear error has anything to do with the standard, the normal APA, substantial evidence, arbitrary capricious standard that this court is going to apply.

[00:03:46] Speaker 10:
No.

[00:03:47] Speaker 10:
I don't disagree with you, but what the board said, and that's what I'm trying to clarify here, the board said your burden, Clayman's burden, in seeking rehearing is to demonstrate clear errors or manifest errors.

[00:04:06] Speaker 10:
And so in some instances, the board said the parties haven't presented such evidence.

[00:04:12] Speaker 10:
But they said, we'll go ahead and discuss the merits of the argument that's being made.

[00:04:19] Speaker 10:
And so it goes on.

[00:04:21] Speaker 10:
And so while we're on an APA standard of review of the board's decisions, we have to take into account what it said in response to the arguments that were made in connection with rehearing, correct?

[00:04:39] Speaker 08:
I think any substantive points it made, certainly, but I don't think it had any substantive responses to the things I'm saying.

[00:04:46] Speaker 10:
I don't think that the sort of- So these issues are being raised before us for the first time, or you're saying you raised them, but they were never addressed on rehearing.

[00:05:00] Speaker 08:
So I'm saying we raised many of these issues at the actual original board determination level.

[00:05:08] Speaker 08:
I think a lot of what the board was saying about second bite at the apple is basically like, look, you already raised these.

[00:05:13] Speaker 08:
We address these.

[00:05:14] Speaker 08:
We're not going to address them again.

[00:05:15] Speaker 10:
Unless you can show clear error or manifesting justice.

[00:05:21] Speaker 10:
Yes, Your Honor, but I think it's- All I'm trying to get at is you quoted all sides have quoted what our court has said about our review under an APA standard of these types of board allocations.

[00:05:37] Speaker 10:
We're talking about rough justice, all right?

[00:05:41] Speaker 10:
So I'm trying to understand what it is that we should be looking at

[00:05:49] Speaker 10:
in terms of the board says, you've read your motion for reconsideration.

[00:05:56] Speaker 10:
There's nothing new here.

[00:05:58] Speaker 10:
There's nothing that shows clear error or manifest injustice.

[00:06:05] Speaker 10:
So where the court has an APA standard of review, but we're looking for rough justice.

[00:06:12] Speaker 10:
We're not looking for precision.

[00:06:15] Speaker 10:
How do we put all that together?

[00:06:17] Speaker 08:
I think that what the court has said is that you have to have a non-arbitrary method of allocation.

[00:06:24] Speaker 08:
And I think the method the board chose is arbitrary.

[00:06:26] Speaker 08:
And I don't think that the sort of rehearing standard is really relevant here in the same way that this court might deny an en banc review or panel rehearing because there's nothing new.

[00:06:37] Speaker 08:
And that wouldn't affect how the Supreme Court reviews the underlying decision.

[00:06:40] Speaker 10:
So is the underlying argument here that the board

[00:06:46] Speaker 10:
in adopting the methodology it did, inadequately explain why it chose particular allocation numbers for the various claimants?

[00:07:05] Speaker 08:
That is one of our many.

[00:07:07] Speaker 08:
That is, I think, our third argument.

[00:07:10] Speaker 10:
I'm just trying to get this

[00:07:12] Speaker 10:
under my belt, in terms of when you say, well, they were arbitrary, they did this, like that.

[00:07:22] Speaker 10:
Had the board explained why it chose those numbers, we might be in a different position in addressing your arguments.

[00:07:33] Speaker 10:
That's what I'm trying to understand.

[00:07:34] Speaker 08:
Yeah, I think had the board done a better job of responding to some of our arguments, you would be in a different, better position.

[00:07:41] Speaker 08:
But I think what the board has to have is it has to have a non-arbitrary method that's supported by substantial evidence that suggests that the numbers it's choosing from are correct, that they actually reflect marketplace value.

[00:07:58] Speaker 10:
So the board says,

[00:08:01] Speaker 10:
All the parties have proposed various methodologies.

[00:08:05] Speaker 10:
We've looked at them all, and we've made some decisions and determinations about the methodologies.

[00:08:12] Speaker 10:
And while we like Tyler best, there are some problems there.

[00:08:18] Speaker 10:
And while we like the survey, there are problems there.

[00:08:24] Speaker 10:
And everybody agrees that what period of time the board is addressing

[00:08:30] Speaker 10:
is different from the past.

[00:08:33] Speaker 10:
So the board says, you know, the normal procedure isn't going to work.

[00:08:41] Speaker 10:
And I don't hear arguments being made other than to say, well, the board should address our position as distinct from what the board has done.

[00:08:54] Speaker 08:
Well, I'd be happy to just very specifically address why what the board did was arbitrary, which I think we'll get at your question.

[00:09:02] Speaker 08:
So with respect to the regression, so the board said, we think 90% of the relevant data is completely irrelevant and can't be included in the regression because it's based on people who are not making economic decisions.

[00:09:17] Speaker 08:
And then what it says is, we're going to accept a regression that throws out 90% of the data.

[00:09:22] Speaker 08:
Nobody proposed that regression.

[00:09:23] Speaker 08:
Nobody doctor Tyler did not propose that regression.

[00:09:26] Speaker 08:
He did not suggest that should be used.

[00:09:29] Speaker 08:
And then what that regression does is it produces totally absurd results.

[00:09:35] Speaker 08:
And even which the board acknowledged for many climate categories.

[00:09:39] Speaker 08:
And Dr. Tyler himself said, and this is at J 343, if a regression is wrong for one coefficient, all of the other coefficients are likely to be biased as well in unknown directions.

[00:09:51] Speaker 08:
He said himself, Dr. Tyler said himself that a badly measured variable contaminates all of the estimates.

[00:09:57] Speaker 08:
And the board finds that many of these variables are wrong, are badly measured.

[00:10:02] Speaker 08:
The regression reports that the infomercials are entitled to 7.3% of the royalties, even though everyone agrees they have no marketplace value.

[00:10:11] Speaker 03:
On this, didn't Tyler say about the sensitivity

[00:10:18] Speaker 03:
as his sensitivity model as opposed to the baseline model, the sensitivity model, which only looks at the above minimum fee ones.

[00:10:27] Speaker 03:
So I thought he said considering a version of the model including only above minimum fee CSOs does have some merit.

[00:10:35] Speaker 08:
He did.

[00:10:35] Speaker 08:
He said some merit.

[00:10:36] Speaker 08:
He did.

[00:10:37] Speaker 03:
So it's not, I mean, by his own estimation, it's not outlandish to look at this.

[00:10:42] Speaker 03:
He says it has some merit.

[00:10:43] Speaker 03:
And then he goes on to explain why it has some merit, because that's going to be the best indication of a revealed preference.

[00:10:51] Speaker 03:
That still may be, I mean, you may still have some problems with it, but based on Tyler's own assessment,

[00:10:56] Speaker 03:
He's not warding people off from looking at that.

[00:10:59] Speaker 03:
He's saying, yeah, that could have some merit and because it maps onto revealed preferences in a way that's more telling.

[00:11:05] Speaker 08:
He says that it has some merit sort of to corroborate the original survey that the board original direction that the board finds is is wrong.

[00:11:13] Speaker 08:
But he says it's too extreme.

[00:11:15] Speaker 08:
And what he actually says is what he says is that, you know, as to that 10 percent, we have some basis for thinking they're making economic decisions.

[00:11:23] Speaker 08:
He doesn't say that that means that the above minimum fee regression is accurately mapping 100 percent.

[00:11:29] Speaker 08:
And again, I mean, but even putting aside what Tyler said, I mean, overwhelmingly, the actual results here show the absurdity.

[00:11:38] Speaker 08:
Fifty-five percent confidence interval.

[00:11:40] Speaker 08:
That's ridiculous.

[00:11:41] Speaker 08:
No scientist would accept that.

[00:11:43] Speaker 03:
The board does not suggest that any scientist would accept that.

[00:11:47] Speaker 03:
Just help me understand this.

[00:11:50] Speaker 03:
So what the board says at J511, the judges take note of the 55% confidence level and then go on to give a statement as to why.

[00:11:59] Speaker 03:
What does it mean to take note of it?

[00:12:00] Speaker 03:
Because when I'm looking at the table, I see a 55% column, I see a 90% column, I see a 95%, and I see a 99%.

[00:12:07] Speaker 03:
Of course, the range gets narrower as you go to the left because the confidence is getting less.

[00:12:13] Speaker 03:
So that makes sense to me as an intuitive matter.

[00:12:16] Speaker 03:
There's also these other columns and so the columns all have ranges in them.

[00:12:21] Speaker 03:
That's the, but for the, for the, to the extent that the board took into account the regression.

[00:12:27] Speaker 03:
I don't think we think they took into account a range.

[00:12:31] Speaker 03:
I think they took into account some value that's in that range.

[00:12:36] Speaker 03:
So if they took into account some value that's in that range, and maybe it's the left hand most column that's labeled the share, I'm not sure you can tell me about that, but whatever the value is, it's in that range.

[00:12:47] Speaker 03:
If it's in the range of all of them, what does it mean when the board says, I'm taking note of the 55% column when the value that they're ultimately using to the extent they're using the regression for a particular category?

[00:13:00] Speaker 03:
is also within the range for the other confidence intervals too.

[00:13:03] Speaker 08:
If you look at the 95% confidence interval for commercial television, which for 2015 is between 7% and 15% and for 2016 is between 6% and 20%.

[00:13:19] Speaker 08:
So the regression isn't telling you anything about the particular confidence that the actual value for CTV is any particular number within that range.

[00:13:30] Speaker 08:
What it's telling you basically is that if you repeat this 100 times, 95% of the time, you're going to get some number in that range.

[00:13:37] Speaker 08:
But the level of imprecision here, maybe commercial television is 6%,

[00:13:43] Speaker 08:
maybe it's 20%.

[00:13:44] Speaker 08:
I mean, that's an enormous level of imprecision when you're trying to allocate 100% between six different claiming categories.

[00:13:50] Speaker 08:
And again, that is one of the categories the board said could be accurately measured.

[00:13:55] Speaker 08:
It acknowledges that these numbers are wrong for sports devotional

[00:14:00] Speaker 08:
Canadians.

[00:14:01] Speaker 08:
I mean, for Canadians, it says they're so wrong that we're going to splice back in this prior regression that we just said is completely bunk.

[00:14:10] Speaker 08:
For sports, even at the 55% confidence interval for 2016 and for 2017, the numbers are the range

[00:14:18] Speaker 08:
is negative, right?

[00:14:20] Speaker 08:
And so that's really remarkable.

[00:14:21] Speaker 08:
What this regression is doing is even at the lowest amount of confidence, even if you're just saying we have the confidence of a coin flip, it can't exclude the possibility that having sports lowers the value.

[00:14:34] Speaker 08:
And that's just wrong.

[00:14:36] Speaker 08:
And that shows that the regression is wrong.

[00:14:38] Speaker 08:
I think it's also the case that every single economist, every single regression expert other than Dr. Tyler said that the reason this regression is totally wrong is because

[00:14:48] Speaker 08:
it's trying to regress minutes of sort of a category against this rate that's set by a statute that isn't a market price.

[00:15:00] Speaker 08:
And so it's just mimicking the statutory formula.

[00:15:02] Speaker 08:
There's no reason, even putting aside the total imprecision here, there's just no reason to assume that the numbers, the regression is spitting out

[00:15:11] Speaker 08:
are actually reflecting the marketplace value of a minute, right?

[00:15:14] Speaker 08:
So there's the imprecision issue.

[00:15:16] Speaker 08:
And then there's the question of like, well, you have a regression and it gives you some numbers that say you multiply minutes of a content category by your coefficient, which is supposed to be the marginal value of a minute.

[00:15:27] Speaker 08:
And then you get the end result.

[00:15:30] Speaker 08:
You have to have some economic basis, some rationale for thinking that those coefficients actually represent

[00:15:37] Speaker 08:
the marketplace value of a minute, as opposed to just representing some correlation that's totally unrelated to marketplace value.

[00:15:43] Speaker 08:
And so this is what Dr. Rubenfeld, who's this economist from Berkeley, he's the one who wrote the regression chapter for the Federal Judicial Center's manual on use of scientific evidence.

[00:15:55] Speaker 10:
And the board dealt with his testimony.

[00:15:57] Speaker 10:
I'm sorry?

[00:15:58] Speaker 10:
The board addressed.

[00:16:00] Speaker 08:
No, the board did not address this issue, Your Honor.

[00:16:05] Speaker 10:
They certainly talked about what he said and what his opinion was.

[00:16:11] Speaker 08:
So I think the board says at some point that it will address the arguments that Tyler's regression just mimics the statutory formula.

[00:16:22] Speaker 08:
See infra.

[00:16:23] Speaker 08:
That's what it says.

[00:16:24] Speaker 08:
And if you go to infra, there's no actual discussion of this particular point.

[00:16:34] Speaker 10:
I guess, I mean, they did discuss the expert testimony that was offered by two, not only Reverend Tell, but the other.

[00:16:44] Speaker 10:
Yes.

[00:16:44] Speaker 10:
All right.

[00:16:45] Speaker 10:
And had problems with it.

[00:16:47] Speaker 10:
So it's not as though it ignored it.

[00:16:48] Speaker 10:
But I just want, is a result of your analysis here that the board had no choice other than to use surveys?

[00:16:58] Speaker 08:
Our view is that the survey was the best evidence on this record.

[00:17:04] Speaker 10:
That's right.

[00:17:04] Speaker 10:
Because the board says, after it goes through its explanation about why the Tyler sensitivity analysis is what it's going to follow with all these adjustments, it says, and none of the other regression analyses were pressed upon us.

[00:17:27] Speaker 10:
All right, so it views it as even though people proposed these other ways of looking at it, there were all kinds of problems there, which the board discuss.

[00:17:38] Speaker 10:
So they were left with Tyler with these various adjustments.

[00:17:43] Speaker 10:
But your point is that because we come up with these ridiculous, absurd results, it's clear the board had no choice other than to use the survey.

[00:17:56] Speaker 08:
That's right, your honor.

[00:17:57] Speaker 08:
We're not suggesting that any of the regressions the board rejected were better.

[00:18:01] Speaker 08:
Our view is that given the actual data in this context, you just can't use a regression.

[00:18:06] Speaker 03:
Can I just make sure I understand your stake in this?

[00:18:09] Speaker 03:
So as I understand what the board ultimately did for JSC,

[00:18:16] Speaker 03:
actually the regression didn't play much of a role in pegging the JSC number.

[00:18:21] Speaker 03:
It played more of a role in the PTV number.

[00:18:25] Speaker 03:
And then the point for you is, well, if it played a role in the PTV number, then it necessarily played a role in our ultimate allocation too, because we're talking about a zero-sum game with an 100.

[00:18:33] Speaker 03:
Correct.

[00:18:34] Speaker 03:
But what you get there is,

[00:18:36] Speaker 03:
If they didn't, in other words, excluding the regression altogether, it might not actually affect very much where the board started for CSC, at least, if they base CSC on the survey, but it would affect where the board could have started with PTV.

[00:18:50] Speaker 03:
And if it affects where the board could have started with PTV, then it necessarily has a feedback.

[00:18:55] Speaker 03:
effect on you.

[00:18:56] Speaker 08:
That's that's that's correct your honor and our numbers were lower than the numbers that the our ultimate sort of synthesized numbers were lower than the numbers that the board awarded us under the adjusted survey that the board accepted and every year they were they were lower than the our survey numbers and in 2014 they were lower than our regression number and our survey number which I think no one has any response to or no one has any explanation for why that's not arbitrary.

[00:19:22] Speaker 03:
I think there is a response to that, actually, because I thought on just on that narrow point, it may not.

[00:19:28] Speaker 03:
It may not affect the rest of this, but I thought what the board said in the reconsideration decision.

[00:19:33] Speaker 03:
That maybe this is relevant for a reason.

[00:19:36] Speaker 03:
I'm not exactly following.

[00:19:37] Speaker 03:
It's on.

[00:19:40] Speaker 03:
Is that.

[00:19:42] Speaker 03:
In 2014, the allocation sums to marginally greater than a hundred percent.

[00:19:46] Speaker 03:
And the judges, therefore, adjusted the allocation shares proportionally to achieve an aggregated allocation of 100%.

[00:19:51] Speaker 03:
In 2014 shares, this process required a modest downward adjustment.

[00:19:56] Speaker 03:
And so if it requires a downward adjustment, then am I not understanding this right?

[00:20:00] Speaker 03:
Then you could understand why it would go lower.

[00:20:02] Speaker 08:
That's in response to a different error.

[00:20:06] Speaker 08:
So they made an adjustment.

[00:20:10] Speaker 08:
I think that was an error raised by PTB that there was some mistake in 2014 that the numbers didn't add up to 20 to 100 and they changed the adjustment so that the value for JSC in 2014 in the initial determination went very modestly up in the final determination.

[00:20:29] Speaker 03:
I didn't understand this to be a response actually to a particular error.

[00:20:32] Speaker 03:
I thought this was just a general method that they followed because they had to get everything to add up to 100 and

[00:20:38] Speaker 03:
For 2014, all the numbers total together exceeded 100, so they had to reduce them all.

[00:20:44] Speaker 08:
But we can I don't I don't think that that's responsive at all to the point that we're making, which is that our number is.

[00:20:54] Speaker 08:
is lower than both of our allocations under what the board purported to be.

[00:21:00] Speaker 03:
I understand that point.

[00:21:01] Speaker 08:
I don't think it is.

[00:21:03] Speaker 08:
The government certainly didn't argue that it was.

[00:21:06] Speaker 08:
And I don't think it's the case that anybody else's number was lower than both of their numbers.

[00:21:11] Speaker 03:
Can I ask you about sports in particular?

[00:21:12] Speaker 03:
Because you raised this question about the negative values is another thing.

[00:21:16] Speaker 03:
I take the point on a negative value being potentially surprising.

[00:21:22] Speaker 03:
But in terms of the

[00:21:23] Speaker 03:
sports value going way down after 2014.

[00:21:29] Speaker 03:
If I understand the context, what we're talking about is retransmission of local broadcast.

[00:21:37] Speaker 03:
So if I can just finish what you may already anticipate where I'm going with this.

[00:21:42] Speaker 03:
But if WGN was the big elephant in the room at this point, I take it that what that means is that people in California who want to see the Cubs

[00:21:52] Speaker 03:
The local broadcast of WGN to them is how a person who moved from Chicago to somewhere else can see the Cubs.

[00:22:02] Speaker 03:
And it turns out that that was the one that was doing all the work in this area.

[00:22:06] Speaker 03:
I mean, I don't even think you dispute that.

[00:22:09] Speaker 03:
taking JWGN out of the field of vision had a pretty dramatic effect on the value of retransmitting local channels, because this was the local channel that actually turned out to be the one that was left that everybody cared about.

[00:22:23] Speaker 03:
So if that's true, it doesn't seem to me to be altogether surprising that after taking WGN out of the field of vision, because it's no longer broadcast, it's not going to be on cable, then there's just not that much left

[00:22:37] Speaker 03:
that's locally available that needed to be rebroadcast for people to see.

[00:22:41] Speaker 03:
We're not talking about the World Series.

[00:22:43] Speaker 03:
We're not talking about the Super Bowl.

[00:22:45] Speaker 03:
We're not talking about those things.

[00:22:46] Speaker 03:
We're talking about the rebroadcast of a local feed of which WGN was the major one.

[00:22:50] Speaker 08:
Yes, so let me let me address that and we are talking about the World Series and Super Bowl and I'll turn to that in a minute.

[00:22:55] Speaker 08:
But with respect specifically to so the number of unique live sports games that are retransmitted every year in 2015 to 2017 is 2200 unique live sports games a year.

[00:23:07] Speaker 08:
That's at SGA 15 and 121 to 122.

[00:23:10] Speaker 08:
That is more than the number of unique live sports games that is transmitted in 2014.

[00:23:16] Speaker 08:
So the difference between WGN and the rest of the stations that are being distantly retransmitted is that WGN is being retransmitted, because it's a superstation, it's being retransmitted to many more subscribers across the country.

[00:23:32] Speaker 08:
That's the issue.

[00:23:33] Speaker 08:
But it's not different in kind.

[00:23:35] Speaker 08:
So WGN is retransmitting Cubs, White Sox games, that sort of stuff.

[00:23:39] Speaker 08:
So let me talk a little bit about what is being retransmitted in 2015 to 2017 after the conversion.

[00:23:45] Speaker 08:
It's the same kind of thing.

[00:23:47] Speaker 08:
So this is it S.J.

[00:23:49] Speaker 08:
123 to 130.

[00:23:52] Speaker 08:
So what's being transmitted here is New York City channels that carry Mets and Yankees games are being transmitted to subscribers in

[00:23:59] Speaker 08:
Philadelphia, New Jersey, upstate New York who don't have access to those games.

[00:24:03] Speaker 08:
Same thing for Giants and Jets games.

[00:24:05] Speaker 08:
Fox and NBC affiliates in Philadelphia that are carrying Phillies and Eagles games.

[00:24:10] Speaker 08:
Those games are being retransmitted to other areas of Pennsylvania, New Jersey, Delaware, other places where they're likely to be fans.

[00:24:17] Speaker 08:
So LA, one of the channels that's being retransmitted here carries Dodgers games to other places outside the LA metro area where the Dodgers are popular.

[00:24:28] Speaker 08:
The NBC affiliate here in DC carries preseason commanders games.

[00:24:34] Speaker 08:
That's being distantly retransmitted to places in Maryland, Virginia, Delaware that are outside the range of the local DC signal.

[00:24:42] Speaker 03:
Those are just pre-season?

[00:24:43] Speaker 03:
I just want to make sure I understand the context.

[00:24:44] Speaker 08:
I think that the particular example in the record there was pre-season, but all of the other examples I have given are not.

[00:24:50] Speaker 03:
I mean, I watch pre-season, but that's a level of fandom that may be different.

[00:24:55] Speaker 08:
All of the other examples I just gave you were pre-season.

[00:24:59] Speaker 08:
There's a station that carries Notre Dame football to subscribers that's being retransmitted to subscribers in Ohio and Kentucky.

[00:25:05] Speaker 03:
So if I take all this to be true, then are you

[00:25:10] Speaker 03:
I thought everybody was kind of operating in common ground that the elimination of WGN was a significant deal.

[00:25:18] Speaker 03:
But if we're talking about the New York sports, we're talking about LA sports, we're talking about Notre Dame football, a takeaway you're saying is nothing changed with respect to any of those.

[00:25:29] Speaker 03:
If that's true, then I thought even your own proposal recognized that there was a significant shift when WGN gets taken.

[00:25:35] Speaker 08:
Yeah, our proposal recognizes that there's a shift because there are just fewer subscribers total who are getting this content.

[00:25:45] Speaker 08:
But the content is no less valuable.

[00:25:46] Speaker 08:
And let me let me talk about the World Series in the Super Bowl, because the government, I think, says in their brief, this isn't what this is.

[00:25:50] Speaker 08:
That's about that's just completely wrong.

[00:25:52] Speaker 08:
And I don't know where they got that.

[00:25:53] Speaker 08:
So

[00:25:56] Speaker 08:
So there are a number of subscribers who do not have a local Fox signal.

[00:26:00] Speaker 08:
And when Fox carries the World Series, which it did in 2014, 2015, 2016 and 2017, those subscribers are only getting the World Series through the Section 111 retransmissions.

[00:26:11] Speaker 08:
That is also the case for the Super Bowl in 2014 and 2017 when it's carried on Fox.

[00:26:17] Speaker 08:
This is at SGA 130.

[00:26:18] Speaker 08:
So this absolutely includes the World Series in the Super Bowl.

[00:26:22] Speaker 03:
I mean, it could include those, but if it's for dramatically limited numbers of people, then why doesn't that matter?

[00:26:30] Speaker 03:
Of course, the value of sports in the abstract, I mean, it's sort of like saying, if one person in America can only get the Super Bowl through a retransmission of a local broadcast, then yes, the Super Bowl is really, really, really valuable.

[00:26:42] Speaker 03:
There's no doubt about that.

[00:26:43] Speaker 03:
But if it's only one person that we're talking about, then for these purposes, it doesn't seem like we'd reflect the value of sports in the abstract as the relevant criteria.

[00:26:52] Speaker 08:
And we're not disputing that the value of sports should have gone down because the quantity that was retransmitted went down and the survey does reflect it.

[00:27:00] Speaker 08:
It's just that it doesn't go down as much as the board found.

[00:27:04] Speaker 08:
And so in particular, I think one of the relevant points here is that scarcity in this context often makes things more valuable.

[00:27:14] Speaker 08:
And also that, I mean, when people are getting

[00:27:17] Speaker 08:
television like it doesn't really matter that you might, you know, you're getting 30 extra hours of Seinfeld reruns that you can watch on Netflix or getting 60 extra hours of Seinfeld reruns that you can watch on Netflix.

[00:27:29] Speaker 08:
There's no real difference in the value there as compared to the two hours of a live sports game that you can't watch on Netflix.

[00:27:35] Speaker 00:
I wanted to get some sense back again about you talking about this regression analysis because that's long been used to infer value.

[00:27:43] Speaker 00:
So are you saying that there should be a categorical denial of that type of process and you prefer that we only look at surveys or are you just attacking the regression analysis here?

[00:27:53] Speaker 08:
Yeah, we're we're not saying that the court has to conclude that no regression ever in this context no matter what.

[00:28:00] Speaker 08:
What we're saying is that given the data here which where you have to throw out 90% of the transmissions and given the absurd results that it produces, you can't use a survey in this context and given the fact that you don't actually have a mark.

[00:28:14] Speaker 08:
You can't use regression.

[00:28:15] Speaker 08:
Oh, I'm so sorry that you can't use a regression in this context.

[00:28:17] Speaker 08:
Thank you for that correction.

[00:28:20] Speaker ?:
Okay.

[00:28:20] Speaker 08:
And can I just, if I, I would just want to say.

[00:28:24] Speaker 00:
I just wanted to, I mean, there's going to be winners and losers, just like in sports.

[00:28:29] Speaker 00:
And so what are you taking us to in terms of a specific approach that is fair across the lines?

[00:28:35] Speaker 00:
Because there was a lot of information in this record, a lot of deference to statisticians, you know, other experts, et cetera, that the court generally refers to as long as it's reasonably explained.

[00:28:49] Speaker 00:
And so do you have a specific formula that you're asking us to go to that, you know, makes it fair to all parties, not just the show?

[00:28:57] Speaker 08:
Yes, we think.

[00:29:00] Speaker 08:
So, and I know I've gone way over my time.

[00:29:02] Speaker 08:
I would, if I can, like to talk about the survey adjustment problem for a few minutes if I can.

[00:29:07] Speaker 08:
But we think that the court should hold that on this record, using the regression was arbitrary and irrational.

[00:29:14] Speaker 08:
We think the court should hold that the survey, as the board found,

[00:29:20] Speaker 08:
you know, is something that gets directly at marketplace value by literally asking the cable systems what the marketplace value is.

[00:29:28] Speaker 08:
We think the court should remand for the board to reconsider the adjustment that it applied to the survey.

[00:29:34] Speaker 08:
And let me talk about that for a few minutes.

[00:29:35] Speaker 10:
Can I just ask you a question?

[00:29:38] Speaker 10:
You've got the board making some findings of JA 546.

[00:29:45] Speaker 10:
They say they categorically reject

[00:29:48] Speaker 10:
JSC's arguments that they act inconsistently and thus clear error by giving less evidentiary weight to minimum fee royalty.

[00:29:58] Speaker 10:
You can read that and you're probably more familiar with it than I am, but the point is we need to do something

[00:30:07] Speaker 10:
or you need to be able to give us something in response to that, because the board is saying that your own witnesses don't support your own finding.

[00:30:22] Speaker 08:
Yeah, I mean, I don't think what the board is saying here is

[00:30:31] Speaker 08:
A reasonable explanation.

[00:30:32] Speaker 08:
I'm just trying to figure out it's a on J five forty six because it's as you know, it's it's a long, it's a long opinion.

[00:30:38] Speaker 08:
So I'm just looking at five forty six.

[00:30:41] Speaker 09:
It's in column a. And it's the judge's category Jack.

[00:30:49] Speaker 10:
That halfway down the column and they take your each of your arguments and they say specifically argues on re, hearing that.

[00:31:02] Speaker 08:
Yeah, so this is a response on this issue of the McLaughlin adjustment that they applied to the survey.

[00:31:09] Speaker 08:
So let me just talk about that for a minute.

[00:31:11] Speaker 08:
So that adjustment takes every PTV-only system and assumes that it values PTV at 100%, even if it's barely transmitting any PTV to subscribers, and even if that same system had valued PTV at 8% in 2014.

[00:31:30] Speaker 08:
I think the main point about this survey has been used for a couple of decades.

[00:31:35] Speaker 08:
Adjustments have been used previously, but they never made any difference.

[00:31:37] Speaker 08:
So in 2014, we're not objecting to the use of this adjustment in 2014.

[00:31:43] Speaker 08:
It changes the sports allocation by like point one.

[00:31:47] Speaker 08:
So it just didn't make any difference before.

[00:31:49] Speaker 08:
And now it does make a difference.

[00:31:51] Speaker 08:
because there were a lot of systems that were PTV plus WGN, and now they're PTV only.

[00:31:57] Speaker 08:
But you don't have to agree with anything I say.

[00:31:59] Speaker 08:
All you have to do is take what the board said about why the adjustment it applied was arbitrary and gracious.

[00:32:04] Speaker 08:
It says, quote, there is no rationale for augmenting.

[00:32:07] Speaker 08:
This is a J537.

[00:32:10] Speaker 08:
It says, there is no rationale for augmenting the survey results with the McLaughlin adjustment for all the PTV-only systems that come into existence after 2014.

[00:32:20] Speaker 08:
That's what it says.

[00:32:22] Speaker 08:
And that is why it refuses to credit the McLaughlin adjustment for PTV.

[00:32:27] Speaker 08:
The McLaughlin adjustment in 2015 to 2017 would have raised PTV's average allocation from like 7.5% to 46.7%.

[00:32:35] Speaker 08:
So this is in column B, right?

[00:32:39] Speaker 10:
Sort of in the middle.

[00:32:41] Speaker 08:
Yes, with respect to PTV, basically what it is saying here is that the McLaughlin adjustment produces such an absurd increase in PTV's numbers that we refuse to credit it for PTV.

[00:32:57] Speaker 08:
And so.

[00:33:00] Speaker 08:
If that is true.

[00:33:03] Speaker 08:
It is completely arbitrary and inconsistent to use that exact same adjustment to lower sports is valued.

[00:33:10] Speaker 08:
And that's what they're doing.

[00:33:11] Speaker 08:
And nobody has any response to that.

[00:33:13] Speaker 08:
The board, Your Honor Judge Rogers, the board did not has not responded to that point.

[00:33:18] Speaker 08:
And the government has not responded to that point at all.

[00:33:21] Speaker 08:
Nobody can explain why it's recent decision making to say this is crazy, but we're going to use it for sports.

[00:33:26] Speaker 08:
And there are a number of obvious reasons why it's totally crazy to make this assumption.

[00:33:30] Speaker 08:
So a full third of the PTV only systems are must carry.

[00:33:34] Speaker 08:
They're literally required to carry PTV by statute.

[00:33:38] Speaker 08:
And then 57% of the PTV only systems are actually only carrying PTV locally just in the same way that they're carrying

[00:33:48] Speaker 08:
stations that transmit sports locally and there's just this bizarre statutory corp that says when you carry PTV locally it counts as distant so nobody's making any choice to carry PTV over local commercial stations with sports and news and movies in those in those systems.

[00:34:06] Speaker 03:
So and the upshot of this is from so for just if I'm understanding the overall architecture the argument it's that

[00:34:12] Speaker 03:
The board shouldn't consider regression at all.

[00:34:15] Speaker 03:
It should only consider survey.

[00:34:17] Speaker 03:
But actually, it shouldn't consider survey in the way that it considered the survey.

[00:34:20] Speaker 03:
It should consider the survey in the way you want them to consider the survey.

[00:34:23] Speaker 03:
And the way you want them to consider the survey is they can't do the McLaughlin adjustment.

[00:34:28] Speaker 03:
That's part of it.

[00:34:30] Speaker 03:
You have a problem with the adjustments to the survey that they made.

[00:34:33] Speaker 08:
They can't do the version of the McLaughlin adjustment that they did.

[00:34:35] Speaker 08:
We've proposed two alternative adjustments that we think are- Adjustment one and adjustment two.

[00:34:39] Speaker 08:
That's right.

[00:34:39] Speaker 08:
And again, we would be totally fine with the court remanding for the board to pick a different adjustment.

[00:34:44] Speaker 08:
I mean, I think the import of this court's decision in the settling devotional claimants cases, the board can't just say, well, we have bad evidence, so we're picking something.

[00:34:52] Speaker 08:
That's not, it can't do that.

[00:34:54] Speaker 08:
So I think that it's very, very clear on this record that the adjustment the board chose was arbitrary.

[00:34:58] Speaker 10:
and so you know look at column c yes this is still on 537 yes so ample evidence in the record the sdc provides niche programming blah blah blah and that niche value of sdc has been reflected well in the board's surveys received in this proceeding do you see that yes your honor

[00:35:29] Speaker 10:
I mean, they heard you, but they said they thought the value was reflected, reflected well.

[00:35:41] Speaker 08:
So for the settling devotional claimants, they said that the survey reflected, reflected them well, but that's different than for the

[00:35:52] Speaker 08:
for PBS.

[00:35:54] Speaker 08:
And that's really where the rubber meets the road with this adjustment, where they say that that adjustment is absurd.

[00:35:58] Speaker 08:
And I'm happy to talk about our two adjustments.

[00:36:01] Speaker 08:
I mean, I think they were good adjustments.

[00:36:03] Speaker 08:
I think it's pretty clear that the board's reason for rejecting our second adjustment, which was that we hadn't offered it, is just totally wrong.

[00:36:10] Speaker 08:
It's right there in the record.

[00:36:13] Speaker 08:
But I know I'm way over my time.

[00:36:14] Speaker 03:
So then can we just talk for a minute about

[00:36:17] Speaker 03:
A point that I think you noted and then briefed, but we haven't gotten to yet, which is the way that all this gets cashed out in the end and put together, because I take it part of your submission is this is most evident on the same page, a 537 and then on reconsideration at 561, 562, I think is the board.

[00:36:40] Speaker 03:
I think what it did was it thought that the survey results were particularly helpful with certain groups.

[00:36:49] Speaker 03:
And it thought that the regression was particularly helpful, at least with PTV.

[00:36:52] Speaker 03:
And I can't remember the other men and others as well.

[00:36:56] Speaker 03:
And it indicated that, at least for certain years, that it was going to give a special weight to one or the other for a particular group.

[00:37:06] Speaker 03:
I'm not sure that we know, and we can ask the government about this, I'm not sure that we know exactly what weight

[00:37:10] Speaker 03:
was given, but there was an indication that it was going to get a lot of weight, maybe dispositive weight, maybe heavy weight, kind of words along those lines were being used.

[00:37:18] Speaker 03:
Is it your submission that unless we know exactly the weight that was given to either the survey or the regression for each grouping, then the resolution has to be set aside?

[00:37:37] Speaker 03:
Or what are you basically objecting to?

[00:37:38] Speaker 03:
Because I think I've summed up the problem that's been identified, which is, yeah, there's some kind of qualitative suggestions that we heavily relied on this.

[00:37:46] Speaker 03:
We heavily relied on that.

[00:37:47] Speaker 03:
We dispositively relied on this.

[00:37:49] Speaker 03:
But when you look at the survey results and then you look at the regression results,

[00:37:56] Speaker 03:
Neither of those is reflected in the ultimate allocations.

[00:38:01] Speaker 03:
You can kind of think that it's pretty close to one or the other in certain situations and others further away.

[00:38:06] Speaker 03:
We don't know exactly how these final figures are being arrived at.

[00:38:10] Speaker 03:
We just have some kind of description of roughly how they're being arrived at, which leaves a fair amount to the imagination, I thought was what you were suggesting in your brief.

[00:38:19] Speaker 03:
And I'm just wondering, what's the upshot of that?

[00:38:21] Speaker 03:
What do you think the board has to do, at least as a minimum?

[00:38:26] Speaker 08:
Look, I think if it provided the actual weights than actual numerical weights, that would be that would be the best.

[00:38:31] Speaker 08:
I guess I'm not sure whether there's something short of that that it could do.

[00:38:36] Speaker 08:
I think that what it did do is it offered a description of the waiting process that was inconsistent with the results.

[00:38:42] Speaker 08:
So, um,

[00:38:44] Speaker 08:
I think we cited one example, like, they say they're they're weighing survey events heavily for both CTV, which is commercial television and program suppliers, but the programs higher allocation is like halfway between the regression in the survey and the CTV allocation just match the survey.

[00:39:01] Speaker 08:
For PTV, it says it's giving dispositive weight to the regression.

[00:39:04] Speaker 08:
But PTV's allocation for 2015 to 2017 is higher by nearly three points every single year than the regression, than its regression allocation.

[00:39:14] Speaker 08:
While JSC's allocation is

[00:39:16] Speaker 08:
lower every year than the survey that the board said it was relying on for us.

[00:39:22] Speaker 08:
So it's just not consistent with what they said.

[00:39:24] Speaker 08:
And I think if they provided some more detail about what they were actually doing, I think that would be helpful for the parties in the court to figure out whether what they were doing was non-arbitrary.

[00:39:34] Speaker 08:
And again, I think the 2014 example is

[00:39:39] Speaker 08:
really reflects the arbitrariness here in a quite clear way.

[00:39:44] Speaker 03:
That's the one where the sports ends up lower.

[00:39:46] Speaker 08:
Lower than both.

[00:39:47] Speaker 08:
Lower than both.

[00:39:47] Speaker 08:
And I'll take a look while the other parties are going at that particular page you identified.

[00:39:52] Speaker 08:
But again, I mean, the government didn't identify that page as a response.

[00:39:54] Speaker 03:
Yeah, it might be totally off, but it's just, yeah, okay.

[00:39:56] Speaker 10:
That's why I started where I did with a question to you.

[00:40:00] Speaker 10:
And that's where the chief is ending, all right?

[00:40:04] Speaker 10:
And part of the problem is, what we have before us is the board's response to the objections as it understood them and the failing lengthy statement about why it rejected one, went with the other, tried to come up with something that it thought made sense in these circumstances.

[00:40:30] Speaker 10:
And from time to time, it says, look, we've acknowledged this.

[00:40:34] Speaker 10:
We've acknowledged that.

[00:40:35] Speaker 10:
The parties acknowledge.

[00:40:37] Speaker 10:
And what the parties haven't done is to give us anything that we think comes up with the appropriate allocations.

[00:40:48] Speaker 10:
So just to send this back to the board isn't enough.

[00:40:57] Speaker 10:
And I thought that's where the chiefs

[00:41:00] Speaker 10:
question might be headed.

[00:41:03] Speaker 10:
Because we get records like this all the time.

[00:41:07] Speaker 10:
And every time I sort of look for something, I can find something in here where the board has addressed the matter.

[00:41:16] Speaker 10:
But whoever the claimant is doesn't necessarily agree with that analysis.

[00:41:24] Speaker 10:
But that's different, even on an APA review.

[00:41:29] Speaker 10:
And so

[00:41:31] Speaker 10:
you know, what are we signaling to the board if we say, look, you gave us, you know, I don't know how many pages, find type, you know, they, you may not like their answers, but they didn't ignore anything.

[00:41:49] Speaker 10:
So, I mean, just so you know what I'm getting at.

[00:41:53] Speaker 10:
And when chief says, you know, at the bottom,

[00:41:57] Speaker 10:
is your point that we need to know why it put numbers in one place or another.

[00:42:02] Speaker 10:
But I thought the thrust of your argument today is that's not gonna do us any good because the analysis itself is faulty.

[00:42:11] Speaker 10:
So telling us where you put the numbers based on that faulty analysis, that's not going to resolve anything.

[00:42:18] Speaker 08:
I absolutely agree.

[00:42:20] Speaker 08:
And I think that colloquy was just about our sort of third point.

[00:42:24] Speaker 08:
But our fundamental submission is that you can't rely on the regression at all.

[00:42:28] Speaker 08:
And obviously, if the court holds that, it would avoid the issue about this synthesis.

[00:42:32] Speaker 08:
But our fundamental submission is you can't rely on the regression at all.

[00:42:36] Speaker 10:
Well, the board tells us you can't rely on the survey either.

[00:42:40] Speaker 10:
And it says, why?

[00:42:42] Speaker 08:
I respectfully disagree, Your Honor.

[00:42:44] Speaker 08:
I mean, the board does rely on the survey.

[00:42:46] Speaker 10:
I know, but it says it's got to make all these adjustments.

[00:42:48] Speaker 08:
It makes one adjustment for the survey.

[00:42:50] Speaker 08:
It makes three very ad hoc adjustments for their aggression.

[00:42:54] Speaker 08:
And I think that, you know.

[00:42:57] Speaker 10:
I know.

[00:43:00] Speaker 10:
One big one and three little ones is two different things, depending on who's claiming.

[00:43:06] Speaker 10:
Who is the claimant arguing here?

[00:43:09] Speaker 10:
So they say the board says.

[00:43:13] Speaker 10:
No, here we've looked at this survey.

[00:43:15] Speaker 10:
And.

[00:43:17] Speaker 10:
It's still funny.

[00:43:26] Speaker 10:
That the Tyler model is the most appropriate regression model in this record.

[00:43:32] Speaker 10:
and accorded it the most weight.

[00:43:34] Speaker 10:
This is again, 537.

[00:43:36] Speaker 10:
And then it says the board surveys provide relevant illustrations on the distance.

[00:43:45] Speaker 10:
But, and then it goes on.

[00:43:47] Speaker 10:
So, I mean, it isn't enough were we to say for hypothetically, well, you can't rely on the regressions, but just use the survey data.

[00:43:59] Speaker 08:
So of course, I acknowledge the board says that the Tyler regression is the most appropriate in this record.

[00:44:04] Speaker 08:
And we agree that all of the other regressions are inappropriate too.

[00:44:08] Speaker 08:
But I mean, our fundamental submission, Your Honor, is that it was arbitrary to say that the Tyler regression was appropriate here.

[00:44:14] Speaker 08:
It may have been the most appropriate.

[00:44:15] Speaker 10:
I understand that.

[00:44:16] Speaker 10:
But I thought, and all three judges have asked you this question.

[00:44:21] Speaker 10:
You said you want the survey data.

[00:44:23] Speaker 10:
That's what the board should have followed.

[00:44:25] Speaker 10:
All right.

[00:44:26] Speaker 10:
But the board says there's some problems with the survey.

[00:44:29] Speaker 08:
Yes, the board does say that.

[00:44:31] Speaker 08:
And I think that the question on remand, if the court agrees with us, would be just simply what's the right adjustment.

[00:44:36] Speaker 08:
But I will say the adjustments the board made to the regression are enormous.

[00:44:42] Speaker 08:
They're not small.

[00:44:43] Speaker 08:
And it's also the case that the adjustment that needs to be made to the survey is to account for the fact that there's some of these PTB only systems.

[00:44:53] Speaker 08:
It's a small number.

[00:44:53] Speaker 08:
It's like

[00:44:54] Speaker 08:
like 20 percent.

[00:44:55] Speaker 08:
It's like there's like 170 or so PTB only systems and there's like 940 or so total systems.

[00:45:00] Speaker 08:
So that's 20 percent.

[00:45:02] Speaker 08:
Whereas what's being thrown out of the regression is 90%.

[00:45:05] Speaker 08:
And one thing to note is that what's going on in the regression when the board is making these random ad hoc adjustments is none of them are actually aimed at trying to figure out what those 90% that are being thrown out think.

[00:45:15] Speaker 08:
They're much more specific than that.

[00:45:17] Speaker 08:
There's the random adjustment to splice back in something for the devotional claimants.

[00:45:21] Speaker 08:
And then there's a few PTB specific adjustments.

[00:45:23] Speaker 08:
But the board isn't suggesting that there's any possible way to adjust the regression to account for the fact that it is throwing out

[00:45:31] Speaker 08:
90% of the entire data.

[00:45:34] Speaker 08:
And that's different than the survey where there's a much smaller adjustment that's needed.

[00:45:40] Speaker 08:
And it's specific to a set number of systems.

[00:45:42] Speaker 08:
And you just have to figure out how to figure out what those systems think.

[00:45:46] Speaker 03:
When you say 90%, you're talking about narrowing it to only the above minimum.

[00:45:50] Speaker 08:
Correct, Your Honor.

[00:45:52] Speaker 08:
Who are not representative of the rest.

[00:45:54] Speaker 08:
And frankly, that's the whole point that the board is making is they're not representative.

[00:45:59] Speaker 04:
Okay, make sure there's no additional questions at this point.

[00:46:03] Speaker 04:
We'll talk about it.

[00:46:05] Speaker 04:
Thank you counsel.

[00:46:18] Speaker 02:
Dove.

[00:46:30] Speaker 05:
Your honors may it please the court.

[00:46:32] Speaker 05:
My name is Ron Dove and I represent PBS and the public television claimants.

[00:46:37] Speaker 05:
I'd like to reserve three minutes for rebuttal.

[00:46:40] Speaker 05:
The public television claimants are a large and diverse group of copyright owners, including the producers of Sesame Street, Downton Abbey, American Experience and thousands of other high quality programs.

[00:46:50] Speaker 05:
These programs made up the large majority of Section 111 distance signals during the 2014 to 2017 period, reaching as high as 66% of all retransmissions by 2017.

[00:47:02] Speaker 05:
But instead of allocating public television a share of royalties commensurate with this dominant market share, the judges awarded public television only 11 to 25%.

[00:47:12] Speaker 05:
And the judges reached that erroneous result by adopting a zero value approach to minimum fee cable systems and must carry signals, impacting far more public television programs than any other type.

[00:47:25] Speaker 05:
The judges used, as we've been talking about, used a regression that calculated the price per minute for each type of programming, multiplied by the number of minutes of that programming.

[00:47:34] Speaker 05:
And that part was fine.

[00:47:35] Speaker 05:
It's basic economics, price times quantity.

[00:47:39] Speaker 05:
But when applying that regression to the facts here, the judges discarded millions of minutes of public television programming, not only in estimating the value per minute, but also from the quantity of retransmissions, all because they claimed that as a category, those minutes had zero measurable value.

[00:47:59] Speaker 05:
And they then gave this regression evidence dispositive weight in determining public television share for 2015 to 2017.

[00:48:06] Speaker 05:
So the judge's approach was erroneous for two fundamental reasons that are narrow reasons, actually.

[00:48:15] Speaker 05:
First, with respect to minimum fee signals, the zero value approach marked an unexplained departure from precedent that was contrary to all the evidence.

[00:48:24] Speaker 05:
The judges then compounded that error by improperly excluding retransmissions from minimum fee cable systems, only to restore all that value through adjustments for every claimant group except public television.

[00:48:36] Speaker 03:
So just to understand the context here, I mean, I take it you don't disagree with the basic idea that because a must carry obligation is a part of the mix here, that the analysis should try to figure out what role the requirement to carry might have in the marketplace.

[00:48:56] Speaker 03:
that it could have some distorting effects that it's not a free market decision to carry.

[00:49:01] Speaker 03:
It's a requirement to carry.

[00:49:03] Speaker 03:
And therefore, what we're trying to do is estimate the value that the market would place on it.

[00:49:10] Speaker 03:
We should do something to account for the fact that some of this might be coming about because of an obligation rather than an estimation of what the market would otherwise accommodate.

[00:49:19] Speaker 05:
Well, your honor, it's not irrational to look into that issue.

[00:49:23] Speaker 05:
And all the parties presented different methodologies.

[00:49:26] Speaker 05:
Even the board survey, for example, cable operators were surveyed even when they carried must carry signals and were asked to value what those must carry signals were.

[00:49:37] Speaker 05:
Public television put it in its own methodology, that regression methodology that looked at that.

[00:49:43] Speaker 05:
In fact, all the experts did that.

[00:49:45] Speaker 05:
It was only other claimants then looked at it and tried to discount from those methodologies to account for must carry.

[00:49:56] Speaker 05:
But with respect to must carry signals, the judge's zero value approach was based on a fundamental misreading of the must carry statute in our view.

[00:50:04] Speaker 05:
The judges assumed that must carry signals had zero value simply because they were must carry signals.

[00:50:10] Speaker 05:
But Congress made clear that copyrighted programs on must carry signals are valuable and compensable under section 111 and the record evidence confirmed as much.

[00:50:21] Speaker 05:
So I want to go now to the minimum fee in a little bit more detail.

[00:50:25] Speaker 05:
In particular, I'd like to draw the court's attention to the 2010 to 2013 allocation decision, which immediately preceded the one at issue here.

[00:50:34] Speaker 05:
There, the judges explained that minimum fee systems do reveal value, and they adopted a regression that included those systems.

[00:50:43] Speaker 05:
But in the decision below, the judges did the exact opposite.

[00:50:48] Speaker 05:
They asserted that minimum fee systems lack value, and they adopted a regression that stripped out those systems.

[00:50:54] Speaker 00:
But didn't that predate the WGNA factor into this case?

[00:51:00] Speaker 05:
It did, Your Honor.

[00:51:01] Speaker 05:
The 2010 to 2013 time period was before the WGN situation.

[00:51:07] Speaker 00:
So we needed a shift, some adjustment.

[00:51:10] Speaker 05:
There was definitely an earthquake in the marketplace with WGN being removed.

[00:51:16] Speaker 05:
All of this programming that was not public television, sports programming and other programming was removed from the distance signal analysis.

[00:51:24] Speaker 05:
So it was a shift.

[00:51:25] Speaker 00:
Why would the prior precedent be controlling when you've got this major catastrophic shift?

[00:51:30] Speaker 05:
Because the prior precedent was based on general economic principles that didn't really relate to the facts

[00:51:38] Speaker 05:
Um, in the record, you know, it right, the point 10 to 13 decision recognized that there is value.

[00:51:46] Speaker 05:
In carrying minimum fee signals, because there are physical costs to, to, to if you choose to transmit a signal.

[00:51:55] Speaker 05:
there's a cost associated with that to actually retransmit it.

[00:51:59] Speaker 05:
There are opportunity costs.

[00:52:00] Speaker 05:
You're choosing one signal, say a public television signal, over another signal that you could have chosen.

[00:52:05] Speaker 05:
And so the panel talked about that distinction from a matter of economics as to why these minimum fee signals reveal value.

[00:52:16] Speaker 05:
So

[00:52:19] Speaker 05:
The judges, in this proceeding, removed millions of minimum fee minutes in determining both price and the quantity.

[00:52:25] Speaker 05:
And this impacted public television disproportionately because it had many more minutes excluded, including every single minute from every cable system that only carried public television, which was more than 30% of all systems by 2017.

[00:52:42] Speaker 05:
And worst of all, Your Honors, the judges claimed that they were following the exact same approach that they followed in the 2010 to 13 decision, as we just discussed.

[00:52:52] Speaker 05:
And that's a textbook change in position violation.

[00:52:56] Speaker 05:
No one in this room, not the government, not the joint sports claimants, not the interveners, has explained how it's not.

[00:53:02] Speaker 05:
And they do.

[00:53:04] Speaker 05:
They say that this violation can be excused because there were lots more minimum fee signals

[00:53:10] Speaker 05:
in 2014 to 2017 and in 2010 to 2013.

[00:53:14] Speaker 05:
But that just makes the error more egregious because it means that more valuable data, the 90% of data that we were just talking about, more valuable data was discarded.

[00:53:25] Speaker 05:
In any event, the judge's minimum fee approach was contrary to all the evidence.

[00:53:29] Speaker 05:
Indeed, every claimant expert concluded that minimum fee signals reveal at least some value, yet the judges still excluded those signals, the quantity of those signals from the analysis.

[00:53:42] Speaker 05:
If I could turn to must-carry signals, the judge's zero-value approach to must-carry signals was unlawful multiple times over.

[00:53:50] Speaker 05:
For one, it was contrary to the must-carry statute.

[00:53:53] Speaker 05:
That statute expressly contemplates that must-carry signals can generate increased copyright royalties under Section 111.

[00:54:01] Speaker 05:
And the government doesn't dispute that.

[00:54:03] Speaker 05:
It attempts to defend the judge's zero-value approach by saying that there wasn't record evidence establishing that must-carry signals have value.

[00:54:13] Speaker 05:
But all of the surveys and the regressions that the claimants proposed revealed that must-carry signals have at least some measurable value.

[00:54:23] Speaker 05:
So how did the judges end up where they did?

[00:54:25] Speaker 05:
For the judges, the statute was the evidence.

[00:54:29] Speaker 05:
They simply assumed that because there was a statutory requirement to carry the signals, those signals could not reveal value.

[00:54:39] Speaker 05:
But Congress determined otherwise.

[00:54:41] Speaker 05:
It contemplated that royalties would be paid and allocated for must-carry signals.

[00:54:48] Speaker 05:
Now, as for the interveners, they would conveniently have public television stations pay royalties into the section 111 pool for public television's own programming.

[00:54:59] Speaker 05:
And they would then have those same royalties reallocated to other claimant groups with no copyright in those programs.

[00:55:07] Speaker 05:
And that's what we're talking about here is

[00:55:09] Speaker 05:
compensating copyright owners whose programs were actually carried, not in some hypothetical world, but actually carried by cable systems.

[00:55:19] Speaker 05:
In other words, the interveners won a windfall, but that's not the scheme that Congress designed.

[00:55:26] Speaker 05:
As with the minimum fee issue, the judges not only adopted a flawed zero-value framework, they also applied that approach in an arbitrary way.

[00:55:35] Speaker 05:
To identify must-carry signals, the judges relied on a fundamentally flawed methodology advanced by JSC's expert that no one except JSC defends.

[00:55:44] Speaker 05:
And when confronted with these flaws, the judges, they acknowledged the flaws, but they shifted the burden to public television and applied an adverse inference.

[00:55:54] Speaker 05:
And they required public television to supply a reliable methodology for identifying must carry signals after the hearing was closed, even though public television's proposed methodology already placed value on every signal.

[00:56:09] Speaker 05:
And there was no need for public television to identify must carry signals in particular.

[00:56:14] Speaker 05:
So the judges got things backward.

[00:56:16] Speaker 05:
It's the judges who must support their decision with substantial evidence.

[00:56:20] Speaker 05:
And if any party has had a burden to identify must carry signals, that was JSC, the claimant group, contending that those signals should be stripped of value.

[00:56:31] Speaker 03:
And for these purposes, are we talking about the regression?

[00:56:35] Speaker 03:
Or what exactly are you talking about with respect to?

[00:56:38] Speaker 05:
With regard to must carry signals?

[00:56:41] Speaker 05:
Yes, we're talking about the regression.

[00:56:42] Speaker 05:
The must carry in adjustment B, the must carry both the quantity of must carry

[00:56:54] Speaker 05:
Minutes is removed from the from the allocation.

[00:56:58] Speaker 05:
So that regression for regression purposes.

[00:57:00] Speaker 03:
Yes, so on so.

[00:57:02] Speaker 03:
I mean, what we're supposed to looking at is whether.

[00:57:05] Speaker 03:
What the board did is arbitrary and on.

[00:57:08] Speaker 03:
Okay, 468 the board says.

[00:57:12] Speaker 03:
It notes that doctors more expanded and major all agree that including PTV must carry solutions and directions.

[00:57:19] Speaker 03:
Results in an overestimation of the value of TV content for all 4 years.

[00:57:23] Speaker 03:
So they're relying on experts who have come forward and said that putting must carry into the regression analysis in this way is going to overestimate.

[00:57:34] Speaker 05:
But the way that they do that is they attribute zero value for must-carry signals.

[00:57:41] Speaker 05:
In other words, even though every expert accorded some value to must-carry signals, the judges adjust for it by totally zeroing out all must-carry signals from the quantity of must-carry signals from the analysis in adjustment B.

[00:57:58] Speaker 05:
There's no, despite all the evidence of, you know, that must carry signals do have value and despite the fact that Congress in enacting the Cable Act, you know, made it clear that distance carriage will result in, that cable operators are to pay royalties for the distant carriage of must carry signals.

[00:58:22] Speaker 05:
Despite all that, the panel decided that it should be zeroed out entirely.

[00:58:29] Speaker 05:
And that's why we view that to be arbitrary.

[00:58:33] Speaker 10:
At 469, doesn't the board say that's not what they're doing?

[00:58:41] Speaker 10:
Let's get it in front of me.

[00:58:44] Speaker 10:
It says it's not due to zero value.

[00:58:48] Speaker 10:
It's just saying in the regression analysis,

[00:58:54] Speaker 10:
So 469 and column C, they say,

[00:59:21] Speaker 10:
The point is not that the programs on must-carry stations, including those subject to royalty indemnification payment back to the CSOs, lack value.

[00:59:31] Speaker 10:
Rather, the point is that they lack objective and measurable value.

[00:59:40] Speaker 05:
Yes, Your Honor, and that's not the open.

[00:59:45] Speaker 05:
That's not true.

[00:59:45] Speaker 05:
They do have objective and measurable value that every expert included.

[00:59:51] Speaker 05:
Yeah.

[00:59:56] Speaker 10:
And the board talks about the experts that you called and says the experts for PTV and CCG mistakenly seem to analogize must carry PTV stations to

[01:00:15] Speaker 10:
to TWA must buy carry PT-based stations, to must buy automobile attributes, seat belts, and airbags, and to must carry health insurance, which comes at a cost.

[01:00:34] Speaker 10:
There are two problems with this argument.

[01:00:36] Speaker 10:
And then they say first and second.

[01:00:38] Speaker 10:
So you're familiar with that.

[01:00:40] Speaker 05:
I am familiar with that argument.

[01:00:41] Speaker 05:
Yes, we've made the argument.

[01:00:45] Speaker 10:
Your argument is broader than what the board did.

[01:00:49] Speaker 05:
Well, the board did not articulate the overwhelming evidence in the record that was credited by the judges showed that must carry signals have value.

[01:01:03] Speaker 05:
For example, the board survey that we've talked about, the judges credited that survey as a methodology

[01:01:09] Speaker 05:
In that survey, over 95% of cable operators that retransmitted purportedly must carry public television signals and that responded to the board survey indicated that those signals had value.

[01:01:23] Speaker 05:
They placed a number on it.

[01:01:24] Speaker 10:
And so they go on to say that it would improperly count the distance signals from which the PBS indemnified the cable operators.

[01:01:38] Speaker 10:
So that's their point about they can't be measured.

[01:01:40] Speaker 10:
And you're saying that's just wrong because your experts said it could be measured.

[01:01:44] Speaker 05:
Well, I think, Your Honor, for example, it talked about indemnification there.

[01:01:49] Speaker 05:
I think they just didn't understand how the indemnification worked.

[01:01:54] Speaker 05:
For a must-carry signal,

[01:01:56] Speaker 05:
And we laid this out in the briefs.

[01:01:58] Speaker 05:
For a must-carry signal, if a cable operator has to pay the royalty for that distant must-carry signal, but it can choose under the cable act, it can choose to seek out indemnification from the public television station that's being retransmitted.

[01:02:19] Speaker 05:
So cable operator pays, cable operator may get that money back if it chooses to seek that indemnification.

[01:02:26] Speaker 05:
But that money that was paid was paid for public television programming.

[01:02:33] Speaker 05:
And it still needs to be distributed.

[01:02:35] Speaker 05:
It's still in the royalty pool.

[01:02:37] Speaker 05:
In many cases, it's the only distant programming that's carried by the cable system is this one public television programming.

[01:02:46] Speaker 10:
So when your argument then is in part that the board is just doing sort of a double speak here,

[01:02:57] Speaker 10:
Because it's not really addressing your argument, that air point.

[01:03:01] Speaker 05:
In that particular instance, yes, Your Honor.

[01:03:03] Speaker 05:
I think that's a good summary.

[01:03:06] Speaker 05:
One final point, Your Honor, and this gets to the sort of what are we asking the judges to do here.

[01:03:17] Speaker 05:
The government's basic approach to the case is that it's complicated, and the judges wrote a long decision, and so this court should affirm.

[01:03:25] Speaker 05:
But a complicated record is no excuse for arbitrary decision making.

[01:03:28] Speaker 05:
And there were simple, straightforward valuation approaches that were in the record, and that the judges could have adopted and applied to all parties without violating the APA.

[01:03:38] Speaker 10:
So that the synthesis that the board adopted is the problem.

[01:03:43] Speaker 05:
the synthesis that the board adopted is part of the problem there.

[01:03:46] Speaker 05:
They're cherry picking one place, cherry picking another place.

[01:03:49] Speaker 05:
We need to have consistent application of these methodologies.

[01:03:54] Speaker 10:
So what would you be asking the board for?

[01:03:59] Speaker 05:
Well, what we would ask the board to do is to remand with instructions to issue a new decision that does not apply the judges flawed zero value approach.

[01:04:09] Speaker 10:
Oh, I've got that.

[01:04:10] Speaker 10:
But what I'm getting at is we pushed.

[01:04:14] Speaker 10:
Council to what they really want.

[01:04:17] Speaker 10:
They use the survey.

[01:04:19] Speaker 10:
So what is it?

[01:04:20] Speaker 05:
Well, what we would want, we would want them, you know, send it back to the, to the panel and they will have a choice though.

[01:04:26] Speaker 05:
They will look at that based on the instructions you give.

[01:04:29] Speaker 05:
They could have adopted, you know,

[01:04:33] Speaker 05:
any of the regressions that included as long as they include minimum fee signals and must carry signals, they could have applied the McLaughlin adjusted board survey to all the parties, including public television as they've done for the past two decades.

[01:04:47] Speaker 05:
Or they could have combined, you know, or they could have combined those approaches as long as they explain what they did and treat all the parties fairly.

[01:04:55] Speaker 05:
Any of these any of these methods would have afforded at least rough justice in estimating what section 111 requires.

[01:05:02] Speaker 10:
What I'm getting at is we have a board that says that's what they've done and council are arguing

[01:05:12] Speaker 10:
we have to grant the petitions because the board hasn't adequately explained and it's rejected things arbitrarily.

[01:05:21] Speaker 10:
So my point is, you send it back and get another four volumes of an opinion.

[01:05:31] Speaker 10:
And we're faced with the same sort of problems.

[01:05:36] Speaker 10:
And I'm trying to get some sense of narrowing here so that we don't just get that.

[01:05:43] Speaker 10:
And we also don't get a one-page order that says, we affirm our previous decision.

[01:05:51] Speaker 05:
Well, Your Honors, I think the panel needs to explain.

[01:05:53] Speaker 05:
But really what I'm asking them to do is to apply.

[01:05:56] Speaker 05:
They could apply the Tyler model without excluding minimum fee,

[01:06:03] Speaker 05:
and without excluding must carry, right, based on my arguments here.

[01:06:09] Speaker 05:
And that is consistent, entirely consistent with the board's survey results as adjusted by the McLaughlin adjustment, which as it's done for the last 20 years.

[01:06:21] Speaker 10:
So one side says, apply the survey, period.

[01:06:25] Speaker 10:
The other side says, well, not quite.

[01:06:29] Speaker 10:
We want some adjustments.

[01:06:32] Speaker 05:
You mean as to the board survey?

[01:06:34] Speaker 05:
Yes.

[01:06:36] Speaker 05:
The board survey is biased against public television.

[01:06:41] Speaker 05:
Everybody recognizes that.

[01:06:43] Speaker 10:
I didn't want it as a personal preference, but rather that you think it's legally required.

[01:06:48] Speaker 05:
Yes, it's literally required.

[01:06:49] Speaker 05:
It has to be adjusted, and that's why the panel's done it for the last 20 years.

[01:06:56] Speaker 05:
There are

[01:06:57] Speaker 05:
I think it's 33% of the systems only carry public television.

[01:07:01] Speaker 05:
In those situations, that's the only copyrighted programming that's being retransmitted.

[01:07:06] Speaker 05:
And what the McLaughlin adjustment does is for those situations where we're dealing with relative value, the relative value of public television on those systems is 100%.

[01:07:16] Speaker 05:
It has to be by definition.

[01:07:17] Speaker 05:
There's no other, maybe WGN used to be there, and there were sports that used to be on that distance signal, but no more.

[01:07:24] Speaker 05:
It's 100%.

[01:07:25] Speaker 05:
And so it's a very simple and appropriate adjustment to make and apply here.

[01:07:33] Speaker 00:
All this data available to it.

[01:07:35] Speaker 00:
It applied it to each claimant situation as relative to the circumstances.

[01:07:42] Speaker 00:
They look to expert testimony.

[01:07:44] Speaker 00:
You're asking us to kind of substitute our judgment for that expert testimony and then come out with a different result.

[01:07:51] Speaker 00:
But I'm not finding, you know, based on Judge Rogers question, what law or what

[01:08:00] Speaker 00:
weighing of substantial evidence that you want us to go after.

[01:08:03] Speaker 00:
You just all seem to have a different approach as to how the board weighed all of this, even with respect to them looking at other experts and utilizing what they deemed appropriate or not in the expert's testimony.

[01:08:19] Speaker 05:
Your honor, at least from public television's perspective, it's much narrower than that.

[01:08:23] Speaker 05:
Our argument with regard to minimum fee systems is that this is a classic change in position.

[01:08:30] Speaker 05:
The panel adopted an approach in 2010 to 2013.

[01:08:35] Speaker 00:
Which we've explained becomes different because of the WGNA.

[01:08:40] Speaker 05:
explosion but the laws of economics don't become different your honor yes that the number of systems is different but the laws of economics and and just the fact that there are opportunity costs and physical costs and other costs that actually demonstrate value that prove that these systems have value um that doesn't i mean that's that's that stays the same and yet they you know they completely reverse themselves and and

[01:09:07] Speaker 05:
you know, excluded millions and millions of public television minutes from the regression analysis.

[01:09:14] Speaker 05:
And that just, that's millions, that's minutes, that's copyrighted programs that are to be compensated in these proceedings.

[01:09:21] Speaker 05:
And that's what happened.

[01:09:22] Speaker 05:
And that is why that is arbitrary.

[01:09:27] Speaker 00:
And just curiously, have you done an analysis that if that was placed back in, how everybody would come out?

[01:09:35] Speaker 05:
Yes, Your Honor, it's actually Tyler himself did that analysis.

[01:09:39] Speaker 05:
It's the model that Tyler himself preferred and advocated in this proceeding.

[01:09:46] Speaker 10:
It's the... It's not the sensitivity model.

[01:09:52] Speaker 05:
No, not the sensitivity model.

[01:09:54] Speaker 05:
The model that he actually proposed is the model that resolves these problems from public television's perspective.

[01:10:04] Speaker 04:
issue.

[01:10:04] Speaker 04:
I always don't have any questions for you this time.

[01:10:06] Speaker 04:
Thank you.

[01:10:07] Speaker 03:
Give you some time for rebuttal as well.

[01:10:33] Speaker 03:
I hear from the government now.

[01:10:35] Speaker 03:
Ms.

[01:10:35] Speaker 03:
Carson.

[01:10:37] Speaker 06:
Good morning.

[01:10:37] Speaker 06:
May it please the court, Sonia Carson for the government.

[01:10:40] Speaker 06:
The copyright royalty judges acted reasonably in applying a flawed record to the difficult, counterfactual, hypothetical question of relative marketplace value for an industry in which no free market has ever existed.

[01:10:55] Speaker 06:
The fact that all of the evidence in the record was flawed does not mean that the copyright royalty judges could not rely on it.

[01:11:02] Speaker 06:
Here the agency conducted a month-long trial in which they admitted hundreds of exhibits, considered testimony from dozens of experts, and wrote a painstaking opinion acknowledging the flaws and accounting for them as best they could.

[01:11:21] Speaker 06:
The argument, as I think the colloquy with the appellants shows here, is that the judges should have weighed some evidence more heavily than others in predictably a direction that favors the party who is advocating for their preferred position.

[01:11:38] Speaker 06:
The problem here is, of course, as the judges exhaustively explained, that none of the evidence in the record is perfect, and perfect is not the standard.

[01:11:47] Speaker 06:
The standard of review here is whether the judge's allocation of royalties was reasonable, supported by substantial evidence in the record, and here,

[01:11:56] Speaker 06:
There can be no serious doubt that what the copyright royalty judges did was, for example, account for the fact that the Bort survey just has a data gap.

[01:12:07] Speaker 06:
It's always had this.

[01:12:08] Speaker 06:
The JSC commissioned this survey, and the Bort's media company excluded every cable system operator who retransmitted only either PTV content or content from the Canadian Claimants Group.

[01:12:23] Speaker 06:
Now, this is a gap that because it has existed before, the McLaughlin adjustment was developed as one way to address it.

[01:12:32] Speaker 06:
JSC came into this proceeding with a survey that they chose to conduct in the same way, and the judges have to take the record as they find it.

[01:12:40] Speaker 06:
This is not the government's money.

[01:12:42] Speaker 06:
We get involved in these cases because the parties are unable to settle among themselves how the royalties should be distributed.

[01:12:49] Speaker 06:
And the project for the judges here was to take a look at all of the evidence that was in the record and decide as best they could what reasonable ways to approximate the entire market as a whole.

[01:13:03] Speaker 06:
How would a regression model best approximate

[01:13:07] Speaker 06:
this hypothetical counterfactual industry that has never existed, how would a survey model sort of best approximate a hypothetical counterfactual free market that has never existed?

[01:13:17] Speaker 06:
And then individually, with respect to each claimant group, how persuasive, how well does each frame of vision, whether it's regression or survey, map on to the type of content that the claimant retransmits?

[01:13:32] Speaker 03:
Can we start with, I do have some questions about how it all got brought together.

[01:13:37] Speaker 03:
Sure.

[01:13:38] Speaker 03:
You know, sort of picking one modal, one of the options for one of the category groups, picking another one for another one and, you know, not knowing exactly how they mix.

[01:13:49] Speaker 03:
I would like to guess about that.

[01:13:50] Speaker 03:
If we just start with each one in succession and we start with regression, if we could.

[01:13:56] Speaker 03:
So with the regressions,

[01:13:58] Speaker 03:
There's no doubt everybody agrees that the regression was relied on to some extent, and particularly with respect to public television, I think, is where the board relied on it to the most expressly.

[01:14:10] Speaker 03:
So then if on the regression table, the one at 511, at least, which seems like a relevant one, if not the most relevant one, there is a 55% confidence interval to which the board takes note.

[01:14:27] Speaker 03:
And I guess my question is, I don't think you dispute that at some point in confidence interval gets so low that it wouldn't make sense to even take note of it, whatever take note of it means.

[01:14:38] Speaker 03:
That has to be true, I would think, right?

[01:14:40] Speaker 02:
Yes.

[01:14:41] Speaker 03:
So if it's a 10% confidence interval, it wouldn't make any sense to rely on it.

[01:14:46] Speaker 03:
So if it's 55,

[01:14:50] Speaker 03:
And I don't reject the premise that what the board is supposed to be doing doesn't have to meet the level of what statisticians said should be done to decide which clinical trial to give effect to if you're in the FDA or something.

[01:15:02] Speaker 03:
I understand that.

[01:15:04] Speaker 03:
But 55 just does seem like a pretty low confidence interval relative to what one normally sees, including even in this context in previous iterations.

[01:15:16] Speaker 03:
And so I'm just wondering,

[01:15:18] Speaker 03:
What do you understand the board to have done with the 55% confidence interval?

[01:15:23] Speaker 03:
And why do you think that was okay?

[01:15:25] Speaker 06:
Sure.

[01:15:26] Speaker 06:
So two points.

[01:15:27] Speaker 06:
I think it's helpful if I could just explain sort of in ordinary English what a regression model

[01:15:34] Speaker 06:
it shows the correlation between how many minutes a given kind of programming a CSO had and how much of their budget they were willing to spend on distant retransmissions.

[01:15:47] Speaker 06:
And so the inference is that the regression will show that if a CSO, that if there is that relationship, if a CSO spends more of its budget and retransmits more of one category of programming, it values that category of programming relatively more.

[01:16:04] Speaker 06:
And so a confidence interval speaks to the strength of the correlation that the regression can establish.

[01:16:12] Speaker 06:
And there's no dispute here that the number of joint sports claimants minutes that were available for re-transmission from 2015 on fell off a cliff.

[01:16:21] Speaker 06:
This is in part why the judges decided to adopt the Tyler model that had the above minimum fee only data because

[01:16:30] Speaker 06:
Dr. Tyler himself said that that was the data that showed with, quote, the highest degree of confidence, and here I'm at JA 549, that there was an inference that was relevant to willingness to pay and relative market value as the standard.

[01:16:43] Speaker 06:
So the confidence interval in and of itself

[01:16:47] Speaker 06:
Number one, does not impugn the reliability of regression as an approach.

[01:16:53] Speaker 06:
And two, the judges candidly acknowledged that this model was not perfect.

[01:16:59] Speaker 06:
And that was accounted for in the allocation that the judges ultimately awarded, which for the joint sports claimants was much closer to the poll that would have been suggested by the survey than the regression.

[01:17:15] Speaker 06:
And I'd like to illustrate that, if I could.

[01:17:17] Speaker 06:
um the joint sports claimants if the judges had allocated purely based on the the above minimum fee operator Tyler regression model, the joint sports claimants would have received 2.3% in 2015 to 1.56% in 2016 and 0.61% of the funds in 2017.

[01:17:36] Speaker 06:
Wait, hold on just one one second.

[01:17:41] Speaker 03:
I just want to make sure there's so many numbers

[01:17:47] Speaker 03:
I just want to make sure I have the right chart in front of me.

[01:17:49] Speaker 03:
Do you have that somewhere that you can point me to?

[01:17:52] Speaker 06:
So that's in the government's brief.

[01:17:53] Speaker 06:
And I just want to illustrate that the point is the regression model suggested, not surprisingly, that as sports were a category for which very few minutes of content were available for retransmission, that if one were to rely on that model alone as a comprehensive view of the industry,

[01:18:14] Speaker 06:
that the allocations to the joint sports claimants would be very low.

[01:18:18] Speaker 06:
But of course, what the joint sports claimants actually received was significantly more than that.

[01:18:25] Speaker 06:
The joint sports claimants.

[01:18:29] Speaker 03:
Where are you looking?

[01:18:30] Speaker 06:
So I'm looking at the government's brief at page 30.

[01:18:32] Speaker 06:
OK.

[01:18:34] Speaker 06:
The joint sports claimants for 2015 received not

[01:18:39] Speaker 06:
2.3%, but 11.42% for 2016, not 1.56%, but instead 10.72% for 2017, not 0.61%, but instead 12.36%.

[01:18:57] Speaker 06:
And this is because, as the judges acknowledged, there is just a more limited ability for a regression model because of how it functions and the volume of data that

[01:19:07] Speaker 06:
is input to it to explain joint sports claimants programming when the number of minutes is so diminished.

[01:19:16] Speaker 06:
And this is why they overweighted the survey evidence when it came to the joint sports claimants, not only because of the volume of data that was available to the regression, but because the judges expressively acknowledged that for some categories of programming, like devotional programming or like sports programming, one minute does not necessarily capture how subjectively valuable

[01:19:37] Speaker 06:
that kind of programming is for the consumer who receives it.

[01:19:41] Speaker 03:
Just stepping back for a second, I think I understand that the point you're making, which is that, look,

[01:19:48] Speaker 03:
If you compare the regression results on one hand and the survey results on one hand and the sports claimants are saying, just discount the regression, like use the survey.

[01:19:58] Speaker 03:
That's what we really like.

[01:19:59] Speaker 03:
They actually got something pretty close to the survey.

[01:20:01] Speaker 03:
I take that point.

[01:20:03] Speaker 03:
But I understand what they're saying is, but the regression still mattered for public television.

[01:20:09] Speaker 03:
And then if the regression is fundamentally flawed and you took it out, then we'd actually have gotten even more than we got because if you only use the survey, even for public television, then public television's share would have gone down some and our share would have gone up some more.

[01:20:26] Speaker 03:
And you should have only used the survey.

[01:20:29] Speaker 03:
You should have discounted this regression altogether because the regression is fundamentally flawed.

[01:20:33] Speaker 03:
It's just not even remotely reliable.

[01:20:35] Speaker 03:
So, yeah, we got

[01:20:37] Speaker 03:
pretty close to where you'd be for ourselves if you just did the survey.

[01:20:42] Speaker 03:
But you let the regression seat back in with respect to public television, which in a zero-sum game, redounds to our detriment.

[01:20:48] Speaker 03:
I take it that that's what they'd be saying.

[01:20:50] Speaker 03:
And I don't think you'd probably dispute that it makes some difference to them whether the regression seeps in at all.

[01:20:55] Speaker 06:
Yes, of course.

[01:20:56] Speaker 06:
But as the judges explained, neither a regression model nor a survey model alone was the right or a reasonable even way to think about the entire industry as a whole.

[01:21:07] Speaker 06:
There are very different kinds of content that are involved here that are being retransmitted for

[01:21:13] Speaker 06:
some for quite a number of minutes, some for not many at all.

[01:21:17] Speaker 06:
And so the judge's task in determining what the relative marketplace value is, which is their task which Congress left entirely to their discretion to decide, the question is willingness to pay.

[01:21:28] Speaker 06:
And when for some categories of content, the number of minutes is illustrative, and for other categories of content, the number of minutes is not as illustrative,

[01:21:37] Speaker 06:
it's perfectly reasonable for the judges under these circumstances to make the very careful and painstaking decisions that they did.

[01:21:44] Speaker 03:
So I guess my question is, though, I think I have great sympathy for the copyright judges.

[01:21:52] Speaker 03:
I mean, it's an unenviable task.

[01:21:54] Speaker 03:
And I'll just accept your premise that there's no perfect solution here.

[01:21:58] Speaker 03:
And there clearly were flaws.

[01:22:00] Speaker 03:
Everybody thought there were flaws, at least in some measure, to a lot of things across the board.

[01:22:06] Speaker 03:
there's no doubt that the regression played a role.

[01:22:08] Speaker 02:
Yes.

[01:22:09] Speaker 03:
And if it's true, suppose that it was a regression that rested on a coin flip.

[01:22:13] Speaker 03:
I mean, even if it played a role, and even if the sports claimants got pretty close to where they would have gotten otherwise, nobody could sanction the use of a regression that has embedded within it a coin flip, because that's the definition of arbitrariness.

[01:22:25] Speaker 03:
And so I guess the question is, if the regression did play some role, even if I know that in a kind of rough justice conclusion sense, you could say, look,

[01:22:35] Speaker 03:
This is not unruff injustice because got pretty close to where the surveys, which is what you, the joint sports claimants really are drawing attention to, would get you to.

[01:22:46] Speaker 03:
I totally, I take that point.

[01:22:48] Speaker 03:
But if the regression played a role and there's just a fundamental flaw in the regression, and I'm curious as to why, I want to give you the chance to explain why that's not the case.

[01:22:58] Speaker 03:
Then I think we would still say, yeah, the regression played some role.

[01:23:02] Speaker 03:
It actually didn't inert your detriment all that much because you got pretty close to where you are.

[01:23:07] Speaker 03:
This is a huge approximation.

[01:23:08] Speaker 03:
This is a very unenviable task that the copyright judges have.

[01:23:12] Speaker 03:
They got pretty close.

[01:23:14] Speaker 03:
I get the instinct to leave it alone.

[01:23:16] Speaker 03:
But if it has an element to it that is just resting on something that's just fundamentally flawed, then we have to at least take a look at that.

[01:23:23] Speaker 03:
And so on that, could you just help me with

[01:23:27] Speaker 03:
with the regression and just tell me, why is it 55%?

[01:23:33] Speaker 03:
Just two basic questions, which I think could map onto their two basic questions.

[01:23:37] Speaker 03:
Why is a 55% confidence interval, why is that okay to rely on it in some measure, which it looks like it was relied on in some measure.

[01:23:44] Speaker 03:
I don't exactly understand exactly how, but relied on in some measure.

[01:23:47] Speaker 03:
And then why is it okay that the regression spit out negative numbers and that's a regression that we can still rely on in some way if it has negative numbers in it for sports.

[01:24:02] Speaker 06:
I mean, big picture, because all of the economists who offered regression models in evidence testified that the fact that there was a particular confidence interval does not sort of make the reasonableness of relying on it in any part sort of stand or fall.

[01:24:19] Speaker 06:
The coin flip analysis is not, the analogy is not quite correct.

[01:24:27] Speaker 06:
Well, because I mean,

[01:24:28] Speaker 06:
a 55% confidence interval is the likelihood that the result is not, for example, the number on the page, but it is instead zero, meaning that there is absolutely no relationship, no mathematically significant relationship between the number of minutes of different types of content that are retransmitted and the amount of royalties as a percentage of their overall budget that cable operators spend.

[01:24:59] Speaker 06:
Confidence intervals.

[01:25:00] Speaker 03:
By coin flip, I wasn't meaning to talk about 50%.

[01:25:03] Speaker 03:
I was talking about coin flip meaning I'm just going to do a coin flip to see if heads this side wins, tails this side wins.

[01:25:09] Speaker 03:
I'm saying that's the definition of arbitrary.

[01:25:11] Speaker 03:
I'm not sure that 50% actually is the definition of arbitrary in a particular context.

[01:25:17] Speaker 03:
I was meaning heads and tails.

[01:25:18] Speaker 03:
So I wasn't trying to compare 50% to 55%.

[01:25:21] Speaker 03:
But I think there is.

[01:25:23] Speaker 03:
55% as a confidence interval is lower than what one typically sees, including in this very context in previous iterations.

[01:25:31] Speaker 06:
And the judges acknowledge that candidly.

[01:25:34] Speaker 06:
By statute, one of the judges is required to be an economics expert.

[01:25:38] Speaker 06:
The current member of that panel is who is the expert is David Strickler.

[01:25:41] Speaker 06:
And what the regression illustrates is the strength of the relationship between the number of minutes of a different kind of programming and

[01:25:53] Speaker 06:
how willing, what percentage of the overall budget a cable operator is willing to spend.

[01:25:59] Speaker 06:
And I mean, I suppose the judges could have thrown the proverbial baby out with the bath water as to either.

[01:26:05] Speaker 06:
There was a gap in the survey data.

[01:26:07] Speaker 06:
There's been this gap for decades.

[01:26:09] Speaker 06:
Joint sports came and commissioned this survey.

[01:26:12] Speaker 06:
I don't know why they didn't have it done differently, but that was the choice that they made.

[01:26:18] Speaker 06:
And I want to just make sure that I'm not suggesting that it's the pure numbers here that make the judge's rationale okay.

[01:26:25] Speaker 06:
I am not saying, hey, maybe they would have gotten a lot less, but instead they got more.

[01:26:29] Speaker 06:
And so it's all fine.

[01:26:31] Speaker 06:
We don't do that.

[01:26:33] Speaker 06:
understand the court's decision in the settling the devotional claimants case, but I mean the rough splitting of a difference as the court said in Johnson between two fairly but not wholly satisfactory outcomes is a familiar permissible technique.

[01:26:48] Speaker 06:
And of course, it is a zero-sum pool.

[01:26:52] Speaker 06:
Every decision that is made with respect to one party affects another.

[01:26:56] Speaker 06:
This is in part why the structure of these proceedings is that the parties are incentivized to provide the proposals that most support an award to their group that is larger compared to others.

[01:27:12] Speaker 06:
It's not a flaw in the analysis.

[01:27:16] Speaker 06:
the judge's reality in terms of the evidence that was provided to them, and with respect to the joint sports claimants specifically, it is precisely because there was not a more than necessarily 90% or 95% level of confidence about the strength of the correlation between the number of minutes and the willingness to pay that the judges overweighted the survey evidence in response.

[01:27:43] Speaker 00:
I'm trying to figure out how far do we go into the merits of any of the methodologies as well, because there's a lot of case law that suggests that we should defer.

[01:27:54] Speaker 00:
These are experts.

[01:27:55] Speaker 00:
We're not the statisticians.

[01:27:57] Speaker 00:
That's not quite our role.

[01:27:58] Speaker 00:
And of course, we have to look at whether or not it's been adequately explained.

[01:28:02] Speaker 00:
But I just want to know, what's your thought on how far we actually look into all of this modeling?

[01:28:08] Speaker 06:
I mean, I think the Johnson case is instructive.

[01:28:12] Speaker 06:
The standard of review here by statute is the APA standard of reasonableness.

[01:28:18] Speaker 06:
And so we do not ask whether this panel would have reached a different conclusion if it had been presented with the same facts in the first instance.

[01:28:25] Speaker 06:
We ask, given what was in the record,

[01:28:28] Speaker 06:
How did the judges approach the problem?

[01:28:30] Speaker 06:
Did they act in a way that was consistent with their prior precedents?

[01:28:33] Speaker 06:
Did they explain the choices that they made?

[01:28:36] Speaker 06:
Whether or not they were, you know, perfect or not.

[01:28:39] Speaker 06:
The record here and the determination are what we look at and we look at how those

[01:28:45] Speaker 06:
match up and I think as Judge Rogers perhaps you said I think it's fair to say that for every part of the record to which the parties are raising an objection there is a corresponding part of the determination that explains why the judges reached the conclusion that they did.

[01:28:59] Speaker 06:
Nobody was going to be happy.

[01:29:01] Speaker 06:
The proposals in this case asked for the judges, all told, to allocate 150% of the money that was actually available.

[01:29:08] Speaker 06:
And so there are inevitably winners and losers in these cases.

[01:29:12] Speaker 06:
And these cases only come to the copyright royalty judges because the parties themselves cannot agree on what an appropriate distribution should be.

[01:29:22] Speaker 06:
But that does not mean that the judges are required to attain mathematical exactitude, as this court has observed.

[01:29:31] Speaker 06:
nigh impossible in these circumstances.

[01:29:34] Speaker 03:
I don't disagree with a single thing you just said.

[01:29:36] Speaker 03:
And maybe I'm just not asking the question correctly.

[01:29:40] Speaker 03:
Maybe the question's just off.

[01:29:41] Speaker 03:
But if I could just try one more time.

[01:29:43] Speaker 03:
So on the table on J511, so suppose the left-handmost column was a 10% confidence interval.

[01:29:51] Speaker 03:
Suppose it was 10%.

[01:29:53] Speaker 03:
And then it said the exact same thing on the page.

[01:29:55] Speaker 03:
The judges take note of the 10% confidence level because, and would that be OK?

[01:30:01] Speaker 06:
I think it and I'm not trying to fight the hypo, but I think it really does depend on what else is in the record.

[01:30:06] Speaker 03:
And why is that?

[01:30:08] Speaker 06:
Because the judges are bound to make a decision based on the evidence that the parties put in front of them.

[01:30:16] Speaker 06:
And so if what is in the record is information that supports a 10% confidence interval, it's there because the parties have asked the judges to take a look at it.

[01:30:25] Speaker 06:
It's there because somebody has said to the judges, we want x share of the pie, and we think that this math with this confidence interval supports our proposal.

[01:30:33] Speaker 06:
And the judges say, well, we are trying to figure out what relative marketplace value would be, how these different categories of content would sort of offset each other in a market that has never existed, that is entirely hypothetical, and that

[01:30:50] Speaker 06:
you know, the judges can only take what is before them.

[01:30:54] Speaker 03:
So if the argument is, and I take the point that, you know, somebody put this in, so somebody thought it was relevant, it's before us, we can give effect to it.

[01:31:04] Speaker 03:
I mean, I think one of the arguments that's being made is actually what this is about is the

[01:31:09] Speaker 03:
Tyler sensitivity analysis and nobody actually thought that should be relied on the sensitivity.

[01:31:14] Speaker 03:
Now, it seems like people are comfortable with the nonsense if that's the right term, the non sensitivity Tyler approached the baseline one.

[01:31:22] Speaker 03:
But once you factor in the sensitivity one, that's not actually something that anybody was putting forward.

[01:31:27] Speaker 03:
So even though it's in there.

[01:31:29] Speaker 06:
Well, I mean, and I want to address this point head on because it also gets to a point that the joint sports claimants have made about whether they proposed adjustment to and sort of how the judges treated that.

[01:31:39] Speaker 06:
Dr. Tyler testified that the form of the model that gave sort of him the highest confidence that the data that it analyzed, analyzed reflected willingness to pay was the above minimum fee operator data.

[01:31:55] Speaker 06:
And of course, in the three adjustments,

[01:31:58] Speaker 06:
that the judges made to this model, there were adjustments that accounted for the fact that in some circumstances, the minimum fee operator data could shed light on willingness to pay.

[01:32:11] Speaker 06:
The judges made that adjustment with respect to the Canadian claimants group.

[01:32:14] Speaker 06:
They made that adjustment with respect to PTV.

[01:32:17] Speaker 06:
And so the notion that a party can

[01:32:21] Speaker 06:
sort of propose something in evidence and then disallow the judges from considering it is nowhere to be found in the entirely discretionary standard that Congress has set in determining relative marketplace value.

[01:32:41] Speaker 06:
And it's the same reason why it's

[01:32:44] Speaker 06:
really not correct to say that the joint sports claimants proposed adjustment to but that the judges ignored that.

[01:32:53] Speaker 06:
I point the court to footnote two twenty-one of the determination and also invite the court to compare the proposal from

[01:33:05] Speaker 06:
uh 612 to 614 of the sealed joint appendix.

[01:33:09] Speaker 06:
This is the joint sports came and it's proposed finding a fact in conclusion of law.

[01:33:13] Speaker 06:
They set out there what the results would be for adjustment one and their adjustment to do the survey and then um at SGA 617 where they actually make a request for the figures they want.

[01:33:24] Speaker 06:
They reproduce the figures from adjustment one not from adjustment two.

[01:33:28] Speaker 06:
So the judge's task here is to determine reasonable marketplace value based on the evidence in the record.

[01:33:37] Speaker 06:
And that is what they did.

[01:33:39] Speaker 06:
None of it was perfect.

[01:33:41] Speaker 06:
They didn't ignore the fact that none of it was perfect.

[01:33:44] Speaker 06:
They quite forthrightly acknowledged it.

[01:33:46] Speaker 06:
And that is...

[01:33:48] Speaker 06:
all that either the Copyright Act or the APA require.

[01:33:53] Speaker 06:
I want to briefly address, if I could, a couple of other specific points that the parties were made in response to some of Yara's questions.

[01:34:00] Speaker 06:
I see that my time has expired.

[01:34:02] Speaker 03:
I'm pretty sure my colleagues would too, but I see I'll have some more questions.

[01:34:06] Speaker ?:
OK.

[01:34:07] Speaker 06:
So on the World Series question, I point the court to paragraph 71, page 130 of the Sealed Joint Appendix.

[01:34:17] Speaker 06:
This is the page of the JSC quote in their brief, and this is where they actually provide the number of subscribers that they believe meets the category of, you know, it's section 111 or nothing if they want to watch the World Series.

[01:34:29] Speaker 06:
According to the joint sports claimants, that's between 70,000 and 94,000 subscribers, which I understand amounts to 0.13%, maybe as much as 0.16% of the overall subscriber pool.

[01:34:44] Speaker 06:
So this is not a circumstance where the judges ignored the significance of sports programming.

[01:34:52] Speaker 06:
a point that they agreed with.

[01:34:54] Speaker 06:
They would not have overweighted the survey had they not.

[01:34:57] Speaker 06:
As far as the point about how the figures could end up in the final allocation being below what the joint sports claimants characterize as a range of reasonableness, Your Honor, you were exactly correct.

[01:35:08] Speaker 06:
What happened was the judges individually for each category considered where in a range of rates

[01:35:17] Speaker 06:
would be appropriate for an allocation to fall.

[01:35:19] Speaker 06:
And that's based on how well a regression versus a survey sort of spoke to the kind of content that that programmer, that that program category involved.

[01:35:31] Speaker 06:
That's not an inherently zero sum analysis, right?

[01:35:35] Speaker 06:
I mean, the fact that the survey describes sports claimants content relatively better than it might describe PTV content is not

[01:35:43] Speaker 06:
That's a qualitative conclusion, not a quantitative one.

[01:35:47] Speaker 06:
And so the judges conducted that assessment individually for each of these six claimant groups that participated in this proceeding.

[01:35:55] Speaker 06:
And the total was virtually 100%, but it was not exactly 100%.

[01:36:00] Speaker 06:
And so to allocate the funds that they had, the judges adjusted the numbers proportionally to reach an even total of 100.

[01:36:10] Speaker 06:
It's not as if the judges

[01:36:12] Speaker 06:
considered one range reasonable sort of right up until the final second and then decided inexplicably to assign a different number.

[01:36:19] Speaker 03:
So can I just ask about that?

[01:36:21] Speaker 03:
Yeah.

[01:36:21] Speaker 03:
Just to make sure I think I understand, follow how the final assessment was made.

[01:36:25] Speaker 03:
So let's imagine a world in which there's only two categories of claimants and there's two ways in which we could decide what the allocation is going to be.

[01:36:36] Speaker 03:
Kind of like this, you have a survey one and you have a

[01:36:39] Speaker 03:
regression one, and then you have two categories of claimants.

[01:36:41] Speaker 03:
Is this what happened?

[01:36:44] Speaker 03:
So the board would say, okay, for category of claimant A, the joint sports claimants, let's just say, the one mode that we think is better is the survey one.

[01:36:55] Speaker 03:
And the survey one for them gets them 55.

[01:36:58] Speaker 03:
And then for the second category of claimants, public TV, we think the better approach actually is the regression.

[01:37:05] Speaker 03:
And the regression one gets them 65.

[01:37:08] Speaker 03:
Okay, so then you put them in a hopper and you see 65 plus 55.

[01:37:12] Speaker 03:
Uh-oh.

[01:37:13] Speaker 03:
like I'm over 100.

[01:37:14] Speaker 03:
Okay, so I did 55 from one group, 65 from the other.

[01:37:17] Speaker 03:
Now I got to kind of normalize that, get it within 100.

[01:37:20] Speaker 03:
I'll take the same ratio and just taper it down to get to 100.

[01:37:23] Speaker 03:
So it's going to be a 5.5 to 6.5 ratio, but I'm going to get it within 100.

[01:37:28] Speaker 03:
Is that roughly what happened here?

[01:37:30] Speaker 06:
That is exactly what happened here.

[01:37:32] Speaker 03:
So my question is, that's interesting.

[01:37:35] Speaker 03:
And is it

[01:37:39] Speaker 03:
It's not what normally envisions though.

[01:37:43] Speaker 03:
What normally envisions is...

[01:37:45] Speaker 03:
We'll figure out which one of these approaches just does the best job as a general matter.

[01:37:50] Speaker 03:
And then, yeah, we might have to make some adjustments to that approach.

[01:37:53] Speaker 03:
But rather than kind of picking one from one approach and picking one from another in a way in which they could add up to 200.

[01:38:00] Speaker 03:
It could be you have 100 to 0 on one, 0 to 100 on the other one.

[01:38:03] Speaker 03:
We'll take 100 from here.

[01:38:04] Speaker 03:
We'll take 100 from here.

[01:38:05] Speaker 03:
Put them both together.

[01:38:06] Speaker 03:
It gets to 200.

[01:38:07] Speaker 03:
We normalize it.

[01:38:08] Speaker 03:
Each gets 50.

[01:38:09] Speaker 03:
I mean, you could do that.

[01:38:11] Speaker 03:
And I'm not sure it's arbitrary, but it does strike me as different.

[01:38:16] Speaker 03:
to allow for an approach in which you're taking one from one column, taking one from another column, and then just kind of jamming them together.

[01:38:25] Speaker 03:
if I'm understanding the way this might have happened, although maybe I got it wrong.

[01:38:30] Speaker 06:
Sure.

[01:38:30] Speaker 06:
So first of all, a basic point.

[01:38:33] Speaker 06:
It is uncontroversial for the judges to make adjustments to models that the parties have proposed.

[01:38:39] Speaker 03:
To individual models, no question.

[01:38:41] Speaker 06:
Exactly.

[01:38:41] Speaker 06:
Because at the sort of model level, the question is, what kind of glasses are you putting on to look at the entire industry?

[01:38:49] Speaker 06:
And for the 2014,

[01:38:52] Speaker 06:
of this proceeding, that question was not as difficult.

[01:38:55] Speaker 06:
But when it came to 2015, and all of a sudden we have 90 odd percent of the cable system operators paying only the minimum fee, we have regression models that indicate sort of levels of confidence of correlation between the number of minutes and the value of the programming that are wide, as Your Honor aptly pointed out.

[01:39:20] Speaker 06:
And on the other hand, we have a survey that systemically excludes portions of the market that choose to retransmit only one kind of content category.

[01:39:34] Speaker 06:
And neither one of those is sports, of course.

[01:39:37] Speaker 06:
It excludes the cable system operators that retransmit only

[01:39:41] Speaker 06:
PTV or Canadian claimants group content.

[01:39:44] Speaker 06:
I mean, I suppose the judges could have said, hey, you know, for each one of you, the regression would say this and the survey would say that and we're going to put it together and average them.

[01:39:54] Speaker 06:
I mean, Johnson, this course decision in Johnson would say that that was.

[01:39:57] Speaker 06:
perfectly fine.

[01:39:58] Speaker 06:
But because of the sort of the record that they confronted in this case, the judges, I think to their credit, took even more pains to consider both how well a lens of looking at the industry worked across the board

[01:40:16] Speaker 06:
and how descriptive it was for the type of content that each program group provided.

[01:40:22] Speaker 06:
And in that, again, the judges agree with the joint sports claimants.

[01:40:25] Speaker 06:
That's clear.

[01:40:27] Speaker 06:
It is apparent that for niche programming, simply saying, well, one minute is one minute is one minute is not

[01:40:36] Speaker 06:
a reasonable way to go about it.

[01:40:37] Speaker 06:
And so they didn't.

[01:40:39] Speaker 06:
I don't mean, again, to fight the hypothetical that there might be some point at which it just absolutely makes no sense on its face.

[01:40:49] Speaker 06:
And there could be said to be no application of expert economic judgment or expertise to the decision.

[01:40:56] Speaker 06:
But I would submit that we are quite far from that.

[01:41:01] Speaker 03:
But are we understanding it correctly then that there's two sets of numbers that they could have chosen from in the main, a survey set and a regression set.

[01:41:11] Speaker 03:
And then for different claimant groups, they started with

[01:41:14] Speaker 03:
a different baseline.

[01:41:17] Speaker 03:
Some of them, they started with the regression.

[01:41:20] Speaker 03:
For some of them, they started with the survey.

[01:41:23] Speaker 03:
And both of those had embedded within adjustments.

[01:41:26] Speaker 03:
But as I understand what they said on J537 and then at 561 and 562.

[01:41:31] Speaker 03:
They went, and I take your point that doing it by claimant group makes a lot of sense because you've got to take the particularities that affect an individual claimant group.

[01:41:39] Speaker 03:
But for each claimant group, they figured out, actually, the regression makes more sense for you.

[01:41:45] Speaker 03:
For a different claimant group, it might be that the survey makes more sense for you.

[01:41:51] Speaker 03:
So we're heavily, we're largely, we're dispositively got to use that one for the particular claimant group, right?

[01:41:57] Speaker 06:
Right, the judges explained that they gave different weights to different models.

[01:42:01] Speaker 06:
This is not a case, though, of the judges being bound to pick either the lower bound of one model or the upper bound of another model and justify with precision every tenth of a percentage in between.

[01:42:13] Speaker 06:
For each claimant, the range is 0% to 100% of the royalties that were collected during this period.

[01:42:25] Speaker 06:
I want to agree with your honor's characterization, but I need to push back against the idea that there is a boundary that is imposed by one piece of evidence versus another, because it's reasonableness on the record as a whole.

[01:42:44] Speaker 06:
And here we had a record that supported wildly different

[01:42:49] Speaker 06:
outcomes and the judges grappled with both the industry-wide view and how well each lens sort of mapped on to this hypothetical counterfactual marketplace that has never existed and then for each

[01:43:04] Speaker 06:
kind of copyright holder who was claiming a share of that money, well, OK, there are some points to be made about whether this lens captures your content as well as it captures another group's content.

[01:43:21] Speaker 06:
And the judges weighed the evidence in the way that they explained and explained their conclusions ad nauseum.

[01:43:30] Speaker 03:
But one thing they didn't explain is how exactly they got to the final figures.

[01:43:40] Speaker 03:
They said things on J537 along the lines of, we heavily rely on the survey.

[01:43:47] Speaker 03:
But then if you look at the survey for a particular category, for a claimant category, actually the allocation doesn't map on to what the survey would have given you.

[01:43:58] Speaker 03:
it's adjusted in some way.

[01:44:00] Speaker 03:
And it could be adjusted more for some claimants groups than for others.

[01:44:04] Speaker 03:
And we don't have a through-line explanation of how the judges got from the amount for either the regression or the survey to the final allocation for each claimant group.

[01:44:19] Speaker 06:
So I think that perhaps our disagreement is whether the through-line has enough

[01:44:25] Speaker 06:
math in it.

[01:44:27] Speaker 03:
Or detail, just to understand how.

[01:44:28] Speaker 06:
Or detail to explain it.

[01:44:30] Speaker 06:
And I mean, here, I have to point back to this court's decision in Johnson and in the Sublime Devotional Claimants.

[01:44:37] Speaker 06:
It is not sort of the sine qua non of reasonableness that the judges say, well, for you, we think maybe 70 would be, the regression model, 71% explained well how your content should be valued in a hypothetical counterfactual free marketplace that has never existed.

[01:44:54] Speaker 06:
I think if you just look at the figures, the judges are very clear about where the adjusted models, both regression and survey, come out in terms of the percentages, the allocation percentages that they support.

[01:45:11] Speaker 06:
And for CTV, as my colleague acknowledged, the judges said, well, we think it's about

[01:45:17] Speaker 06:
regression and survey do about equally well in describing this kind of content and so we're going to weigh them equally and they come up with an ultimate allocation that's about in the middle.

[01:45:32] Speaker 06:
I don't think that it's the judge's obligation to say

[01:45:35] Speaker 06:
Well, for you, we think that a Russian model explains only 8% of the potential hypothetical counterfactual value of your content and then have a whole other round of dickering about whether to be 8% or 8.1% or 8.2%.

[01:45:52] Speaker 06:
This touchstone is reasonableness.

[01:45:54] Speaker 06:
the parties I understand disagree about where the polls of reasonableness should be and whether there is any sort of distance in between them that the judges can consider or whether they have to take one another or another.

[01:46:05] Speaker 10:
The conclusion has to be in your analysis that the judges acted reasonably and even though the range was extensive, whatever it shows was

[01:46:22] Speaker 10:
I mean, your discussion is, you know, they went to the middle, but suppose, you know, if you knew what factors they applied, you'd say, well, it really ought to be closer to 5% or 90%, not, you know, 55% or 52%, whatever it is.

[01:46:43] Speaker 10:
And all I'm responding to is there's a very different type of APA review than we normally do.

[01:46:53] Speaker 10:
I mean, the thought is that judges are not experts, but we have to understand what's going on.

[01:47:00] Speaker 10:
And I mean, the briefs do a great job in one sense, but the appellants raise a lot of questions.

[01:47:14] Speaker 10:
And your response, basically, is if we're just applying

[01:47:23] Speaker 10:
a substantial evidence reasonable test.

[01:47:26] Speaker 10:
The judges did enough.

[01:47:29] Speaker 10:
They took what was given to them and decided whether that evidence was persuasive to them in terms of what they had to do.

[01:47:42] Speaker 10:
And that's the end of our review.

[01:47:45] Speaker 10:
So if they hadn't addressed a whole area of argument,

[01:47:51] Speaker 10:
That would be arbitrary and capricious.

[01:47:53] Speaker 10:
But they addressed everything.

[01:47:55] Speaker 06:
Yes, Your Honor, and indeed.

[01:47:57] Speaker 10:
And so unless, I mean, you heard counsel, repellents here, they take very strong positions on there's no way the court could adopt your position because just

[01:48:17] Speaker 10:
Factually, and I think that's what I understand the chief judge's questions to be exploring, is we understand the words, but do we see the analysis that explains those words?

[01:48:31] Speaker 10:
And sometimes I do, and sometimes I don't.

[01:48:36] Speaker 10:
And I realize the board has a terribly burdensome task here, and it's limited, as you point out.

[01:48:46] Speaker 10:
So, so long as it's somewhere around what people were asking for claimants, that's good enough in this context.

[01:48:59] Speaker 06:
So, Your Honor, I think it would be, and I think that the Calvary Royalty judges did much more than that here.

[01:49:04] Speaker 06:
I think the core of what we are sort of going back and forth about is when the judges say, we weight the survey evidence more heavily for one claimant versus another.

[01:49:14] Speaker 06:
Do they need to define with a number what that means in order for the decision to be reasonable?

[01:49:21] Speaker 06:
Well, why?

[01:49:22] Speaker 06:
Well, why they do explain.

[01:49:23] Speaker 06:
They explain that the survey evidence is more persuasive for the joint sports claimants

[01:49:29] Speaker 06:
compared to the regression evidence.

[01:49:31] Speaker 06:
And they try to account for that.

[01:49:33] Speaker 06:
Mathematical exactitude, again, this court has recognized, is impossible.

[01:49:38] Speaker 06:
And I am unfamiliar with any case in which this court has ever said that reasonableness requires saying, well, if you think it's more heavily weighted than another, we have to hear you say that it's 71% instead of 50%.

[01:49:57] Speaker 06:
It might be a different story if the judges had said, well, we think the survey evidence is much more persuasive for the joint sports claimants, and so we're going to weight it more heavily.

[01:50:05] Speaker 06:
And then the ultimate allocation was the regression model number.

[01:50:10] Speaker 06:
But we don't have that incongruity here, because what the judges are trying to do is pick a number that is reasonable for each

[01:50:19] Speaker 06:
party sort of under both their individual circumstances based on the kind of content they have and based on what they know about how this market does and hypothetically could work as a whole.

[01:50:31] Speaker 03:
So here's one concrete example that I think is in the briefing, and it may have been mentioned earlier.

[01:50:37] Speaker 03:
The judges said that for both CTV and for program suppliers, the survey results weight heavily.

[01:50:46] Speaker 03:
I think they use the same location for both.

[01:50:49] Speaker 03:
And then if we look at 2015 to 2017, which I think is the relevant years for this, maybe they also do it for 2014, but I'm going to disregard that for now.

[01:50:58] Speaker 03:
So for 2015 and 2017,

[01:51:01] Speaker 03:
The survey allocations for CTV, just look at 2015 for example, the survey allocation for CTV was 19.2 and the allocation for the judges was 19.78.

[01:51:14] Speaker 03:
It's very close.

[01:51:16] Speaker 03:
So that not only heavily relied, but maybe really heavily relied.

[01:51:19] Speaker 03:
That makes sense.

[01:51:20] Speaker 03:
But then if you look at program suppliers, the survey allocation was 18.4 and the judge's allocation was 28.29.

[01:51:29] Speaker 03:
So that's not to say that they didn't heavily rely on it, but it's quite a bit different from where CTV wound it up.

[01:51:37] Speaker 03:
And it kind of turns out to be in the middle of the survey versus the regression, because the regression would have been 44.8.

[01:51:45] Speaker 03:
The survey would have been 18.4.

[01:51:47] Speaker 03:
28.29 is closer to the survey than the regression.

[01:51:52] Speaker 03:
But it's in the middle.

[01:51:55] Speaker 03:
And that may be fine, but we just don't know, because what we have is an indication that there's heavy reliance on the survey for both to different degrees, apparently, to pretty significantly different degrees, because one of them's almost towing it exclusively to the survey.

[01:52:14] Speaker 03:
The other one's pretty far from the survey, not all the way over to the regression, but kind of in the middle.

[01:52:22] Speaker 03:
And that's what we have to go on.

[01:52:24] Speaker 03:
So we don't know exactly how it was weighed.

[01:52:27] Speaker 03:
We know there was weight given to it.

[01:52:28] Speaker 03:
Does that seem fine?

[01:52:31] Speaker 06:
Yes, because what the APA requires is not the mathematical precision.

[01:52:38] Speaker 06:
And I'm sorry to keep returning to that phrase, that the kind of inquiry that you propose would entail.

[01:52:45] Speaker 06:
If the ultimate number was completely inconsistent with the reason that the judges gave for

[01:52:51] Speaker 06:
arriving at it or if we're trending in that direction, it would be a very different case.

[01:52:55] Speaker 03:
Do you think it would be inconsistent if the number was directly, if the statement was made, we heavily rely on the survey and then the number turns out to be exactly in the middle of the survey and the regression?

[01:53:08] Speaker 06:
No, because the final number, recall, accounts both for how well the survey and regression evidence

[01:53:16] Speaker 06:
describes the particular kind of content in that category, but how it maps onto the other five categories that are also at issue.

[01:53:24] Speaker 06:
And so it's too simplistic to say, well, there was this number and there was this number, and they had to pick either something in between, and they had to say it was 50-50.

[01:53:33] Speaker 06:
And then if they were above this number, then that means it was unreasonable.

[01:53:36] Speaker 06:
I mean, that is just not the kind of- So I think I agree.

[01:53:38] Speaker 03:
I believe I understand this and agree with you that because it's a zero-sum game,

[01:53:43] Speaker 03:
even if you rely heavily on one, even if you rely exclusively on one, it's not going to wind up being that exact one because it's going to be adjusted based on what happens elsewhere.

[01:53:52] Speaker 03:
I guess what puzzles me some is that

[01:53:55] Speaker 03:
That might be true, but then with one where you heavily rely, it ends up basically in exactly the same place.

[01:54:01] Speaker 03:
With another one in which you heavily rely, it ends up quite a bit different.

[01:54:04] Speaker 03:
I think there would be adjustments, but I would imagine that the adjustments would occur in a somewhat equivalent or proportional way such that you would see some predictable result.

[01:54:14] Speaker 03:
And I guess my question is, it doesn't turn out to be that way as between CTV and PS, for example, for 2015.

[01:54:23] Speaker 06:
I understand that.

[01:54:24] Speaker 06:
And that is a product of the reality that there are vastly different kinds of content that are all lumped in together under the section 111 license.

[01:54:31] Speaker 06:
I mean, the section 111 license is about retransmitting content.

[01:54:35] Speaker 06:
It's about sending it beyond its local service area, not about what somebody sees when they turn on the channel.

[01:54:42] Speaker 06:
And so the fact that

[01:54:44] Speaker 06:
as I may have tried to express earlier that the joint sports claimants type of content is better described or more reasonably described by survey data.

[01:54:55] Speaker 06:
I mean it's true that because we've got to add it up to a hundred and we don't have unlimited money that

[01:55:02] Speaker 06:
There's a sense in which it's zero sum, but it is truly a qualitative analysis.

[01:55:07] Speaker 06:
And the fact that the survey evidence might weigh more heavily for one group does not mean, as a matter of what is reasonable or what the evidence supports, that the survey evidence must, as a result, be deemed to weigh less heavily for another.

[01:55:23] Speaker 06:
And look, if the judges acted in a sort

[01:55:28] Speaker 06:
excess of of earnestness and trying to go beyond the idea of you know what what would be sort of the copy and paste model that we could apply here and and what would that spit out.

[01:55:40] Speaker 06:
I mean they certainly could have but what the judges did in this determination was agree with.

[01:55:46] Speaker 06:
in the main, the parties' arguments that they're making here today.

[01:55:50] Speaker 06:
I understand that the parties are saying, well, not only was that a good argument, it was a really, really, really good argument.

[01:55:55] Speaker 06:
And so my number should have been bigger instead of smaller.

[01:55:57] Speaker 06:
That's not the sort of decision that this court super intends.

[01:56:04] Speaker 06:
And it's not the kind of question that is susceptible to the task that the judges have before them, which is to determine relative marketplace value

[01:56:16] Speaker 06:
allocate a finite sum of money based on that and do it in a way that is reasonable and supported by substantial evidence in the record.

[01:56:25] Speaker 03:
I'm sorry to belabor this.

[01:56:26] Speaker 03:
I have one more question, just one more question about the kind of picking from one category, picking from the other.

[01:56:33] Speaker 03:
I can understand the appeal of saying this category is more, this type of analysis is more explanatory for joint sports claimants.

[01:56:41] Speaker 03:
This type of analysis is more explanatory for public television.

[01:56:44] Speaker 03:
And so I understand the appeal of doing that.

[01:56:46] Speaker 03:
I guess my question is this, if we imagine the world in which there's only two categories and there's only two types of analysis,

[01:56:52] Speaker 03:
So the two categories are joint sports and public television.

[01:56:54] Speaker 03:
The two types of analysis are regression and survey.

[01:56:58] Speaker 03:
If the board says for the sports claimants, survey makes more sense.

[01:57:04] Speaker 03:
For public television, regression makes more sense.

[01:57:07] Speaker 03:
So that's what we're going to do.

[01:57:09] Speaker 03:
By definition, aren't you saying if you say for public television regression makes more sense and you use that number, aren't you necessarily then by using that number also using the regression number for the joint sports claimants too?

[01:57:22] Speaker 03:
Because if you bring in the 65 from there, you're necessarily bringing in the 35 for sports claimants too, because the 65 is just 100 minus the 35.

[01:57:34] Speaker 03:
So the 35 just necessarily gets baked in.

[01:57:37] Speaker 03:
And the same is true with the converse too.

[01:57:41] Speaker 03:
So picking one from here and picking one from there, I get it.

[01:57:46] Speaker 03:
But it seems like you're necessarily also picking the other one too.

[01:57:49] Speaker 03:
So what have you really gained by doing that?

[01:57:51] Speaker 06:
Well, first of all, we don't dispute that all of this, because we're in a zero sum world where the question is, which dollars go where?

[01:57:59] Speaker 06:
That every decision with respect to one party has some effect on another.

[01:58:04] Speaker 06:
I would suggest that it's different from saying that on the one hand, we think the best model for the PTV is the regression model.

[01:58:12] Speaker 06:
And on the other hand, there's something sort of disingenuous about us saying that we think the survey model is the best model.

[01:58:17] Speaker 03:
I don't think it's disingenuous.

[01:58:18] Speaker 03:
I just wonder what the ultimate

[01:58:20] Speaker 03:
The effect of it is no.

[01:58:22] Speaker 06:
I mean, the effect is that there is an effect.

[01:58:25] Speaker 06:
Nobody disputes this.

[01:58:26] Speaker 06:
And the money has to be divided up.

[01:58:29] Speaker 06:
And the judges, including the statutorily required economic expert, looked at the evidence that was in front of them and made a reasonable decision, which they supported by substantial evidence and which they explained thoroughly.

[01:58:42] Speaker 06:
That is what the Copyright Act and what the APA requires.

[01:58:46] Speaker 06:
And as for the points about

[01:58:50] Speaker 06:
If you don't mind me picking up just a couple of points that the other side made, the minimum fee station data and the must-carry data, I'm happy to address that.

[01:59:02] Speaker 06:
But to Judge Rogers' point, we are not zooming into the weeds level of what the judges did in these circumstances.

[01:59:12] Speaker 06:
They had the evidence they had.

[01:59:14] Speaker 06:
They made the best of it that they could.

[01:59:15] Speaker 06:
They explained their choices.

[01:59:19] Speaker 06:
And that is sufficient to affirm.

[01:59:21] Speaker 10:
It's the end of it in your view.

[01:59:23] Speaker 10:
Yes.

[01:59:23] Speaker 10:
And so our questions about the factors they took into account is just not part of this review.

[01:59:33] Speaker 06:
I don't know if I agree with that because, I mean, if the explanation and the outcome was sort of black and white or seems like completely irreconcilable, I think you might say that the explanation was not sufficient.

[01:59:46] Speaker 10:
point about, in one instance, it's very close.

[01:59:49] Speaker 10:
In another instance, it's quite a difference.

[01:59:55] Speaker 10:
And yet, we look, you say, at both in the same way.

[02:00:00] Speaker 06:
This is the scheme that Congress established.

[02:00:03] Speaker 06:
And it encompasses many different kinds of content.

[02:00:07] Speaker 06:
In a marketplace where, I mean, as the judges observed, the sort of strongest factor in a cable system's actual decision making is inertia.

[02:00:15] Speaker 06:
We're not dealing with an industry where, on the demand side, we have a copyright consumer that is sort of parsing this different content very carefully.

[02:00:29] Speaker 06:
It is a difficult task.

[02:00:32] Speaker 06:
It is a square peg in a round hole in a triangular tube.

[02:00:35] Speaker 06:
It is a really challenging task.

[02:00:38] Speaker 06:
exercise inevitably because of the way that the statute operates.

[02:00:43] Speaker 06:
But the fact that the evidence was flawed, the judges acknowledged it.

[02:00:48] Speaker 06:
The judges accounted for that.

[02:00:49] Speaker 06:
They reached conclusions as far as the final numbers that they explained, and that are reasonable.

[02:00:58] Speaker 06:
And that is the end of the analysis.

[02:01:03] Speaker 06:
May I ask that determination be affirmed?

[02:01:05] Speaker 03:
Thank you, counsel.

[02:01:08] Speaker 03:
We'll hear from interveners council now.

[02:01:14] Speaker 03:
Inertia may or may not explain why some unnamed homeowners might still have a direct TV satellite dish in their backyard, but.

[02:01:23] Speaker 01:
May I please the court?

[02:01:24] Speaker 01:
I'm Matthew McLean from the law firm Pillsbury Winthrop Shaw Pitman.

[02:01:28] Speaker 01:
I represent the Settling Devotional Claimants, but today I'm speaking on behalf of all four of the joint interveners, the SDC, the Canadian Claimants Group, the Commercial Television Group and the program suppliers.

[02:01:43] Speaker 01:
And I would say that during the five weeks of hearings,

[02:01:47] Speaker 01:
involving six parties, 33 live witnesses, hundreds of exhibits, these very complex economic models that we're talking about, survey data, the numerous industry professionals that testified, the four of us joint interveners disagreed on plenty.

[02:02:07] Speaker 01:
But today we do come here agreeing on two things.

[02:02:13] Speaker 01:
First of all is that in the face of this very extensive, very complicated record, the board came to a reasoned decision supported by substantial evidence.

[02:02:27] Speaker 01:
And the other thing is this, some of these funds at this point, we're talking about as far back as 2014, some of these funds were deposited more than 10 years ago.

[02:02:38] Speaker 01:
And as this court has recognized, royalty distribution can never be an exact science.

[02:02:46] Speaker 01:
Rough justice is bound to prevail.

[02:02:48] Speaker 01:
In this court's words, perfection in dividing up this royalty pool, much less consensus, is simply

[02:02:58] Speaker 01:
not going to be attainable.

[02:03:01] Speaker 01:
Now, many of the same issues that we're debating right here today and many other new issues are now before the board again in the next round of proceedings, as they have been in prior rounds of proceedings.

[02:03:13] Speaker 01:
And that's as it should be.

[02:03:16] Speaker 01:
And in fact, this court has expressly contemplated

[02:03:22] Speaker 01:
as a reason against adopting an overly inflexible approach in reviewing the Copyright Royalty Board's decisions.

[02:03:32] Speaker 01:
As this court contemplated in the 1998 NAB decision, in the annual determination process, the claimants would be able to improve upon the quality and the sophistication of their evidentiary submissions.

[02:03:48] Speaker 01:
So in the prior round,

[02:03:51] Speaker 01:
In this proceeding, from the prior round, the parties have improved upon, sharpened their arguments, brought in new arguments, brought in changes to the marketplace.

[02:04:00] Speaker 01:
In the next round, we're going to do the same thing, and we're going to incrementally get...

[02:04:06] Speaker 01:
Hopefully, better at measuring this amount.

[02:04:10] Speaker 01:
But the standard that this court applies to what the judges are doing is a deferential standard.

[02:04:16] Speaker 01:
It's a standard that asks, did the judges come within a zone of reasonableness?

[02:04:22] Speaker 01:
And that word zone, it has a meaning here.

[02:04:27] Speaker 01:
And the ends of that zone are not necessarily going to be well-defined.

[02:04:32] Speaker 01:
But at the end of the day,

[02:04:34] Speaker 01:
Congress intended and Congress directed that these decisions were going to be made by judges, not by econometricians, which means that they're going to be able to look at these econometric approaches, the survey data, all of these kinds of data points, consider them as reference points, but then at the end of the day,

[02:04:53] Speaker 01:
They have to make a judgment call, which inherently involves weighing different evidence.

[02:04:59] Speaker 01:
So I definitely want to get into the quantitative evidence, because that's mainly what the petitioners are bringing up.

[02:05:06] Speaker 01:
But in doing that, I would ask the court to bear in mind and to look through the lens of two things.

[02:05:13] Speaker 01:
But first of all, that the standard that the judges were applying is one of relative, relative marketplace value, not absolute value.

[02:05:22] Speaker 01:
And none of these quantitative techniques were intended to measure in absolute terms.

[02:05:29] Speaker 01:
We're talking about the proportion of value, one category against another.

[02:05:35] Speaker 01:
And so in balancing those

[02:05:38] Speaker 01:
You have to take that into account.

[02:05:39] Speaker 01:
The second is, and this is very, very important, is don't discount the qualitative industry-based evidence.

[02:05:48] Speaker 01:
The industry experts from cable system operators, from television stations, an appraiser of media assets, these qualitative, the quantitative approaches were reference points.

[02:06:03] Speaker 01:
And that's a word that

[02:06:05] Speaker 01:
the judges have used, that this court has used.

[02:06:07] Speaker 01:
The quantitative points provide reference points, but nowhere close to the whole picture.

[02:06:12] Speaker 01:
At the end of the day, there is a judgment call that has to be made.

[02:06:15] Speaker 01:
And it's not necessarily going to be directed by x percent times x percent is y. That's why the zone of reasonableness is the standard that this court has applied.

[02:06:33] Speaker 01:
Going to these quantitative approaches, and there are a couple of points I want to make quickly.

[02:06:45] Speaker 01:
First of all, today the petitioners are taking some pretty hard line positions, okay?

[02:06:53] Speaker 01:
In the court below that were much, much softer on some of these same issues, JSC's counsel today cited Dr. Rubenfeld.

[02:07:01] Speaker 01:
He was our expert witness, not theirs.

[02:07:03] Speaker 01:
Their own expert witness acknowledged that the above minimum fee data in a regression analysis or data from systems above minimum fees can be informative and were informative in prior proceedings.

[02:07:15] Speaker 01:
They disagree that they were as informative in this proceeding.

[02:07:18] Speaker 01:
And the judges took that into account.

[02:07:20] Speaker 01:
And it accordingly gave less weight to the regression analysis than they did in the prior proceeding.

[02:07:26] Speaker 01:
TTV, similarly.

[02:07:28] Speaker 01:
Public television's own expert witness, their own expert econometrician, present an alternative analysis on above minimum fee data only.

[02:07:37] Speaker 01:
It is not the case that the judges gave zero value to PTV minutes in below minimum fee systems.

[02:07:44] Speaker 01:
The judges weighed all the regression approaches that were presented, including those that included minimum fee systems.

[02:07:50] Speaker 01:
They relied primarily on the regression on above minimum fee systems.

[02:07:55] Speaker 01:
And then they identified the direction

[02:07:58] Speaker 01:
and approximate magnitude of potential biases.

[02:08:01] Speaker 01:
And they did the exact same thing with respect to the board's surveys.

[02:08:05] Speaker 01:
They identified a known bias, a bias that JSC itself, the joint sports claimants themselves, admit.

[02:08:13] Speaker 01:
that all parties agreed existed in the surveys.

[02:08:16] Speaker 01:
They considered multiple different methods of performing that adjustment, and they chose a method and they explained the choice that they made.

[02:08:25] Speaker 01:
They did this with both of those two techniques, and then Chief Judge Cernovoncis, as you said, they then

[02:08:36] Speaker 01:
made choices, are we going to be closer, not necessarily exact, but closer to one or the other?

[02:08:41] Speaker 01:
And then, of course, they had to normalize that to equal 100%, which means you're not going to get exact percentages.

[02:08:48] Speaker 01:
And they explained in rough terms the direction

[02:08:52] Speaker 01:
and the magnitude of the changes that they were making.

[02:08:58] Speaker 01:
And that may seem like an unusual way of doing things, but it is exactly the way it was done in the last proceeding.

[02:09:05] Speaker 01:
The program suppliers, this court's decision of the program suppliers proceeding in 2020, they did the exact same thing.

[02:09:11] Speaker 01:
They relied on survey expert regression expertise.

[02:09:17] Speaker 01:
They explained why, some categories.

[02:09:19] Speaker 01:
They used one more than the others, and then they normalized it 200%.

[02:09:23] Speaker 01:
They did essentially the same thing in the 1998 NAB decision, which this court also affirmed.

[02:09:31] Speaker 01:
So this is essentially the same technique that has been affirmed in multiple decisions of this court.

[02:09:39] Speaker 01:
I see that I'm out of time, but of course, I'm happy to answer any of your questions.

[02:09:46] Speaker 01:
Thank you, counsel.

[02:09:47] Speaker 01:
Thank you.

[02:09:47] Speaker 01:
We request the court to affirm.

[02:09:49] Speaker 01:
Thank you.

[02:09:49] Speaker 01:
Thank you.

[02:09:58] Speaker 03:
Theodore, we'll give you three minutes for rebuttal.

[02:10:00] Speaker 03:
Both sides will give three minutes for rebuttal.

[02:10:02] Speaker 03:
And of course, if we have questions, we'll be on that.

[02:10:04] Speaker 08:
Okay, thank you, your honor.

[02:10:07] Speaker 08:
So I want to emphasize that the regression is wrong for everyone, not just sports.

[02:10:13] Speaker 08:
And one point I didn't make before is that if you the regression calculates that.

[02:10:19] Speaker 08:
So CTV's relative percentage of subscriber minutes is cut in half between 2014 and 2015.

[02:10:25] Speaker 08:
That's at J248.

[02:10:27] Speaker 08:
But its allocation under the regression stays the same.

[02:10:30] Speaker 08:
Devotional percentage goes down between 2014 and 2015.

[02:10:35] Speaker 08:
But its allocation

[02:10:37] Speaker 08:
um under the regression goes up program suppliers stays the same in terms of minutes percentage minutes but its allocation goes up by a third um and again that's the chart with minutes is at j 248 the regression calculates that the uh value of a minute of sports is 30 less in 2015 than in 2014 and you see that if you go to the um

[02:11:00] Speaker 08:
JE-241, the coefficients for JSC for compensable minutes are 30% lower.

[02:11:06] Speaker 08:
And so all of this is showing that the regression is not calculating minutes at the per minute value for anybody.

[02:11:16] Speaker 08:
So let me let me turn to your question about the synthesis.

[02:11:20] Speaker 08:
So if you look at what the government said on page 26 of its brief is that the board for 2014 was giving equal weight for JSC.

[02:11:32] Speaker 08:
to to boards survey and to their aggression and that's obviously not what the results showed with respect to your specific question about J a five sixty one.

[02:11:42] Speaker 08:
I took a look at that and I think what's going on there.

[02:11:44] Speaker 08:
So if you actually look at the twenty fourteen shares they add up to ninety nine point nine under the survey.

[02:11:50] Speaker 08:
That's the adjustment

[02:11:51] Speaker 08:
and then the survey adds up to a hundred and so I think what's going on is that when the board does it's completely unspecified combination of those two things it somehow gets to over a hundred and that's part of the problem we don't know how they did it but the I'm not sure if this is making sense but the the reason why sports is below those two numbers is not some artifact of the fact that the survey and the regression add up to more than a hundred it's an artifact of the fact that the boards

[02:12:20] Speaker 08:
totally unclear weighting adds up to more than 100.

[02:12:23] Speaker 08:
So that can't explain why JSC is below both of those things for 2014.

[02:12:29] Speaker 08:
I want to correct one thing the government said, which is that with respect to the 55%, Dr. Tyler did not propose reliance on 55%.

[02:12:38] Speaker 08:
If you look at the page where the board does 55%, they say it's derived from one of his charts.

[02:12:45] Speaker 08:
If you know the standard error, you can just derive any confidence interval you want based on some basic equations.

[02:12:50] Speaker 08:
There's absolutely no regression expert in this case who said that it was proper to rely on 55%.

[02:12:56] Speaker 08:
And we never got a chance to explain that it wasn't proper to rely on 55 percent.

[02:13:01] Speaker 10:
You had a chance during the hearing.

[02:13:06] Speaker 08:
I think we raised some things during the hearing petition, but we weren't required to raise everything during the hearing petition.

[02:13:11] Speaker 10:
But you say you you didn't have it.

[02:13:14] Speaker 10:
You didn't have a chance.

[02:13:16] Speaker 10:
You did.

[02:13:17] Speaker 10:
That's all I'm saying.

[02:13:17] Speaker 10:
Whether you chose to do it or not, it's another issue.

[02:13:20] Speaker 08:
But we're raising it in this court and it's up.

[02:13:25] Speaker 10:
I'm not going to belabor this.

[02:13:26] Speaker 08:
I'm sorry, Your Honor.

[02:13:29] Speaker 03:
I would like to just follow up on that.

[02:13:30] Speaker 03:
I mean, if you knew about the reliance on the 55% as of the initial decision, right?

[02:13:35] Speaker 03:
Yes.

[02:13:36] Speaker 03:
Okay.

[02:13:36] Speaker 03:
So you could have made an argument as to the 55% on rehearing before the board.

[02:13:43] Speaker 08:
What we said on rehearing before the board was that reliance on the above minimum fee was arbitrary for a variety of reasons.

[02:13:49] Speaker 08:
I don't recall if the 55% was in our rehearing petition or not, but we absolutely said that reliance on the above minimum fee Tyler regression was completely arbitrary.

[02:13:57] Speaker 10:
We understand that and the board responded to the arguments that were presented on rehearing.

[02:14:04] Speaker 10:
That's my only point.

[02:14:07] Speaker 08:
So, and your honor, I think

[02:14:09] Speaker 08:
Let me talk also, the government said that Tyler said that the above minimum fee gave him the most highest confidence.

[02:14:16] Speaker 08:
If you actually look at his testimony at J8216, that's not what he says at all.

[02:14:20] Speaker 08:
What he says is that as to that 10% of people or of systems, he has the most confidence, but not that he has the most confidence that if you take that 10%, you can apply it to the entire thing.

[02:14:32] Speaker 10:
No, he says that in two different places, at least, that I saw.

[02:14:38] Speaker 10:
It's just the board saying, look, the expert hears the objection.

[02:14:42] Speaker 10:
And he says he has confidence still.

[02:14:46] Speaker 10:
That's one of the analysis, as I understood, what the board feels.

[02:14:57] Speaker 08:
So, just a couple of very quick points.

[02:14:59] Speaker 08:
There was no response on our argument that it was arbitrary to apply the clock on adjustment to everyone.

[02:15:04] Speaker 08:
But which is the only claimant.

[02:15:08] Speaker 08:
It was designed to help the only claimant.

[02:15:09] Speaker 08:
It was designed to help.

[02:15:10] Speaker 08:
The board says it's arbitrary to apply it to them and that requires remand if nothing else does.

[02:15:17] Speaker 08:
And with that, my final point is that with respect to our second adjustment, I think the government said we didn't propose it, but we did.

[02:15:25] Speaker 08:
On SJA 614 and SJA 615, we proposed that adjustment.

[02:15:29] Speaker 08:
We said we preferred adjustment one, but that alternatively, adjustment two was a good adjustment as well.

[02:15:34] Speaker 10:
But you preferred adjustment one.

[02:15:36] Speaker 10:
That's what the government said.

[02:15:37] Speaker 10:
We did today.

[02:15:40] Speaker 08:
We did prefer adjustment one, but we very explicitly said that adjustment two was an alternative.

[02:15:45] Speaker 03:
just as a preservation point, you're saying you.

[02:15:48] Speaker 08:
Well, we said we said both were economically sound.

[02:15:50] Speaker 08:
We were we were proposing adjustment one.

[02:15:53] Speaker 08:
But if the board rejected adjustment, one adjustment to was certainly better than McLaughlin.

[02:15:56] Speaker 08:
That's what we said.

[02:15:57] Speaker 08:
That certainly preserves your honor.

[02:16:00] Speaker 02:
Thank you.

[02:16:01] Speaker 08:
Thank you.

[02:16:07] Speaker 03:
Mr Dove will give you also three minutes.

[02:16:09] Speaker 05:
Thank you, your honor.

[02:16:10] Speaker 05:
Just wanted to focus briefly on, you know, I think our main point at this, it was arbitrary and capricious to assign zero value to all the programs on all of the cable systems that were paying the minimum fee.

[02:16:23] Speaker 05:
That was 90% of the retransmissions at issue.

[02:16:27] Speaker 05:
So this is not a weeds level situation.

[02:16:30] Speaker 05:
It's not a rough justice situation.

[02:16:32] Speaker 05:
It is a fundamental flaw that excludes massive quantities of programming and particularly impacts public television because the panel placed dispositive weight on the regression for public television.

[02:16:45] Speaker 05:
But if the board believes that the regression cannot measure value on minimum fee systems after the WGN conversion, if it believes that on remand, then the board would need to rely on the survey.

[02:17:03] Speaker 05:
It credited the survey for measuring the value of minimum fee systems.

[02:17:09] Speaker 05:
The survey measured that.

[02:17:10] Speaker 05:
And so adjusted by McLaughlin, that would get to the point where you would just rely on that one piece of evidence for all the parties, and you wouldn't have the cherry picking problem.

[02:17:23] Speaker 05:
The Tyler sensitivity was not endorsed by anyone as a measure of relative value.

[02:17:30] Speaker 05:
And I think that's important to keep in mind.

[02:17:32] Speaker 05:
Unlike the joint sports claimants, we are not just advocating for our preferred method.

[02:17:40] Speaker 05:
We are saying if there is some evidence, it's okay to adopt that.

[02:17:44] Speaker 05:
But there was no evidence that minimum fee systems should be accorded zero value, that all that quantity of minutes, that millions of minutes should have been excluded from the analysis.

[02:17:56] Speaker 05:
There was evidence of value from every single party for both minimum fee systems.

[02:18:01] Speaker 10:
You're taking issue with the board's statement that it couldn't be accurately measured, right?

[02:18:09] Speaker 10:
That's what we were going through in the record when you were first arguing.

[02:18:14] Speaker 05:
I think in part, Your Honor, we're taking issue with that, but really, we're taking issue with what they did with that.

[02:18:20] Speaker 05:
They said it couldn't be accurately measured, so they just decided to give it zero value, to totally zero out all these minutes of programming.

[02:18:28] Speaker 10:
They gave a reason.

[02:18:32] Speaker 05:
Well, they gave a reason.

[02:18:33] Speaker 10:
Your argument today, just let me be clear, because I may have misunderstood your argument.

[02:18:37] Speaker 10:
Your argument is that they didn't give

[02:18:43] Speaker 10:
any value.

[02:18:44] Speaker 10:
And the board said, well, it couldn't be accurately measured.

[02:18:50] Speaker 10:
And is your argument that no, that's incorrect because there was expert testimony that the board?

[02:18:58] Speaker 05:
Well, yes, Your Honor.

[02:18:59] Speaker 05:
All the evidence in the record suggests that it could be measured.

[02:19:03] Speaker 05:
And all the evidence in the record suggests that it was not zero.

[02:19:07] Speaker 10:
So what did you think the board meant when it said could not accurately be measured?

[02:19:15] Speaker 05:
I think they were frustrated with what we've been frustrated with here today, Your Honor, which it's very hard to pinpoint.

[02:19:22] Speaker 05:
You've got different methodologies coming at it differently.

[02:19:26] Speaker 05:
But the reality was that the evidence before them clearly measured that the board survey surveyed minimum fee systems.

[02:19:34] Speaker 05:
And measurements were given as to the value of the programming on those systems.

[02:19:40] Speaker 05:
The regression analysis, all the parties put forward a regression analysis.

[02:19:45] Speaker 05:
Their preferred models measured the value, had valuations of those minimum fee systems, and did not exclude, just throw them out of the analysis.

[02:19:55] Speaker 05:
So I think that they were just frustrated with the ability to get that precise figure.

[02:20:05] Speaker 04:
Thank you, counsel.

[02:20:07] Speaker 03:
Thank you to all counsel.

[02:20:08] Speaker 03:
We'll take this case under submission.