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submits this Introductory Memorandum to its written rebuttal case in accordance with 37 C.F.R.
§ 35104. This Memorandum describes the contents of SoundExchange's written rebuttal case
SoundExchange's written rebuttal case contains: (A) this Introductory Memorandum; (B)
SoundExchange's Revised Proposed Rates and Terms, including proposed regulatory language;
(C) the written rebuttal testimony of Janusz Ordover; (D) the written rebuttal testimony of Kyle
Funn; (E) SoundExchange Rebuttal Exhibit 1 (a template Statement of Account fonn); (F)
SoundExchange Rebuttal Exhibit 2 (Restricted) (a Live365 Statement of Account form); and (G)
a certificate of service.
Pursuant to 37 C.F.R. § 35004(a), § 35104(a), and the Court's Order ofJune 24,2009,
SoundExchange is filing an original, five copies, and an electronic copy of the materials in its
this exhibit as Restricted, and is filing a motion to designate the exhibit as Restricted.
SoundExchange's rate proposal is in large part unchanged. The per performance royalty
rates set forth in SoundExchange's Revised Proposed Rates and Terms are the same as proposed
in SoundExchange's original rate proposal. SoundExchange's proposal has been revised in the
following ways: (1) to reflect developments with respect to the NAB and CBI settlements
previously proposed; (2) to reflect the stipulation that SoundExchange and Live365 submitted
with respect to ephemeral recordings and the minimum fee for commercial web casters; and (3) to
propose a tenn clarifying details related to the submission of statements of account. In addition,
proposaL. The proposed regulations show changes from the current regulations in redlined
format.
B. Witness Testimony
Janusz Ordover, Ph.D., is Professor of Economics and former Director of the Masters in
Attorney General for Economics at the Antitrust Division of the United States Department of
antitrust and regulation economics. Dr. Ordover's testimony rebuts the testimony ofLive365's
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expert witness, Mark Fratrik. First, Ordover testifies that Dr. Fratrik's methodology for
assertion that Live365 is a typical web caster; and it assumes that a web caster is entitled to a 20%
operating margin, which lacks a sound economic basis and is inconsistent with the wiling
buyer/willing seller standard. Second, Ordover responds to Fratrik's claim that the Judges
Ordover explains why Fratrik's criticisms of the NAB agreement are unfounded. He concludes
that the rates contained in the NAB agreement are probative evidence for setting rates under the
requirements. His testimony rebuts Live365's claim that it is entitled to a so-called "aggregator
discount" by explaining that Live365's conduct has imposed burdens on and created additional
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Michael J. Huppe (DC Bar 455161)
General Counsel
;;g
David A. Handzo (DC Bar 3840 )
Michael B. DeSanctis (DC Bar 460961)
C. Colin Rushing (DC Bar 470621) Jared O. Freedman (DC Bar 469679)
Senior Counsel JENNER & BLOCK LLP
SoundExchange, Inc. 1099 New York Ave., N.W.
1121 14th Street, N.W., Suite 700 Washington, D.C. 20001
Washington, D.C. 20005 (v) 202-639-6000
(v) 202-640-5858 (f) 202-639-6066
(f) 202-640-5883 dhandzo@jenner.com
mhuppe@soundexchange.com mdesanctis@jenner.com
crushing@soundexchange.com j freedman@jenner.com
June 7, 2010