Before theUNITED STATES COPYRIGHT ROYALTY JUDGES

Washington, D.C.

In the Matter of:

Digital Performance Right in SoundRecordings and Ephemeral Recordings

Docket No. 2009-1

CRB Web casting III

INTRODUCTORY MEMORANDUM TO THEWRITTEN REBUTTAL CASE OF SOUNDEXCHANGE, INC.

SoundExchange, Inc. ("SoundExchange"), through its undersigned counsel, respectfully

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

and briefly summarizes the testimony of its witnesses.

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

written rebuttal case.

SoundExchange Rebuttal Exhibit 2 is a Live365 Statement of Account, which is

confidential under 37 C.F.R. § 380.5. Pursuant to § 380.5(d)(4), SoundExchange has marked

this exhibit as Restricted, and is filing a motion to designate the exhibit as Restricted.

SUMMARY OF SOUNDEXCHANGE'S WRITTEN REBUTTAL CASE

A. Revised Proposed Rates and Terms

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,

SoundExchange is submitting proposed regulations that implement SoundExchange's rate

proposaL. The proposed regulations show changes from the current regulations in redlined

format.

B. Witness Testimony

SoundExchange is submitting the written testimony of two witnesses, one of whom is an

expert witness (Ordover) and one of whom is a fact witness (Funn).

Janusz Ordover, Ph.D., is Professor of Economics and former Director of the Masters in

Economics Program at New York University. He previously served as Deputy Assistant

Attorney General for Economics at the Antitrust Division of the United States Department of

Justice. His areas of specialization include industrial organization economics, particularly

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

developing a recommended rate structure is severely flawed -- it is premised on the false

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

should not consider the SoundExchange-NAB agreement without substantial adjustment.

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

willing buyer/willing seller standard.

Kyle Funn is Manager, Licensing and Enforcement, at SoundExchange. His job

responsibilities include monitoring licensees' compliance with statutory and regulatory

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

work for SoundExchange.

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Michael J. Huppe (DC Bar 455161)General CounselC. Colin Rushing (DC Bar 470621)Senior CounselSoundExchange, Inc.1121 14th Street, N.W., Suite 700Washington, D.C. 20005(v) 202-640-5858(f) 202-640-5883mhuppe@soundexchange.comcrushing@soundexchange.com

Of Counsel

June 7, 2010

;;gDavid A. Handzo (DC Bar 3840 )

Michael B. DeSanctis (DC Bar 460961)Jared O. Freedman (DC Bar 469679)JENNER & BLOCK LLP1099 New York Ave., N.W.Washington, D.C. 20001

(v) 202-639-6000(f) 202-639-6066dhandzo@jenner.commdesanctis@jenner.comj freedman@jenner.com

Counsel for SoundExchange, Inc.

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