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`APPEAL No. 15-13100-AA
`
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`IN THE UNITED STATES COURT OF APPEALS
`FOR THE ELEVENTH CIRCUIT
`
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`FLO & EDDIE, INC., a California corporation, individually and on behalf of all
`others similarly situated,
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`Plaintiff-Appellant,
`
`v.
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`SIRIUS XM RADIO, INC., a Delaware corporation,
`
`
`Defendant-Appellee,
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`DOES 1 through 10,
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`Defendants.
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`
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`On Appeal from the United States District Court
`for the Southern District of Florida
`
`
`BRIEF AMICUS CURIAE OF THE
`NATIONAL ASSOCIATION OF BROADCASTERS
`IN SUPPORT OF SIRIUS XM RADIO, INC. AND AFFIRMANCE
`
`
`
`Rick Kaplan
`NATIONAL ASSOCIATION
`OF BROADCASTERS
`1771 N Street, NW
`Washington, DC 20036
`(202) 429-5430
`
`Stephen B. Kinnaird
`Counsel of Record
`PAUL HASTINGS LLP
`875 15th Street, NW
`Washington, DC 20005
`(202) 551-1700
`stephenkinnaird@paulhastings.com
`
`Counsel for Amicus Curiae National Association of Broadcasters
`
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`

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`15-13100-AA Flo & Eddie, Inc. v. Sirius XM Radio, Inc.
`USCA11 Case: 15-13100 Document: 50-2 Date Filed: 10/13/2015 Page: 2 of 43
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`CERTIFICATE OF INTERESTED PERSONS AND
`CORPORATE DISCLOSURE STATEMENT
`
`Pursuant to 11th Cir. R. 26.1 and 11th Cir. R. 28-1, Amicus Curiae National
`
`Association of Broadcasters (“NAB”) hereby discloses each of the trial judge(s),
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`and all attorneys, persons, associations of persons, firms, partnerships, or
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`corporations that have an interest in the outcome of this case or appeal, including
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`subsidiaries, conglomerates, affiliates and parent corporations, including any
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`publicly held corporation that owns 10% or more of the amicus’s stock, and other
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`identifiable legal entities related to a party:
`
`Gayles, Darrin P.
`
`Barnett, Eleanor
`
`Breuder, Drew
`
`Cohen, Evan
`
`Flo & Eddie, Inc.
`
`Geller, Harvey
`
`Gordon, Jason
`
`Gradstein & Marzano, P.C.
`
`Gradstein, Henry
`
`Hacker, Jonathan
`
`Heller Waldman, P.L.
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`C-1 of 3
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`15-13100-AA Flo & Eddie, Inc. v. Sirius XM Radio, Inc.
`USCA11 Case: 15-13100 Document: 50-2 Date Filed: 10/13/2015 Page: 3 of 43
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`Kaplan, Rick
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`Kaylan, Howard
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`Kinnaird, Stephen B.
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`Liberty Media Corporation (NASDAQ: LMCA, LMCB, LMCK)
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`Marroso, David
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`Marzano, Maryann
`
`Massey, David
`
`Mayor, Evan
`
`National Association of Broadcasters
`
`O’Melveny & Myers LLP
`
`Paul Hastings LLP
`
`Petrocelli, Daniel
`
`Seto, Cassandra
`
`Sirius XM Holdings Inc. (NASDAQ: SIRI)
`
`Sirius XM Radio Inc.
`
`Steinberg, Martin
`
`Turnoff, William
`
`Volman, Mark
`
`Waldman, Glenn
`
`
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`C-2 of 3
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`15-13100-AA Flo & Eddie, Inc. v. Sirius XM Radio, Inc.
`USCA11 Case: 15-13100 Document: 50-2 Date Filed: 10/13/2015 Page: 4 of 43
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`DATED: October 13, 2015
`
`Respectfully submitted,
`
`By:
`
`
`
`/s/ Stephen B. Kinnaird
`Stephen B. Kinnaird
`Counsel of Record
`PAUL HASTINGS LLP
`875 15th Street, N.W.
`Washington, DC 20005
`Telephone: (202) 551-1700
`Facsimile: (202) 551-1705
`stephenkinnaird@paulhastings.com
`
`Rick Kaplan
`NATIONAL ASSOCIATION
`OF BROADCASTERS
`1771 N Street, NW
`Washington, DC 20036
`(202) 429-5430
`
`
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`C-3 of 3
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`USCA11 Case: 15-13100 Document: 50-2 Date Filed: 10/13/2015 Page: 5 of 43
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`TABLE OF CONTENTS
`
`
`Page
`INTEREST OF AMICUS CURIAE ......................................................................... 1
`INTRODUCTION AND SUMMARY ..................................................................... 1
`BACKGROUND ...................................................................................................... 3
`A.
`Record Companies Are the Primary Holders of Copyright in
`Sound Recordings ................................................................................. 3
`Record Companies Have Long Encouraged the Radio
`Broadcast of Sound Recordings, Without Any Claim to
`Compensation, So As To Maximize Record Sales .............................. 4
`Record Companies Have Reaped Enormous Economic Benefits
`from Radio Airplay .............................................................................. 9
`Congress Has Denied Federal Copyright in Over-The-Air Radio
`Broadcasts of Sound Recordings because of the Historical
`Symbiosis of the Recording and Radio Industries ............................. 10
`ARGUMENT .......................................................................................................... 14
`I.
`FLORIDA COMMON LAW DOES NOT RECOGNIZE PUBLIC
`PERFORMANCE RIGHTS IN SOUND RECORDINGS .......................... 14
`A.
`The Law Only Grants Limited Performance Rights for Certain
`Kinds of Authorial Works .................................................................. 14
`Florida Law Does Not Protect Public Performance of Sound
`Recordings .......................................................................................... 17
`EQUITABLE FACTORS MILITATE AGAINST EXPANDING
`COMMON LAW RIGHTS RETROACTIVELY OR BEYOND
`FEDERAL RIGHTS IN POST-1972 SOUND RECORDINGS .................. 24
`CONCLUSION ....................................................................................................... 30
`
`B.
`
`C.
`
`D.
`
`B.
`
`II.
`
`
`
`-i-
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`
`TABLE OF CITATIONS
`
` Page(s)
`
`Cases
`*Bonneville Int’l Corp. v. Peters,
`347 F.3d 485 (3d Cir. 2003) ............................................................. 10, 11, 12, 13
`
`Capitol Records, Inc. v. Mercury Records Corp.,
`221 F.2d 657 (2d Cir. 1955) ............................................................................... 25
`
`Capitol Records, Inc. v. Naxos of Am., Inc.,
`4 N.Y.3d 540 (N.Y. 2005) .................................................................................. 18
`
`CBS, Inc. v. Garrod,
`622 F. Supp. 532 (M.D. Fla. 1985) ............................................................... 18, 23
`
`Chamberlain v. Feldman,
`300 N.Y. 135 (1949) ........................................................................................... 24
`
`DeSilva Constr. Corp. v. Herrald,
`213 F. Supp. 184 (M.D. Fla. 1962) ..................................................................... 15
`
`Engle v. Liggett Grp., Inc.,
`945 So. 2d 1246 (Fla. 2006) ............................................................................... 27
`
`*Estate of Martin Luther King, Jr., Inc. v. CBS, Inc.,
`194 F.3d 1211 (11th Cir. 1999) .......................................................................... 15
`
`Ferris v. Frohman,
`223 U.S. 424 (1912) ............................................................................................ 16
`
`Firestone Tire & Rubber Co. v. Acosta,
`612 So. 2d 1361 (Fla. 1992) ............................................................................... 30
`
`Flo & Eddie, Inc. v. Pandora Media, Inc.,
`No. 2:14CV07648 (C.D. Cal. Feb. 23, 2015), appeal filed, No. 15-
`55287 (9th Cir. Feb. 24, 2015) ........................................................................... 24
`
`*Flo & Eddie, Inc. v. Sirius XM Radio, Inc.,
`62 F. Supp. 3d 325 (S.D.N.Y. 2014), appeal filed, No. 15-1164 (2d
`Cir. Apr. 15, 2015) .................................................................................. 23, 27, 29
`
`
`
`-ii-
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`
`TABLE OF CITATIONS
`(continued)
`
` Page(s)
`
`Fortnightly Corp. v. United Artists Television, Inc.,
`392 U.S. 390 (1968) ............................................................................................ 19
`
`Jerome H. Remick & Co. v. Am. Auto. Accessories Co.,
`5 F.2d 411 (6th Cir. 1925) .................................................................................. 25
`
`Liquor Store, Inc. v. Cont’l Distilling Corp.,
`40 So. 2d 371 (Fla. 1949) (en banc) ................................................................... 21
`
`*Martinez v. Scanlan,
`582 So. 2d 1167 (Fla. 1991) ............................................................................... 28
`
`*Palmer v. DeWitt,
`47 N.Y. 532 (1872) ................................................................................. 14, 15, 17
`
`Phillips v. Kaplus,
`764 F.2d 807 (11th Cir. 1985) ............................................................................ 24
`
`S. Pac. Co. v. Jensen,
`244 U.S. 205 (1917) ............................................................................................ 27
`
`*Shands Teaching Hosp. & Clinics, Inc. v. Smith,
`497 So. 2d 644 (Fla. 1986) ................................................................................. 24
`
`SmokEnders, Inc. v. Smoke No More, Inc.,
`No. 73-1637, 1974 WL 20234 (S.D. Fla. Oct. 21, 1974) ................................... 22
`
`*In re T.A.C.P.,
`609 So. 2d 588 (Fla. 1992) ............................................................................. 2, 23
`
`Tatum Bros. Real Estate & Inv. Co. v. Watson,
`109 So. 623 (Fla. 1926) ...................................................................................... 20
`
`United States v. Am. Soc’y of Composers, Authors and Publishers,
`No. CIV.A. 42-245, 1950 WL 42273 (S.D.N.Y. Mar. 14, 1950) ....................... 26
`
`United States v. Broad. Music Inc.,
`No. 64 CIV. 3787, 1994 WL 901652 (S.D.N.Y. Nov. 18, 1994) ....................... 26
`
`
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`-iii-
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`TABLE OF CITATIONS
`(continued)
`
`*Van Dusen v. Se. First Nat’l Bank of Miami,
`478 So. 2d 82 (Fla. Dist. Ct. App. 1985) ............................................................ 15
`
`Waite v. Waite,
`618 So. 2d 1360 (Fla. 1993) ................................................................................. 2
`
` Page(s)
`
`Statutes
`
`17 U.S.C.
`§ 101 .................................................................................................................... 20
`§ 106(4) ......................................................................................................... 11, 20
`§ 106(6) ............................................................................................................... 12
`§ 112(a) ............................................................................................................... 11
`§ 114(d) ......................................................................................................... 24, 29
`§ 114(d)(1)(A) ..................................................................................................... 13
`§ 114(d)(1)(C)(ii) ................................................................................................ 14
`§ 114(d)(1)(C)(iv) ............................................................................................... 14
`§ 114(g)(2) .................................................................................................... 12, 26
`§ 115(a) ............................................................................................................... 20
`§ 301(a) ............................................................................................................... 17
`§ 301(c) ......................................................................................................... 11, 17
`
`Digital Millennium Copyright Act,
`Pub. L. No. 105-304, 112 Stat. 2860 (1998) ...................................................... 13
`
`Digital Performance Right in Sound Recordings Act of 1995,
`Pub. L. No. 104-39, 109 Stat. 336 ...................................................................... 12
`
`Fla. Stat.
`§ 540.11(2)(a)(1)-(4) ........................................................................................... 22
`§ 543.02 (1941) (repealed 1977) ........................................................................ 30
`
`Fla. R. Civ. P.
`1.220(d)(2) .......................................................................................................... 26
`
`Other Authorities
`
`1 NIMMER ON COPYRIGHT (2015) ............................................................................. 17
`
`
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`-iv-
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`TABLE OF CITATIONS
`(continued)
`
` Page(s)
`
`2 NIMMER ON COPYRIGHT § 8.04 (2015) .................................................................. 20
`
`2 NIMMER ON COPYRIGHT § 8.14[A] (2015) ............................................................ 20
`
`6 NIMMER ON COPYRIGHT § 30.03 (2015) .................................................................. 3
`
`Adam D. Renhoff, The Consequences of “Consideration Payments”:
`Lessons from Radio Payola (2010) ....................................................................... 6
`
`Calif. Setting The Tempo in Sounds, Song, Style, BILLBOARD (Apr. 9,
`1966) ..................................................................................................................... 9
`
`E.J. Macgillivary, A TREATISE UPON THE LAW OF COPYRIGHT IN THE
`UNITED KINGDOM AND THE DOMINIONS OF THE CROWN, AND IN
`THE UNITED STATES OF AMERICA (1902) ................................................ 15, 16, 17
`
`Eaton S. Drone, A TREATISE ON THE LAW PROPERTY IN INTELLECTUAL
`PRODUCTIONS IN GREAT BRITAIN AND THE UNITED STATES (1879) ................... 16
`
`Edison Research and Triton Digital, The Infinite Dial 2015,
`http://www.edisonresearch.com/the-infinite-dial-2015 ........................................ 8
`
`“Ex’s” Striking It Rich on W. Coast, BILLBOARD (Dec. 11, 1965) ........................... 9
`
`Fredric Dannen, HIT MEN (1990) ...................................................................... 6, 7, 8
`
`G. Sidak & D. Kronemeyer, The ‘New Payola’ and the American
`Record Industry: Transactions Costs and Precautionary Acts For
`Illicit Services, 10 HARV. J.L. & PUB. POL’Y 521 (1987) ................................. 7, 9
`
`H.R. Conf. Rep. No. 105–796 (1998) ...................................................................... 13
`
`H.R. Rep. No. 104–274 (1995) ................................................................................ 13
`
`In Re: Determination of Royalty Rates and Terms for Ephemeral
`Recording and Digital Performance of Sound Recordings (Web
`IV),
`Docket No. 15-CRB-0001-WR (Copyright Royalty Board) (April
`30, 2015) ............................................................................................................... 8
`
`
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`-v-
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`TABLE OF CITATIONS
`(continued)
`
` Page(s)
`
`James N. Dertouzos, Radio Airplay and the Record Industry: An
`Economic Analysis (2008),
`https://www.nab.org/documents/resources/061008
`_Dertouzos_Ptax.pdf ........................................................................................... 10
`
`Joeri Mol & Nachoem Wijnberg, Competition, Selection and Rock
`and Roll: The Economics of Payola and Authenticity, 41 J. ECON.
`ISSUES 701 (2007) ............................................................................................. 5, 7
`
`Marc Eliot, ROCKONOMICS: THE MONEY BEHIND THE MUSIC (1989) ....................... 6
`
`Mark R. Fratrik, How Will the Radio Industry Be Affected by Pre-
`1972 Music Performers’ Fees (BIA/Kelsey July 27, 2015),
`http://www.biakelsey.com /pdf/ImpactOfPre72MusicRoyalties.pdf ................. 28
`
`Michael C. Keith, THE RADIO STATION (8th ed. 2010) ........................................ 7, 25
`
`Nate Rau, Sony Nashville CEO Talks Importance of Country Radio,”
`THE TENNESSEAN (Feb. 25, 2015),
`http://www.tennessean.com/story/money/industries/music/2015/02
`/20/sony-nashville-ceo-talks-importance-country-radio/23768711/ .................... 8
`
`Nielsen, Radio Airplay and Music Sales 2013,
`http://www.nab.org/documents/newsRoom/pdfs/Nielsen_Airplay
`_Sales_Study.pdf ................................................................................................ 10
`
`Nielsen, State of the Media: Audio Today,
`http://www.nielsen.com/us/en/insights/reports/2015/state-of-the-
`media-audio-today-a-focus-on-black-and-hispanic-audiences..html ................... 8
`
`PBS Newshour, Music Revolt (July 4, 2002),
`http://www.pbs.org/ newshour/bb/entertainment-july-dec02-
`musicrevolt_7-4 .................................................................................................... 4
`
`The Power of Radio: Nielsen Study Show Radio Drives Music Sales,
`Inside Radio (Oct. 29, 2012 – Oct. 27, 2013) ..................................................... 10
`
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`TABLE OF CITATIONS
`(continued)
`
` Page(s)
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`Press Release, FCC, Broadcast Station Totals as of September 30,
`2015 (October 9, 2015), https://www.fcc.gov/document/broadcast-
`station-totals-september-30-2015 ....................................................................... 25
`
`R. Serge Denisoff, SOLID GOLD, THE POPULAR RECORD INDUSTRY
`(1975) ................................................................................................................ 6, 7
`
`Richard A. Peterson & David G. Berger, Cycles in Symbol
`Production: The Case of Popular Music,
`40 AM. SOC. REV. 158 (1975) ........................................................................... 4, 5
`
`Robert L. Hilliard & Michael C. Keith, THE BROADCAST CENTURY
`AND BEYOND (2010) ......................................................................................... 4, 5
`
`Ronald H. Coase, Payola in Radio and Television Broadcasting, 22
`J.L. & ECON. 269 (1979) ....................................................................................... 6
`
`S. Rep. No. 93-983 (1974) ....................................................................................... 12
`
`U.S. Copyright Office, FEDERAL COPYRIGHT PROTECTION FOR PRE-
`1972 SOUND RECORDINGS: A REPORT OF THE REGISTER OF
`COPYRIGHTS (2011)............................................................................................. 11
`
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`INTEREST OF AMICUS CURIAE1
`The National Association of Broadcasters (NAB)
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`is a non-profit,
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`incorporated association of radio and television stations and broadcasting
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`networks. NAB represents the American broadcasting industry before Congress,
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`the courts, the Federal Communications Commission, and other governmental
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`entities. Many NAB members are not large entities; they are local, independent
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`stations. The claim of Plaintiff-Appellant Flo & Eddie, Inc. (FEI) to an exclusive
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`right under Florida law to the performance of pre-1972 sound recordings, including
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`radio broadcasts, is unfounded in law, and, if it were to succeed, would threaten
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`significant disruption to the radio broadcasting and related industries and the
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`viability of certain musical formats. NAB and its members have a substantial
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`interest in defeating FEI’s claim.
`
`STATEMENT OF ISSUES
`
`Does Florida law recognize an exclusive property right in the public
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`performance (including radio performance) of pre-1972 sound recordings?
`
`INTRODUCTION AND SUMMARY
`
`The Florida Supreme Court has repeatedly declared that “the rule we follow
`
`is that the common law will not be altered or expanded unless demanded by public
`
`
`1Appellee Sirius XM Radio, Inc. consented to this brief, but Appellant Flo &
`Eddie, Inc. refused consent. No counsel for a party authored this brief in whole or
`in part, and no entity other than amicus, its members, or its counsel has made a
`monetary contribution intended to fund the preparation or submission of this brief.
`
`
`
`-1-
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`necessity, or where required to vindicate fundamental rights.” In re T.A.C.P., 609
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`So. 2d 588, 594 (Fla. 1992) (internal citation omitted); Waite v. Waite, 618 So. 2d
`
`1360, 1361 (Fla. 1993). That judicial policy alone forecloses the aggressive
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`expansion of the common law of Florida that FEI advocates.
`
`Even apart from Florida’s judicial policy against common law expansion,
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`there is no basis to grant record companies exclusive rights in the performance of
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`sound recordings that would encompass (among other things) radio broadcasting.
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`At common law, performing rights (playright) were distinct from copyright. The
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`common-law rationales for protecting playright (that the author has the right to
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`perform the work free from unauthorized competition) and copyright (that
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`reproduction and selling copies is an act of inherent bad faith depriving the author
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`of the work’s value) do not apply to radio broadcast of sound recordings. As
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`Congress has long recognized in denying such rights under federal law, radio
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`airplay creates economic value in sound recordings and fame for the performers.
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`This is why record companies, the predominant holders of copyright in sound
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`recordings, have expended (and continue to expend) vast resources to solicit free
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`radio broadcast of their recordings. It would be ironic to award record companies
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`damages for a use—radio airplay—that those companies assiduously urged for
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`decades, without ever claiming a property right or demanding royalties. This Court
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`
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`-2-
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`should affirm the district court’s proper rejection of FEI’s claim for radical
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`expansion of Florida common law.
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`BACKGROUND
`
`Certain background facts are essential for this Court to determine what
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`property rights may exist in sound recordings, and to understand the untenability of
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`FEI’s position.
`
`A. Record Companies Are the Primary Holders of Copyright in
`Sound Recordings.
`
`
`
`Record companies, not performing artists, almost always hold any
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`copyrights in sound recordings.
`
`Copyright ownership of the physical embodiment of the
`performance of a musical composition (e.g., a master
`recording) … usually is the subject of an overall
`contractual relationship between its performers and a
`record company. Almost invariably, the record company
`becomes the proprietor in any physical embodiment of
`the artist’s performance created during the term of the
`recording agreement.
`
`6 NIMMER ON COPYRIGHT § 30.03 (2015) (emphasis added). Indeed, The Turtles
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`originally assigned their rights to White Whale Records, and FEI only recovered
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`those rights after a litigation settlement. D.I. 97-1 ¶¶ 4-7 (Volman Declaration).
`
`Although, depending on contract terms, some artists may receive residuals, in the
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`
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`main record companies would stand to profit from the expansive rule advocated by
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`FEI.2
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`B. Record Companies Have Long Encouraged the Radio Broadcast
`of Sound Recordings, Without Any Claim to Compensation, So As
`To Maximize Record Sales.
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`Record companies have for decades given away sound recordings for free
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`and expended enormous resources to promote airplay, without ever demanding
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`licenses or compensation.
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`In the early days of commercial radio, networks broadcasted live musical
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`entertainment featuring singers, pop bands, and symphony orchestras. See Robert
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`L. Hilliard & Michael C. Keith, THE BROADCAST CENTURY AND BEYOND 56, 101
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`(2010). But the emerging television industry soon eclipsed radio in the early 1950s
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`as the medium for original musical entertainment. See Richard A. Peterson &
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`David G. Berger, Cycles in Symbol Production: The Case of Popular Music, 40
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`AM. SOC. REV. 158, 165 (1975). Radio stations increasingly turned to having “disk
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`jockeys” play records on air. Id.; Hilliard & Keith, supra, at 137.
`
`
`2 Recording contracts often provide minimal compensation even to successful
`artists. See PBS Newshour, Music Revolt (July 4, 2002) (Don Henley, The Eagles:
`“Most artists don’t see a penny of profit until their third or fourth album because of
`the
`way
`the
`business
`is
`structured.”),
`http://www.pbs.org/
`newshour/bb/entertainment-july-dec02-musicrevolt_7-4/.
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`Beginning in 1955, coincident with the dawn of rock-and-roll, many stations
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`began adopting a “Top 40” format that transformed the radio landscape and its
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`relationship with the record industry:
`
`This would mark the intensification of the long and
`intimate relationship (some would call it a marriage)
`between the radio medium and the recording industry, as
`both relied on each other for their well-being and
`continued
`prosperity.
`The
`recording
`industry
`manufactured the popular, youth-oriented music radio
`wanted and needed, and the latter provided the exposure
`that created a market for the product. From the
`perspective of the recording industry, radio was the
`perfect promotional vehicle
`for
`showcasing
`its
`established, as well as up-and-coming, artists.
`
`Hilliard & Keith, supra, at 151 (emphasis added).
`
`Top 40 (with its short playlists) unleashed a competitive fury among record
`
`companies skirmishing for the airplay necessary to success in the lucrative teenage
`
`market for rock-and-roll records. See Joeri Mol & Nachoem Wijnberg,
`
`Competition, Selection and Rock and Roll: The Economics of Payola and
`
`Authenticity, 41 J. ECON. ISSUES 701, 707-708 (2007); Peterson & Berger, supra, at
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`165. Not only the major labels fought for airplay. Smaller independent record
`
`companies (like FEI’s predecessor-in-interest White Whale Records) aggressively
`
`pitched their new songs to local radio stations. See Mol & Wijnberg, supra at 708.
`
`Local radio stations provided a springboard for gaining national popularity because
`
`other stations would pick up on successful songs. Id. at 709.
`
`
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`Record labels placed such high economic value upon airplay that they gave
`
`“payola” to disk jockeys and others to play their music, leading Congress to outlaw
`
`the practice in 1960 unless disclosed to the audience. See Adam D. Renhoff, The
`
`Consequences of “Consideration Payments”: Lessons from Radio Payola 134
`
`(2010). Nonetheless, the economics of record sales remained unchanged:
`
`The average rack capacity in a department store was
`about a hundred albums and the top 40 singles. To get on
`the racks it was necessary to be on the charts. In order to
`be on the charts, it was necessary to have rack space. The
`only way onto this ever-revolving carousel was radio,
`which became an increasingly critical factor in the
`manufacture of hits.
`
`Marc Eliot, ROCKONOMICS: THE MONEY BEHIND THE MUSIC 172-73 (1989).
`
`As Nobel laureate Ronald Coase observed, “[t]o sell music on a large scale it
`
`is necessary that people hear it,” and thus once Congress restrained payola,
`
`promotional efforts by the labels only increased.3 Each big record company had
`
`“promotion men” in every region to call on radio stations, distribute free samples
`
`and literature, and urge them to play new singles. Fredric Dannen, HIT MEN 7
`
`(1990); R. Serge Denisoff, SOLID GOLD, THE POPULAR RECORD INDUSTRY 260
`
`
`3 “[I]t is to be expected that it would lead firms to increase other forms of
`promotional activity, trade press advertising, mailings, visits by salesmen, personal
`appearances by performers and, in general, all other forms of ‘plugging.’ ... We
`have seen that shortly after payola became illegal, there was apparently an
`increased activity by the promotion departments of record companies.” See
`Ronald H. Coase, Payola in Radio and Television Broadcasting, 22 J.L. & ECON.
`269, 316, 317 (1979).
`
`
`
`-6-
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`

`USCA11 Case: 15-13100 Document: 50-2 Date Filed: 10/13/2015 Page: 18 of 43
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`
`(1975); cf. Michael C. Keith, THE RADIO STATION 106 (8th ed. 2010) (“radio
`
`stations seldom pay for their music” because “recording companies send demos of
`
`their new product to most stations”). They also distributed mini-albums and mass
`
`mailings to radio personnel, and bought radio advertising spots featuring album
`
`cuts. Denisoff, supra, at 264, 268-69 (spot advertising turned Don McLean’s
`
`“American Pie” into 1971’s top record). Solicitation of target stations was intended
`
`to induce airplay throughout the industry, as stations in the same and different
`
`markets follow the lead of highly rated stations. G. Sidak & D. Kronemeyer, The
`
`‘New Payola’ and the American Record Industry: Transactions Costs and
`
`Precautionary Acts For Illicit Services, 10 HARV. J.L. & PUB. POL’Y 521, 526
`
`(1987).
`
`The “buckshot” economic model of record companies—releasing many
`
`records so that a few would attain commercial success—contributed to the
`
`competitive frenzy for airplay. Mol & Wijnberg, supra, at 710; Denisoff, supra, at
`
`97-98. Record companies showered radio stations with approximately 7,000
`
`singles each year. Denisoff, supra, at 253. Radio promotional spending accelerated
`
`throughout the 1970s, and companies increasingly retained powerful independent
`
`promoters. Dannen, supra, at 11-17. Because record companies only made money
`
`from hits, and “[p]eople did not buy pop music they never heard,” “promotion, the
`
`art and science of getting songs on the air, drove the record business.… Even the
`
`
`
`-7-
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`

`USCA11 Case: 15-13100 Document: 50-2 Date Filed: 10/13/2015 Page: 19 of 43
`
`
`best A&R—artist and repertoire—couldn’t save you if radio gave you the cold
`
`shoulder.” Id. at 9.4
`
`Unsurprisingly, White Whale Records engaged in extensive radio promotion
`
`in developing The Turtles’ hit records in the 1960s. Former Turtle Howard Kaylan
`
`testified to the importance of promotion: “My gosh, yes, that was everything when
`
`they came out. And radio was the only forum for it at the time. So, yes, it was vital
`
`in the ’60s.” D.I. 81-2 (Kaylan Tr. 70:21-24) (emphasis added). White Whale
`
`founder Ted Feigin attributed The Turtles’ first hit single partly to his and his co-
`
`founder’s abilities, as “former promotion men,” “‘to call on their collective
`
`4 The same dynamic exists today. More than 245 million people, an “all-time
`high” (comprising over 91% of those 12 or older), listen to radio each week.
`State
`of
`the
`Media:
`Audio
`Today,
`Nielsen,
`http://www.nielsen.com/us/en/insights/reports/2015/state-of-the-media-audio-
`today-a-focus-on-black-and-hispanic-audiences.html. Radio remains critical to
`music discovery. See Edison Research and Triton Digital, The Infinite Dial 2015,
`at 33, 36 (national survey of people aged 12 and older who said it was important to
`keep up-to-date with music finding that more respondents (69%) used AM/FM
`radio for keeping up with music than used YouTube, Pandora, Facebook, Apple
`iTunes, Spotify, iHeartRadio, music TV channels, satellite radio, music blogs or
`in-store information/displays; AM/FM radio also reported to be the source used
`most), http://www.edisonresearch.com/the-infinite-dial-2015; Nate Rau, Sony
`Nashville CEO Talks Importance of Country Radio,” THE TENNESSEAN (Feb. 25,
`2015)
`(“‘If
`you’re
`not
`on
`country
`radio,
`you
`don’t
`exist.’”),
`http://www.tennessean.com/story/money/industries/music/2015/02/20/sony-
`nashville-ceo-talks-importance-country-radio/23768711/; In Re: Determination of
`Royalty Rates and Terms for Ephemeral Recording and Digital Performance of
`Sound Recordings (Web IV), Docket No. 15-CRB-0001-WR (Copyright Royalty
`Board), Hearing Tr. 966:16-23 (April 30, 2015) (testimony of Aaron Harrison,
`Senior Vice President, UMG Recordings, Inc., characterizing “[t]errestrial radio”
`as “a platform where we can break artists and get the DJs … to pump up artists” so
`that listeners “migrate from terrestrial radio to actually purchasing” the music).
`
`
`
`-8-
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`USCA11 Case: 15-13100 Document: 50-2 Date Filed: 10/13/2015 Page: 20 of 43
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`
`experiences with distributors and disk jockeys.’” “Ex’s” Striking It Rich on W.
`
`Coast, BILLBOARD at 3 (Dec. 11, 1965); Calif. Setting The Tempo in Sounds, Song,
`
`Style, BILLBOARD at 1 (Apr. 9, 1966) (Turtles manager Bill Utley: “we still need
`
`disk jockey play on the East to get us on the Top 10 nationally”).
`
`FEI and its predecessors have known for decades that terrestrial radio
`
`stations have played their songs, but have never demanded any license or
`
`compensation from them to play Turtles songs. D.I. 81-2 (Kaylan Tr. 99:1-100:4);
`
`D.