[862] Paul M. Smith argued the cause for appellant. With him on the briefs were Steven R. Englund, Jared O. Freedman, Lindsay C. Harrison, Steven M. Marks, Susan B. Chertkof, and Scott A. Zebrak. David A. Handzo entered an appearance.

Kelsi Brown Corkran, U.S. Department of Justice, argued the cause for appellee. With her on the brief were Tony West, Assistant Attorney General, and Scott R. McIntosh, Attorney. Sarang V. Damle, Attorney, entered an appearance.

Jay Cohen argued the cause for intervenors National Music Publishers' Association, Inc., et al. With him on the brief were Lynn B. Bayard, David W. Brown, Jay Rosenthal, Senior Vice-President & General Counsel, National Music Publishers' Association, Inc., Kathryn E. Wagner, Vice President & Counsel, National Music Publishers' Association, Inc., Charles J. Sanders, Special Counsel, Songwriters Guild of America, and Carl W. Hampe.

Before: GARLAND and KAVANAUGH, Circuit Judges, and RANDOLPH, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge KAVANAUGH.

[863] KAVANAUGH, Circuit Judge:

By law, the Copyright Royalty Board sets the terms and rates for copyright royalties when copyright owners and licensees fail to negotiate terms and rates themselves. As part of its statutory mandate, the Board sets royalty terms and rates for what is known as the § 115 statutory license. That license allows individuals to make their own recordings of copyrighted musical works for distribution to the public without the consent of the copyright owner.

In carrying out its statutory responsibilities under 17 U.S.C. § 115, the Board instituted a 1.5 percent per month late fee for late royalty payments. It also implemented a penny-rate royalty structure for cell phone ringtones, under which copyright owners receive 24 cents for every ringtone sold using their copyrighted work.

The Recording Industry Association of America challenges those two aspects of the Board's decision, arguing that they were arbitrary and capricious for purposes of the Administrative Procedure Act. We conclude that the Board's decision was reasonable and reasonably explained. We therefore affirm the Board's determination.

Most songs played on the radio, sold on CDs in music stores, or digitally available on the Internet through services like iTunes embody two distinct copyrights — a copyright in the "musical work" and a copyright in the "sound recording." See 17 U.S.C. § 102. The musical work is the musical composition — the notes and lyrics of the song as they appear on sheet music. The sound recording is the recorded musical work performed by a specific artist.

Although almost always intermingled in a single song, those two copyrights are legally distinct and may be owned and licensed separately. One party might own the copyright in the words and musical arrangement of a song, and another party might own the copyright in a particular artist's recording of those words and musical notes.

This case involves licenses in a limited category of copyrighted musical works — as opposed to sound recordings. Section 115 of the Copyright Act allows an individual to make and distribute phonorecords (that is, sound recordings) of a copyrighted musical work without reaching any kind of agreement with the copyright owner. That right does not include authorization to make exact copies of an existing sound recording and distribute it; if a musical work has been recorded and copyrighted by another artist, a licensee "may exercise his rights under the [§ 115] license only by assembling his own musicians, singers, recording engineers and equipment, etc. for the purpose of recording anew the musical work that is the subject of the [§ 115] license." 2 MELVILLE B. NIMMER & DAVID NIMMER, NIMMER ON COPYRIGHT § 8.04[A], at 8-58.5 (2009). For example, a § 115 licensee could pull together a group of musicians to record and sell a cover version of Bruce Springsteen's 1975 hit Born to Run, but that licensee could not make copies of Springsteen's recording of that song and sell them.

The § 115 licensing regime operates in a fairly straightforward manner. When a copyright owner distributes work "to the public," § 115's provisions are triggered. 17 U.S.C. § 115(a)(1). Once that occurs, anyone may "obtain a compulsory license to make and distribute phonorecords of the work" under § 115 so long as the "primary purpose in making [the] phonorecords is to distribute them to the public [864] for private use." Id. Assuming the copyright has been registered with the Copyright Office, the licensee owes the copyright owner a royalty for every phonorecord "made and distributed in accordance with the [§ 115] license." Id. § 115(c)(2). For purposes of the Copyright Act, a phonorecord is "distributed" — and an obligation to pay the copyright owner a royalty created — when "the person exercising the [§ 115] license has voluntarily and permanently parted with" the phonorecord. Id. In other words, the licensee's sale of its recording of the copyright owner's work triggers the royalty payment obligation. See NIMMER § 8.04[H][1], at 8-77.

Because the § 115 license issues without any agreement between the copyright owner and the licensee, the system needs a mechanism to figure out how much the licensee owes the copyright owner and what the terms for paying that rate should be. Although that mechanism has changed over time, the Copyright Royalty Board currently serves as the rulemaking body for this system. See generally Procedural Regulations for the Copyright Royalty Board, 70 Fed.Reg. 30,901 (May 31, 2005) (discussing the history of royalty ratemaking). The Board is a three-person panel appointed by the Librarian of Congress and removable only for cause by the Librarian.^[1] The Board sets the terms and rates for copyright royalties when copyright owners and licensees fail to negotiate terms and rates themselves. See NIMMER § 7.27[C], at 7-243.

As relevant here, the Copyright Act requires the Board to set "reasonable terms and rates" for royalty payments made under the § 115 license when the parties to the license fail to do so. 17 U.S.C. § 801(b)(1). When establishing terms and rates under that license, the Copyright Act requires the Board to balance four general and sometimes conflicting policy objectives: (1) maximizing the availability of creative works to the public; (2) providing copyright owners a fair return for their creative works and copyright users a fair income; (3) recognizing the relative roles of the copyright owners and users; and (4) minimizing any disruptive impact on the industries involved. Id. § 801(b)(1)(A)-(D).

At specified intervals, the Board holds ratemaking proceedings for licenses issued under the Copyright Act. Section 115 ratemaking proceedings can occur every five years "or at such other times as the parties have agreed." Id. § 804(b)(4).

In 1996, the parties with an interest in the § 115 license (such as the Recording Industry Association of America, the Songwriter's Guild of America, and the National Music Publishers' Association) agreed on various terms and rates for the compulsory license. They also agreed that the settlement with respect to those terms and rates would expire 10 years later. In 2006, after the parties found they could not reach a new compromise, the Board instituted proceedings to set certain terms and rates governing the operation of the § 115 license. The process was long and complicated, involving 28 days of live testimony, more than 140 exhibits, and more than 340 pleadings, motions, and orders. See Mechanical and Digital Phonorecord Delivery Rate Determination Proceeding, 74 Fed. Reg. 4510, 4511 (Jan. 26, 2009).

[865] When the Board published its final determination from those proceedings in 2009, it announced one new § 115 licensing term and two new § 115 royalty rates. First, the Board instituted a late payment of 1.5 percent per month for overdue royalties, measured from the date payment is due. Second, it established a royalty rate for cellular phone ringtones — a sound cell phones can make when they ring that often samples a popular song. It set the rate at 24 cents per ringtone sold.^[2] Third, with respect to physical phonorecords (like CDs) and permanent digital downloads (like those purchased from iTunes), the Board set the § 115 royalty rate at the greater of 9.1 cents per song or 1.75 cents per minute of playing time.

The Recording Industry Association of America, known as RIAA, is a trade association representing companies that create, manufacture, and distribute sound recordings. It participated as a party in the § 115 licensing proceedings. After the Board issued its determination, RIAA filed a motion for rehearing. The Board denied the motion.

RIAA now appeals two aspects of the Board's ruling: (1) the imposition of a 1.5 percent per month late fee and (2) the imposition of a penny-rate royalty structure for ringtones at 24 cents per ringtone sold.

RIAA does not contend that the Board contravened any specific statutory limit. In other words, this is a State Farm case, not a Chevron case. The Board's rulings are subject to review in this Court under the arbitrary and capricious standard of the Administrative Procedure Act. 17 U.S.C. § 803(d)(3); see 5 U.S.C. § 706(2)(A). As a general matter, our review under that standard is deferential. See FCC v. Fox Television Stations, ___ U.S. ___, 129 S.Ct. 1800, 1810, 173 L.Ed.2d 738 (2009); Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983). And we give "substantial deference" to the ratemaking decisions of the Board because Congress expressly tasked it with balancing the conflicting statutory objectives enumerated in the Copyright Act. SoundExchange, Inc. v. Librarian of Congress, 571 F.3d 1220, 1225 (D.C.Cir. 2009). "To the extent that the statutory objectives determine a range of reasonable royalty rates that would serve all [the] objectives adequately but to differing degrees, the [Board] is free to choose among those rates, and courts are without authority to set aside the particular rate chosen by the [Board] if it lies within a zone of reasonableness." Recording Indus. Ass'n of America v. Copyright Royalty Tribunal, 662 F.2d 1, 9 (D.C.Cir.1981) (internal quotation marks omitted).

We first consider RIAA's challenge to the 1.5 percent late fee.

The Copyright Act authorizes the Board to impose a late fee for § 115 royalty payments: "A determination of the Copyright Royalty [Board] may include terms with respect to late payment, but in no way shall such terms prevent the copyright holder from asserting other rights or remedies provided under this title." 17 U.S.C. § 803(c)(7).

The factors listed in § 801(b)(1) of the Copyright Act govern the Board's decision to impose a late fee, as well as its determination of the amount of that fee. Recall that those factors include: (1) maximizing [866] the availability of creative works to the public; (2) providing copyright owners a fair return for their creative works and copyright users a fair income; (3) recognizing the relative roles of the copyright owners and users; and (4) minimizing any disruptive impact on the industries involved. Applying those broad and rather amorphous factors, the Board concluded that the 1.5 percent late fee comports with the statutory objectives because it strikes a balance "between providing an effective incentive to the licensee to make payments timely on the one hand and not making the fee so high that it is punitive on the other hand." Mechanical and Digital Phonorecord Delivery Rate Determination Proceeding, 74 Fed.Reg. 4510, 4528 (Jan. 26, 2009) (internal quotation marks omitted).

RIAA levies several challenges to the late fee. First, RIAA argues that the Board must set royalty terms and rates that track those found in the marketplace and that the Board failed to do so here. Second, RIAA asserts that the late fee is unnecessary in the § 115 licensing context because copyright owners possess a termination right that can be invoked when payments are late. Third, RIAA contends that a late fee is inappropriate because the lateness of payments results in large part from uncertainty about the appropriate division of royalties among joint copyright owners. RIAA suggests that this problem is the fault of the copyright owners themselves. Fourth, RIAA relatedly submits that the Board failed to adequately address its argument about the problems presented by co-copyright owners. We will consider each of those objections in turn.

RIAA argues that the late fee must be tethered to late fees that can be found in the existing market for voluntary licenses. By RIAA's account, there are no late fees in the voluntary market for the copyrights that § 115 covers. As a result, RIAA contends the Board should not be able to impose a late fee in this compulsory license setting.

The Copyright Act provides that the Board "may consider rates and terms under voluntary license agreements" in addition to the mandatory "objectives set forth in section 801(b)(1)" when setting the terms of the § 115 license. 17 U.S.C. § 115(c)(3)(D). As this Court explained in Recording Industry Association of America v. Librarian of Congress, the Librarian has interpreted a Seventh Circuit "precedent to mean that marketplace analogies, along with other evidence, must be considered," which we held to be "a reasonable interpretation of the precedent." 176 F.3d 528, 534 (D.C.Cir.1999). At most, then, the Board must "consider[]" the existing market for voluntary licenses.

The Board did so here, explaining that a late fee would correspond with the practices in other similar markets — in particular, the closely related webcasting and satellite digital radio industries. 74 Fed.Reg. at 4527; see Determination of Rates and Terms for Preexisting Subscription Services and Satellite Digital Audio Radio Services, 73 Fed.Reg. 4080, 4099 (Jan. 24, 2008); Digital Performance Right in Sound Recordings and Ephemeral Recordings, 72 Fed.Reg. 24,084, 24,107 (May 1, 2007). The copyright owners presented evidence during the proceedings — considered by the Board — that the major record labels have late fee clauses in their royalty contracts with digital music services like iTunes. J.A. 523-24. And RIAA acknowledged that at least a handful of royalty agreements provide copyright owners with late-fee protection. J.A. 618-19.

The Board also considered other relevant market metrics. Copyright owners presented evidence indicating that payments were frequently made to copyright [867] owners after they were due. Some of the evidence in the record suggested that from January 2000 to September 2007, over 41,000 payments totaling more than $2.1 billion arrived after their due dates. J.A. 433. Though RIAA disputed the magnitude of the problem, none of the parties to the proceeding claimed the problem was non-existent. 74 Fed.Reg. at 4527 n. 50.

And although the Board considers market conditions when setting terms and rates, they are not required to choose a late fee that exactly matches a market rate. Such a rule would, in effect, nullify the congressional authorization for late fees.

In short, the Board appropriately took market evidence into account when imposing the late fee.

The Copyright Act authorizes copyright owners to terminate § 115 licenses for nonpayment. 17 U.S.C. § 115(c)(6). RIAA argues that the presence of that provision renders a late fee unnecessary.

But the Copyright Act itself refutes this either-or argument. The statute both grants the copyright owners a termination right and authorizes the Board to impose a late fee. Moreover, by the terms of the statute, that late fee "in no way shall ... prevent the copyright holder from asserting other rights or remedies provided" by the Copyright Act. Id. § 803(c)(7). The congressional scheme clearly contemplates both a termination right and a late fee.

The congressional framework makes good sense because the incentive to make timely payments in order to avoid § 115 license termination is rather weak, if any such incentive exists at all. Under the terms of the statute, a copyright owner must give a licensee 30 days to cure any nonpayment before terminating the license. Id. § 115(c)(6). As the Government persuasively points out, the termination provision "cannot possibly serve as an incentive to make timely royalty payments, because the licensee can avoid any consequences of withholding payment by simply waiting until the copyright owner initiates termination and then making the payment before the 30-day notice period has expired." Government's Br. at 40.

In short, a copyright owner's ability to terminate a § 115 license in no ways bars the imposition of a late fee.

RIAA also asserts that it was unreasonable for the Board to impose a late fee benefiting copyright owners because, it says, copyright owners are often the source of the problems that cause late payment. By RIAA's account, when more than one party owns a copyright in a work, those joint copyright owners often fail to decide who is entitled to what share of the royalties. RIAA contends that uncertainty about what amount is owed to individual copyright owners when a copyright is jointly held is often the underlying reason that payments are late.

That argument is unpersuasive. Even if it were true that divided interests in a copyright made it difficult to make timely payments to each copyright owner, that fact would in no way counsel against the imposition of a late fee. The regulations governing the operation of the § 115 license contemplate that scenario and set forth a solution. A licensee can satisfy its obligation to pay a royalty by paying any one copyright owner — even when many individuals have a stake in a copyright. See 37 C.F.R. § 201.18(a)(5) ("For the purposes of this section, the term copyright owner, in the case of any work having more than one copyright owner, means any one of the co-owners.") (emphasis omitted); id. § 201.18(a)(6) ("In the case where the work has more than one copyright [868] owner, the service of the Notice on any one of the co-owners ... shall be sufficient with respect to all co-owners."); id. § 201.19(a)(5) ("In the case where the work has more than one copyright owner, the service of the Statement of Account on one co-owner ... shall be sufficient with respect to all co-owners.").

We therefore reject this argument as a basis for upsetting the Board's imposition of a late fee.

RIAA relatedly argues that the Board failed to adequately consider RIAA's assertion that a late fee was unreasonable because of the uncertainties caused by split payments. But both the Board's final determination and the order denying RIAA's motion for a rehearing specifically addressed that argument. And as we have already discussed, the problem presented by jointly held copyrights is really no problem at all; a licensee can meet its § 115 licensing obligation by paying any one owner of a jointly owned copyright.

In sum, RIAA has failed to raise any argument that would justify our overturning the Board's 1.5 percent per month late fee.

We next consider RIAA's challenge to the royalty rates for cell phone ringtones.^[3]

As part of the § 115 licensing proceedings, the Board established what is known as a penny-rate royalty structure for ringtones. Under that rate, copyright owners receive 24 cents for every ringtone sold using their copyrighted work.

In the proceeding before the Board, RIAA argued for a percentage-of-revenue royalty structure under which copyright owners would receive 15 percent of the wholesale revenue derived from the sale of a ringtone. As a less preferred alternative, RIAA sought a penny-rate royalty structure in which copyright owners would receive 18 cents per ringtone sold.^[4]

Applying the § 801(b)(1) criteria, the Board settled on a penny-rate royalty structure of 24 cents per ringtone sold. With respect to the first statutory criterion it had to consider — maximizing the availability of creative work — the Board concluded that a "nominal rate[] for ringtones" supports that objective. Mechanical and Digital Phonorecord Delivery Rate Determination Proceeding, 74 Fed. Reg. 4510, 4524 (Jan. 26, 2009). As to the second criterion — affording the copyright [869] owner a fair return — the Board found that the new rates did not deprive copyright owners of a fair return on their creative works. Id. The Board also found that the penny rate met the third statutory criterion — respecting the relative roles of the copyright owner and user. Id. at 4525. And under the fourth criterion — minimizing disruptive impact on the industry — the Board found that the rate structure it chose was reasonable and already in place in many parts of the market, minimizing any disruptive impact. Id.

On two separate grounds, RIAA now challenges the structure of the ringtone royalty rate imposed by the Board — specifically, the fact that it is a penny rate rather than a percentage-of-revenue rate. First, using an argument similar to the one it lodged against the 1.5 percent late fee, RIAA alleges that the penny-rate royalty structure inappropriately departs from market analogies for voluntary licenses. Second, RIAA contends that a penny rate is unreasonable in light of falling ringtone prices.

As previously discussed, although existing market rates for voluntary licenses do not bind the Board when making its determinations, the Board considered those rates when selecting the penny-rate royalty structure.

The Board expressly recognized that marketplace ringtone contracts typically provide for royalty payments at the greater of (1) a penny rate ranging from 10 to 25 cents; (2) a percentage of retail revenue ranging from 10 to 15 percent; and (3) a percentage of gross revenue ranging from 9 to 20 percent. 74 Fed.Reg. at 4518.

After weighing the costs and benefits of the parties' proposals and taking into account relevant market practices, the Board concluded that a penny rate was superior to a percentage-of-revenue rate for several reasons.

First, the Board determined that a penny rate was more in line with reimbursing copyright owners for the use of their works. Under the Board's determination, every copyright owner will receive 24 cents every time a ringtone using their work is sold. By contrast, under a percentage-of-revenue system, the royalty paid to copyright owners would vary based on factors in addition to the number of ringtones sold, such as the price charged to the end consumer. This Court has validated the Board's preference for a royalty system based on the number of copyrighted works sold — like the penny rate — as being more directly tied to the nature of the right being licensed than a percentage-of-revenue rate. See Intercollegiate Broad. Sys., Inc. v. Copyright Royalty Bd., 574 F.3d 748, 760-61 (D.C.Cir.2009).

Second, when looking to market analogies, the Board determined that many of the concerns driving the adoption of a percentage-of-revenue royalty structure in other instances were absent here. For example, the Board had previously concluded that a percentage-of-revenue royalty structure made sense in the satellite digital radio context because it would be difficult to measure how much a given work was actually used. See Determination of Rates and Terms for Preexisting Subscription Services and Satellite Digital Audio Radio Services, 73 Fed.Reg. 4080, 4086 (Jan. 24, 2008). In the case of ringtones, "measuring the quantity of reproductions presents no such problems." 74 Fed.Reg. at 4516. In a market based on the sale of individual copyrighted works (like the ringtone market) as opposed to a market where copyrighted works are bundled and sold as a service to consumers (like satellite radio) figuring out how many [870] times a copyrighted work is used (i.e., sold) is much easier.

Third, the Board found that the simplicity of using a penny-rate royalty structure supported its adoption: "No proxies need be formulated to establish the number of such reproductions," which are "readily calculable as the number of units in transactions between the parties." 74 Fed.Reg. at 4516. That simplicity contrasts sharply with the "salient difficulties" presented by RIAA's proposed percentage-of-revenue royalty structure. Id. As the Board recognized, not least among these difficulties were definitional problems such as disagreements about what constituted "revenues." Id.

Tying all of those strands together, the Board ultimately concluded "that a single penny-rate structure is best applied to ringtones as well as physical phonorecords and digital permanent downloads" because of "the efficiency of administration gained from a single structure when spread over the much larger number of musical works reproduced" under the § 115 licensing regime. 74 Fed.Reg. at 4517 n. 21. In the Board's view, the penny rate provided "the most efficient mechanism for capturing the value of the reproduction and distribution rights at issue." 74 Fed.Reg. at 4515.

We find nothing unreasonable about the Board's preference for a penny-rate royalty structure.

RIAA also argues that plummeting ringtone prices render the penny rate inherently unreasonable. The Board considered and rejected this argument, stating: "RIAA's shrill contention that a penny-rate structure `would be disruptive as consumer prices continue to decline' and should, therefore, be replaced by a percentage rate system in order to satisfy 801(b) policy considerations ... is not supported by the record of evidence in this proceeding. ... RIAA [does not] offer any persuasive evidence that would in any way quantify any claimed adverse impact on projected future revenues stemming from the continued application of a penny-rate structure. ..." 74 Fed.Reg. at 4516.

Although the Board concluded that falling ringtone prices were not relevant to the choice of a penny-rate royalty as opposed to a percentage-of-revenue royalty, it did find information about declining prices useful in structuring the terms of the penny rate it chose. See 74 Fed.Reg. at 4523. For example, the Board referenced concerns about reduced revenues when rejecting the copyright owners' request that selected rates be adjusted annually for inflation. Id.

The Board examined the relevant data and determined that there was no meaningful link between the selection of a penny-rate royalty structure for ringtones and future ringtone revenues. RIAA has failed to present any basis for us to overturn that conclusion.

We affirm the Copyright Royalty Board's determination.

So ordered.

[1] RIAA has not raised a constitutional challenge to the method of appointment of the members of the Copyright Royalty Board. Cf. Intercollegiate Broad. Sys., Inc. v. Copyright Royalty Bd., 574 F.3d 748, 755-56 (D.C.Cir. 2009); SoundExchange, Inc. v. Librarian of Congress, 571 F.3d 1220, 1226-27 (D.C.Cir. 2009) (Kavanaugh, J., concurring).

[2] In 2006, the Register of Copyrights ruled that ringtones are phonorecords that fall within the scope of the § 115 license. Mechanical and Digital Phonorecord Delivery Rate Adjustment Proceedings, 71 Fed.Reg. 64,303 (Nov. 1, 2006).

[3] The Government and intervenors argue that waiver, estoppel, or a lack of standing bars RIAA from challenging the Board's imposition of a penny-rate royalty structure for ringtones. Though varying in flavor, these arguments all follow the same essential form: Because RIAA endorsed a penny-rate structure as a less preferred alternative to a percentage-of-revenue structure before the Board, it waived its right to challenge (or is estopped from challenging, or lacks standing to challenge) the imposition of the penny-rate royalty in this Court. Not so. This Court's case law indicates that a party can appeal an agency's adoption of a rate proposed by that party when it was proffered as a second-best option. Cf. Southern Natural Gas Co. v. FERC, 877 F.2d 1066, 1070-71 (D.C.Cir. 1989).

[4] Other parties to the proceeding offered competing rates. For example, the copyright owners endorsed a rate structure in which they would receive the greater of (1) 15 percent of all revenue associated with the ringtone, (2) 33.3 percent of the cost that would have been paid for the mechanical rights to the equivalent musical composition and sound recordings, and (3) 15 cents per ringtone, subject to periodic inflation adjustments. Mechanical and Digital Phonorecord Delivery Rate Determination Proceeding, 74 Fed.Reg. 4510, 4515 (Jan. 26, 2009).

Thomas P. Lane (Michael S. Elkin, Robert C. Turner, on the brief), Winston & Strawn LLP, New York, NY, for Applicant-Appellee-Cross-Appellant Yahoo! Inc.

Kenneth L. Steinthal (Harris Cohen, Greenberg Traurig LLP, San Francisco, CA, Jonathan Bloom, Gregory Silbert, Weil, Gotshal & Manges LLP, New York, NY, on the brief), Greenberg Traurig LLP, San Francisco, CA, for Applicant-Appellee-Cross-Appellant RealNetworks, Inc.

Nicholas Bagley (Tony West, Assistant Attorney General, Philip J. Weiser, Deputy Assistant Attorney General, Scott R. McIntosh, Attorney, Appellate Staff, Civil Division, Department of Justice, Catherine G. O'Sullivan, David Seidman, Attorneys, Appellate Section, Antitrust Division, Department of Justice, Washington, DC, on the brief), Attorney, Appellate Staff, Civil Division, Department of Justice, Washington, DC, for United States.

Michael E. Salzman (Marvin L. Berenson, Joseph J. DiMona, John Coletta, Broadcast Music, Inc., New York, NY, on the brief), Hughes, Hubbard & Reed LLP, New York, NY, for Amicus Curiae Broadcast Music, Inc.

Keenan Popwell (John C. Beiter, Zumwalt, Almon & Hayes PLLC, Nashville, TN, on the brief), SESAC, Inc., New York, NY, for Amicus Curiae SESAC, Inc.

David Leichtman (Hillel I. Parness, Robins, Kaplan, Miller & Ciresi LLP, New York, NY, W. Edward Bailey, Eleanor M. Lackman, Lovells LLP, New York, NY, David Uwemedimo, Confederation Internationale des Societes d'Auteurs et Compositeurs, Neuilly sur Seine, France, on the brief), Robins, Kaplan, Miller & Ciresi LLP, New York, NY, for Amicus Curiae Confederation Internationale des Societes d'Auteurs et Compositeurs.

Jay Cohen (Lynn B. Bayard, Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York, NY, Jay Rosenthal, Kathryn E. Wagner, National Music Publishers' Association, Inc., New York, NY, on the brief), Paul, Weiss, Rifkind, Wharton & Garrison LLP, New York, NY, for Amici Curiae [627 F.3d 68] Association of Independent Music Publishers, Church Music Publishers Association, Music Publishers' Association of the United States, National Music Publishers' Association, Inc., and Production Music Association.

Charles Cummings (Carl W. Hampe, Baker & McKenzie LLP, Washington, DC, Charles J. Sanders, Attorney at Law PC, Briarcliff Manor, NY, on the brief), Baker & McKenzie LLP, New York, NY, for Amici Curiae The Society of Composers and Lyricists, National Academy of Recording Arts and Sciences, Inc., Ad Hoc Coalition of Production Music Company Owners, The Game Audio Network Guild, and Songwriters Guild of America.

Al J. Daniel (Toby M.J. Butterfield, Christopher J. Marino, Cowan, DeBaets, Abrahams & Sheppard LLP, New York, NY, C. Paul Spurgeon, Society of Composers, Authors, and Music Publishers of Canada, Toronto, Ontario, Canada, on the brief), Cowan, DeBaets, Abrahams & Sheppard LLP, New York, NY, for Amicus Curiae The Society of Composers, Authors, and Music Publishers of Canada.

Paul M. Smith (Steven R. Englund, Carrie F. Apfel, on the brief) Jenner & Block LLP, Washington, DC, for Amici Curiae Digital Media Association, Entertainment Software Association, and Motion Picture Association of America, Inc.

John T. Mitchell, Interaction Law, Washington, DC, for Amici Curiae National Association of Recording Merchandisers, Inc., and Entertainment Merchants Association, Inc.

Susan Cleary, Independent Film and Television Alliance, Los Angeles, CA, for Amicus Curiae Independent Film and Television Alliance.

Bruce G. Joseph, Wiley Rein LLP, Washington, DC, for Amicus Curiae CTIA-The Wireless Association.

Before: JACOBS, Chief Judge, JOHN M. WALKER, JR., and LIVINGSTON, Circuit Judges.

JOHN M. WALKER, JR., Circuit Judge:

This case presents two distinct questions that arise from the transmittal of musical works over the Internet: First, whether a download of a digital file containing a musical work constitutes a public performance of that musical work; and, second, whether the district court, acting in its capacity as the rate court, was reasonable in its assessment of the blanket license fees of Yahoo! Inc. and RealNetworks, Inc. (collectively, "the Internet Companies") to publicly perform any of the millions of musical compositions in the American Society of Composers, Authors and Publishers ("ASCAP") repertory.

For the reasons set forth below, we affirm the district court's ruling that a download of a musical work does not constitute a public performance of that work, but we vacate the district court's assessment of fees for the blanket ASCAP licenses sought by the Internet Companies and remand for further proceedings.

The Internet Companies seek separate blanket licenses to publicly perform the entirety of the ASCAP repertory for certain of their websites and services. A blanket license is a license that gives the licensee the right to perform all of the works in the repertory for a single stated fee that does not vary depending on how much music from the repertory the licensee actually uses. [627 F.3d 69] United States v. Am. Soc'y of Composers, Authors & Publishers, No. 41-1395(WCC), 2001 WL 1589999, at *1 (S.D.N.Y. June 11, 2001). ASCAP licenses the non-dramatic, public performance rights in copyrighted musical works. More than 295,000 composers, songwriters, lyricists, and music publishers in the United States participate exclusively in licensing their music through ASCAP. ASCAP licenses approximately 45% of all of the musical works that are played on-line.

The Internet Companies perform music in myriad audio and audio-visual contexts. Yahoo! provides music content in various ways across its website. For example, a user can enjoy the specific song or music video he desires from an "on-demand" stream in Yahoo! Search, listen to a radio-style webcast in Yahoo! Music, view audio-visual clips from movies and television shows in Yahoo! Movies and Yahoo! TV, or upload and share his own videos using Yahoo! Video.^[1] However, only a small portion of the activity on Yahoo!'s website involves performances of musical works, and not all of the areas on Yahoo!'s website offer audio or audio-visual content.

RealNetworks performs music in audio and audio-visual contexts through a number of websites and subscription services.^[2] Like Yahoo!, these sites and services publicly perform musical works in numerous formats, including, inter alia, radio, television, movie, game, and music-video formats. Also like Yahoo!, only a portion of the content on RealNetworks' sites and services consist of performances of musical works.

In addition to performing music on websites and through services, the Internet Companies offer to users copies of recordings of musical works through download transmittals. A download is a transmission of an electronic file containing a digital copy of a musical work that is sent from an on-line server to a local hard drive. See United States v. Am. Soc'y of Composers, Authors & Publishers ( Application of Am. Online, Inc., RealNetworks, Inc., and Yahoo! Inc.) ( "RealNetworks and Yahoo! I"), 485 F.Supp.2d 438, 441 (S.D.N.Y.2007). With a download, the song is not audible to the user during the transfer. Id. at 442, 446. Only after the file has been saved on the user's hard drive can he listen to the song by playing it using a software program on his local computer. Id.

The Internet Companies primarily generate revenue from performances of musical works in two ways. On their websites, they make available, at no cost to users, performances of music, music videos, television programming, and the like that generate revenue from advertisements on the web page or in the audio or audio-visual [627 F.3d 70] player.^[3] The district court found that, in all of the forms of website advertising it considered, one principle is common: the larger the audience and the more times a site is visited, the greater the revenue generated. See United States v. Am. Soc'y of Composers, Authors & Publishers ( Application of Am. Online, Inc., RealNetworks, Inc., and Yahoo!) ( "RealNetworks and Yahoo! II"), 559 F.Supp.2d 332, 338 (S.D.N.Y.2008). For example, advertisers typically pay for display advertising based on the number of "impressions," or views, of the advertisement by users of the page on which an advertisement appears. The second primary way that the Internet Companies generate revenue from performing musical works is through subscription-based services.

Acting in its capacity as the rate court,^[4] the district court (William C. Conner, Judge)^[5] issued rulings in April 2007, April 2008, and January 2009 resolving the issues presented on appeal. In its 2007 decision, the district court held that a download of a digital file containing a musical work does not constitute a public performance of that work. In its 2008 decision, the district court determined a method for calculating the fees for the blanket licenses payable to ASCAP for the Internet Companies' performances of musical works in the ASCAP repertory. In two separate opinions issued in January 2009, the district court, applying the method it determined in 2008, issued Final Fee Determinations for Yahoo! and RealNetworks, respectively.

In its second opinion, issued in 2008, the district court arrived at a license fee formula that multiplied a royalty rate by the percentage of revenue attributable to the performance of music. The district court applied a uniform royalty rate to the Internet Companies' varying music uses that did not fluctuate over the different types of performances on the Internet Companies' sites and services. In ultimately determining a royalty rate of 2.5% for both of the Internet Companies, the district court relied upon several benchmark agreements, including ASCAP's agreements [627 F.3d 71] with Music Choice, terrestrial radio stations, the broadcast television networks, and the cable television networks.

For Yahoo!, because only a portion of the revenue generated from its website is attributable to performances of musical works, the district court decided to measure Yahoo!'s music-use revenue by multiplying the company's total revenue from its licensed services-defined as those business units that publicly perform music-less certain customary costs (such as for advertising sales commissions and traffic acquisition expenses) by a music-use-adjustment factor ("MUAF"). The MUAF was a fraction that reflected the amount of time users spent streaming performances of musical works relative to their overall time on the website; its numerator was the number of hours of music streamed from the licensed sites and services, and its denominator was the number of hours that the company's licensed sites and services were utilized.

For RealNetworks, the district court at first accepted ASCAP's argument that it was unnecessary to apply a MUAF because, unlike Yahoo!, "the vast majority of RealNetworks's revenue subject to fee is generated from subscription music services and advertising-supported sites where music is the central theme." RealNetworks and Yahoo! II, 559 F.Supp.2d at 399; see also id. at 411. The district court, however, did reduce RealNetworks' revenue figure by subtracting revenue attributable to RealNetworks' Technology Products and Solutions business unit, which develops and markets software products and services that enable wireless carriers, cable companies, and other media communication companies to distribute media content to PCs, mobile phones, and other non-PC devices. Id. at 359-60, 411-12. In its 2009 Final Fee Determination, the district court altered course and applied certain MUAFs to RealNetworks' various sites and services, but without explaining how it arrived at these MUAFs. (RealNetworks Judgment Order 2-4)

The Copyright Act confers upon the owner of a copyright "a bundle of discrete exclusive rights," each of which may be transferred or retained separately by the copyright owner. N.Y. Times Co. v. Tasini, 533 U.S. 483, 495-96, 121 S.Ct. 2381, 150 L.Ed.2d 500 (2001) (internal quotation marks omitted). Section 106 of the Copyright Act sets forth these various rights, including the right "to reproduce the copyrighted work in copies" and the right "to perform the copyrighted work publicly." 17 U.S.C. § 106(1), (4). In this case, the Internet Companies offer their customers the ability to download musical works over the Internet. It is undisputed that these downloads create copies of the musical works, for which the parties agree the copyright owners must be compensated. However, the parties dispute whether these downloads are also public performances of the musical works, for which the copyright owners must separately and additionally be compensated. The district court held that these downloads are not public performances, and we agree.^[6]

In answering the question of whether a download is a public performance, we turn to Section 101 of the Copyright Act, which states that "[t]o 'perform' a work means to recite, render, play, dance, or act it, either [627 F.3d 72] directly or by means of any device or process."^[7] 17 U.S.C. § 101. A download plainly is neither a "dance" nor an "act." Thus, we must determine whether a download of a musical work falls within the meaning of the terms "recite," "render," or "play."

"As in all statutory construction cases, we begin with the language of the statute. The first step is to determine whether the language at issue has a plain and unambiguous meaning with regard to the particular dispute in the case." Barnhart v. Sigmon Coal Co., 534 U.S. 438, 450, 122 S.Ct. 941, 151 L.Ed.2d 908 (2002) (internal quotation marks omitted). "[U]nless otherwise defined, statutory words will be interpreted as taking their ordinary, contemporary, common meaning." United States v. Piervinanzi, 23 F.3d 670, 677 (2d Cir.1994) (internal quotation marks and alterations omitted). "When the language of a statute is unambiguous, judicial inquiry is complete."^[8] Marvel Characters, Inc. v. Simon, 310 F.3d 280, 290 (2d Cir.2002) (internal quotation marks omitted); accord Barnhart, 534 U.S. at 450, 122 S.Ct. 941.

The ordinary sense of the words "recite," "render," and "play" refer to actions that can be perceived contemporaneously. To "recite" is "to repeat from memory or read aloud esp[ecially] before an audience," Webster's Third New International Dictionary 1895 (1981); to "render" is to "say over: recite, repeat,"^[9] id. at 1922; and to "play" is to "perform on a musical instrument," "sound in performance," "reproduce sound of recorded material," or "act on a stage or in some other dramatic medium," id. at 1737. All three actions entail contemporaneous perceptibility.

These definitions comport with our common-sense understandings of these words. Itzakh Perlman gives a "recital" of Beethoven's Violin Concerto in D Major when he performs it aloud before an audience. Jimmy Hendrix memorably (or not, depending on one's sensibility) offered a "rendition" of the Star-Spangled Banner at Woodstock when he performed it aloud in 1969. Yo-Yo Ma "plays" the Cello Suite [627 F.3d 73] No. 1 when he draws the bow across his cello strings to audibly reproduce the notes that Bach inscribed. Music is neither recited, rendered, nor played when a recording (electronic or otherwise) is simply delivered to a potential listener.

The final clause of the § 101 definition of "to perform" further confirms our interpretation. It states that "[t]o 'perform' ... a motion picture or other audiovisual work ... [is] to show its images in any sequence or to make the sounds accompanying it audible." 17 U.S.C. § 101. The fact that the statute defines performance in the audio-visual context as "show[ing]" the work or making it "audible" reinforces the conclusion that "to perform" a musical work entails contemporaneous perceptibility. ASCAP has provided no reason, and we can surmise none, why the statute would require a contemporaneously perceptible event in the context of an audio-visual work, but not in the context of a musical work.

The downloads at issue in this appeal are not musical performances that are contemporaneously perceived by the listener. They are simply transfers of electronic files containing digital copies from an on-line server to a local hard drive. The downloaded songs are not performed in any perceptible manner during the transfers; the user must take some further action to play the songs after they are downloaded. Because the electronic download itself involves no recitation, rendering, or playing of the musical work encoded in the digital transmission, we hold that such a download is not a performance of that work, as defined by § 101.

ASCAP, pointing to the definition of "publicly" in § 101, argues that a download constitutes a public performance. Section 101 defines "[t]o perform or display a work 'publicly' " as follows:

(1) to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or (2) to transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.

Id. § 101. ASCAP argues that downloads fall under clause (2) of this definition because downloads "transmit or otherwise communicate a performance," id., namely the initial or underlying performance of the copyrighted work, to the public. We find this argument unavailing. The definition of "publicly" simply defines the circumstances under which a performance will be considered public; it does not define the meaning of "performance." Moreover, ASCAP's proposed interpretation misreads the definition of "publicly." As we concluded in Cartoon Network LP v. CSC Holdings, Inc., "when Congress speaks of transmitting a performance to the public, it refers to the performance created by the act of transmission," not simply to transmitting a recording of a performance. 536 F.3d 121, 136 (2d Cir.2008). ASCAP's alternative interpretation is flawed because, in disaggregating the "transmission" from the simultaneous "performance" and treating the transmission itself as a performance, ASCAP renders superfluous the subsequent "a performance ... of the work" as the object of the transmittal. See Duncan v. Walker, 533 U.S. 167, 174, 121 S.Ct. 2120, 150 L.Ed.2d 251 (2001) ("It is our duty to give effect, if possible, to every clause and word of a statute." (internal quotation marks omitted)). In contrast, our interpretation [627 F.3d 74] in Cartoon Network recognizes that a "transmittal of a work" is distinct from a transmittal of "a performance"-the former being a transmittal of the underlying work and the latter being a transmittal that is itself a performance of the underlying work. See 536 F.3d at 134 ("The fact that the statute says 'capable of receiving the performance,' instead of 'capable of receiving the transmission,' underscores the fact that a transmission of a performance is itself a performance.").

The Internet Companies' stream transmissions, which all parties agree constitute public performances, illustrate why a download is not a public performance. A stream is an electronic transmission that renders the musical work audible as it is received by the client-computer's temporary memory. This transmission, like a television or radio broadcast, is a performance because there is a playing of the song that is perceived simultaneously with the transmission. See, e.g., Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 158, 95 S.Ct. 2040, 45 L.Ed.2d 84 (1975). In contrast, downloads do not immediately produce sound; only after a file has been downloaded on a user's hard drive can he perceive a performance by playing the downloaded song.^[10] Unlike musical works played during radio broadcasts and stream transmissions, downloaded musical works are transmitted at one point in time and performed at another. Transmittal without a performance does not constitute a "public performance." Cf. Columbia Pictures Indus., Inc., v. Prof'l Real Estate Investors, Inc., 866 F.2d 278, 282 (9th Cir.1989) (holding that renting videodiscs to a hotel guest for playback in the guest's room does not constitute the "transmission" of a public performance).

ASCAP misreads our opinion in NFL v. PrimeTime 24 Joint Venture, 211 F.3d 10, 11-13 (2d Cir.2000), to hold that the Copyright Act does not, in fact, require a contemporaneously perceptible performance to infringe on the public performance right. In NFL, defendant PrimeTime, a satellite television provider, captured protected content in the United States from the NFL, transmitted it from the United States to a satellite ("the uplink"), and then transmitted it from the satellite to subscribers in both the United States and Canada ("the downlink"). PrimeTime had a license to transmit NFL games to its subscribers in the United States but not to Canada. The NFL sought to enjoin the transmissions sent to Canada by arguing that the uplink in the United States constituted unauthorized public performances of the games in the United States. The relevant issue was whether the uplink transmission was a public performance even though the uplink was only to a satellite and could not, itself, be perceived by viewers. Id. at 12. We determined that PrimeTime's uplink transmission of signals captured in the United States amounted to a public performance because it was an integral part of the larger process by which the NFL's protected work was delivered to a public audience. Id. at 13.

ASCAP seizes on the fact that the uplink to the satellite was not contemporaneously perceptible to argue against a contemporaneous perceptibility requirement in this case. ASCAP's argument, however, fails to accord controlling significance to the fact that the immediately sequential downlink from the satellite to Canadian PrimeTime subscribers was a public performance of the games. Id. at 11-13; see also [627 F.3d 75] David v. Showtime/The Movie Channel, Inc., 697 F.Supp. 752, 758-60 (S.D.N.Y.1988) (finding that because "Showtime and The Movie Channel both broadcast television programming ... to cable system operators," which, in turn, "pass[ed] the signal along to their individual customers," the initial transmissions constituted public performances because they were a "step in the process by which a protected work wends its way to its audience"); Melville B. Nimmer & David Nimmer, 2 Nimmer on Copyright § 8.14[C][2] at 190.6 & n. 63 (2009) (explaining that when a transmission is made "to cable systems that will in turn transmit directly to the public," the earlier transmission is a public performance despite the absence of any contemporaneous perceptibility). In holding the transmission in Cartoon Network not to be a public performance, we distinguished NFL on the basis that in that case the final act in the sequence of transmissions was a public performance. See 536 F.3d at 137. That same distinction applies here. Just as in Cartoon Network, the Internet Companies transmit a copy of the work to the user, who then plays his unique copy of the song whenever he wants to hear it; because the performance is made by a unique reproduction of the song that was sold to the user, the ultimate performance of the song is not "to the public." See id. at 137, 138; see also United States v. Am. Soc'y of Composers, Authors & Publishers ( Application of Cellco P'ship), 663 F.Supp.2d 363, 371-74 (S.D.N.Y.2009).

Accordingly, we affirm the district court's grant of partial summary judgment on the basis that downloads do not constitute public performances of the downloaded musical works.^[11]

We now turn to the district court's determination of the appropriate fees payable by the Internet Companies for blanket licenses to publicly perform any of the millions of musical compositions in the ASCAP repertory. The district court determined these blanket license fees by applying a uniform royalty rate of 2.5% to the Internet Companies' music-use revenue, which was calculated by multiplying the total revenue from licensed services by a MUAF (music-use-adjustment factor), a fraction that reflected the amount of time users spent streaming performances of musical works relative to their overall time on the website. We conclude that the [627 F.3d 76] district court's analysis was flawed in two major respects.

First, the district court did not adequately support the reasonableness of its method for measuring the value of the Internet Companies' music use. Second, the district court did not adequately support the reasonableness of the 2.5% royalty rate applied to the value of the Internet Companies' music use. Accordingly, we remand to the district court so that it may redetermine reasonable fees for the licenses in light of the following discussion.

"In order to find that the rate set by the District Court is reasonable, we must find both that the rate is substantively reasonable (that it is not based on any clearly erroneous findings of fact) and that it is procedurally reasonable (that the setting of the rate, including the choice and adjustment of a benchmark, is not based on legal errors)." United States v. Broad. Music, Inc. ( Application of Music Choice) ( "Music Choice IV"), 426 F.3d 91, 96 (2d Cir.2005). Fundamental to the concept of "reasonableness" is a determination of what an applicant would pay in a competitive market, taking into account the fact that ASCAP, as a monopolist, "exercise[s] disproportionate power over the market for music rights." Id.

"A rate court's determination of the fair market value of the music is often facilitated by the use of benchmarks-agreements reached after arms' length negotiation between other similar parties in the industry." Id. at 94. Determinations by the district court that particular benchmarks are comparable and particular factors are relevant are questions of law reviewed de novo. Am. Soc'y of Composers, Authors & Publishers v. Showtime/The Movie Channel, Inc. ( "Showtime"), 912 F.2d 563, 569-71 (2d Cir.1990). However, factual findings as to each factor under consideration or those underlying a proposed benchmark agreement, as well as findings with respect to fair market value, are reviewed for clear error. Music Choice IV, 426 F.3d at 96; Showtime, 912 F.2d at 569; United States v. Am. Soc'y of Composers, Authors & Publishers ( Application of Capital Cities/ABC, Inc., CBS Inc., & Nat'l Broad. Co.), 157 F.R.D. 173, 195-96 (S.D.N.Y.1994).

Fundamental to the reasonableness of a fee for music use under a license is the reasonableness of the determination of the revenue attributable to the actual uses by the applicant of the music to which the rate percentage is to be applied. See United States v. Am. Soc'y of Composers, Authors and Publishers ( Applications of Capital Cities/ABC, Inc. & CBS, Inc.) ( "Capital Cities"), 831 F.Supp. 137, 156-57 (S.D.N.Y.1993); United States v. Am. Soc'y of Composers, Authors and Publishers ( Application of Nat'l Cable Television Ass'n.), No. 41-CV-1395 (WCC)(MHD), 1999 WL 335376, at *12 (S.D.N.Y. May 26, 1999). In this case, the value of the applicants' uses could not be premised on total revenue without an adjustment for the fact that some revenues were not at all attributable to any use of ASCAP music. The district court decided to make this adjustment by using a MUAF that discounted the total revenue to reflect only those revenues attributable to music use. We have no quarrel with the use of a MUAF here, but we find error in the district court's method of determining its components.

The district court began by calculating the total revenue of the licensed sites and services-defined as those business units that publicly perform music-less certain customary deductions, to arrive at the revenue [627 F.3d 77] base to which the MUAF was applied. The Internet Companies argue that total revenue, when used as the revenue base, bears no relation to the value they derive performing musical works on the Internet. This argument is unavailing because it overlooks the function of the MUAF, which can be understood as accounting for the value of the Internet Companies' music use in relation to their overall revenue. We find nothing wrong in concept with using a formula that reduces the total revenue of the licensed sites and services by a factor that, with substantial accuracy, accounts for music-use revenue, as the MUAF can be understood to do here.^[12] With respect to the components of the MUAF, however, we find error.

The district court's MUAF accounts for the value of Yahoo!'s music use by using the amount of time that music is streamed. Streaming time, however, neither drives nor correlates with Yahoo!'s advertising revenue. The record evidence makes plain that Yahoo!'s advertising revenue model more accurately correlates with the number of times a particular page is accessed by users than to the duration of streaming time. To the extent that the district court's MUAF relied on an imprecise metric for determining advertising revenue attributable to music use when a superior metric was apparently available and practicable,^[13] the district court's method for calculating the MUAF was unreasonable. [627 F.3d 78]^[14] E.g., Capital Cities, 831 F.Supp. at 156-57 (accepting amount of music used in television program as an adequate measure of the value of the music to the program because it was the only measure available).

Display advertising on the Internet is sold on a cost-per-thousand model that counts the total number of page impressions, i.e., how many times a particular page is accessed. Pages that are accessed a greater number of times occasion higher advertising rates because the advertisements on these pages are viewed with greater frequency. It is, thus, unreasonable to use streaming time, which has no necessary correlation with page views, as a proxy for the number of times a page is viewed; time spent on-line is not reflective of how a user interacts with a particular page.

A user may have a page open that he is not viewing at all, either because he has multiple pages open and is interacting with another page, website, or computer program, or because he has walked away from the computer altogether but has left that page open. For example, user A, who is listening to a four-minute song, may view only the page on which the song is playing in that four minutes because his exclusive focus is on the song, while user B, who is listening to the same song on as background music, may be simultaneously clicking on links and reading articles throughout Yahoo!'s website, and thus may be seeing multiple advertisements on multiple pages during that same four-minute period. The streaming time for users A and B is the same, but the advertising exposure of each differs widely.

The advertising marketplace takes account of the foregoing consideration by applying different advertising rates to different areas of the website. For example, advertising for radio-style webcasts in Yahoo! Music is priced at a rate lower than similarly placed ads on Yahoo!'s homepage, because users normally have the Yahoo! Music window minimized (and thus not viewable) for much of the time the radio-style music is playing, in contrast to other areas on Yahoo!, like the homepage, that command greater viewer attention.^[15] The [627 F.3d 79] district court erred by constructing a MUAF that failed to take into account these various realities of Internet advertising.^[16]

In sum, the district court erred by adopting an imprecise metric-music streaming time rather than page views-as the basis of its MUAF, without providing a sufficient rationale for that decision. We will not specify a particular method of developing a formula for determining music-use revenue on remand; we also leave it to the district court to determine whether it should proceed with a variant of its current formula (revenue multiplied by a MUAF) or in some other way altogether, in light of the foregoing discussion.

Yahoo! has also faulted the district court for using statistics with differing methodologies in the MUAF's numerator and denominator. In calculating the numerator, the district court used Yahoo!'s statistics for the number of hours of music streamed, which give no effect to the specific window engaged by the user. In calculating the denominator, the district court used statistics based on a different methodology provided by comScore Media Metrix for the total hours of use of the licensed sites and services.^[17] Unlike Yahoo!, comScore measures hours used only for the specific window that is engaged. The difference is that, in an instance in which a user has multiple windows open at one time, comScore will count the time for only the single window that is in active use, while Yahoo! will count the time for all the windows open. Yahoo!'s statistics thus reflect considerably greater use time than comScore's because, anytime a user has multiple windows open, Yahoo! is counting the time use for each of the Yahoo! windows open while comScore is counting the time use for only the single window engaged by the user. Without addressing whether one method is preferable to the other, we conclude that constructing a MUAF by using Yahoo!'s statistics for the numerator and comScore's statistics for the denominator is unreasonable because these statistics are not comparable, with the result that their comparison overstates music-streaming time.

The district court's opinion states that, as of the date of its issuance, Yahoo! had failed to supply any site-hours data comparable to that supplied by comScore that could have been used for the denominator, but that Yahoo! was free to do so before the district court ordered its Final Fee Determination. The parties disagree over whether Yahoo! ultimately furnished adequate total site-hours data. Because we remand for reconsideration of the MUAF, we refer this dispute to the district court. We do, however, note that in calculating any MUAF, the district court must strive to use measurements that are as consistent and as precise as practicable.

Turning to RealNetworks, as noted previously the district court in 2009 [627 F.3d 80] determined and applied differing MUAFs to RealNetworks' various licensed sites and services despite its decision not to apply MUAFs in 2008, without any explanation for the basis of these MUAFs. Accordingly, we remand for explanation (or reconsideration if the current MUAFs cannot be justified) because the district court's rationale was insufficient.

The district court applied the following MUAFs to RealNetworks. For its Rhapsody subscription service,^[18] the district court defined the MUAF's numerator as total number of plays of audio-music and music-video streams, and the denominator as the total number of Rhapsody streams plus the number of deliveries of conditionally downloaded music files to subscribers. (RealNetworks Judgment Order 2-3) For its SuperPass subscription service,^[19] the numerator was fixed as the total number of hours of streams to users in each month by means of the music-radio portion of SuperPass, and the denominator as the total number of SuperPass music hours plus the total number of hours of all other streams to users by means of SuperPass. (RealNetworks Judgment Order 3) And for RealNetworks' Music, and Media Software and Services groups, the district court used as the numerator the total number of hours of streams that non-subscription, on-demand, and radio-music users receive from RealNetworks' licensed sites, and as the denominator the total number of hours users spend on RealNetworks' licensed sites. (RealNetworks Judgment Order 4)

Because the district court failed to explain the basis for these MUAFs, and in light of the issues we raised with respect to the MUAF applied to Yahoo!, we remand for the district court to explain or reconsider the MUAFs applied to RealNetworks. In addition to consideration of any issues that it deems appropriate, the district court should address the following: (1) whether its method for calculating the MUAF for the Rhapsody subscription service is more precise or practicable than the method used in the benchmark agreements in the record; (2) whether there is a more precise way, that is also practicable, to account for the value of the music use for the SuperPass subscription service in light of the fact that some components of the subscription do not involve the streaming of content to users; and (3) whether there is a more precise and still practicable way to measure RealNetworks' advertising revenue, in light of the issues we raised in our discussion of Yahoo!'s MUAF.

The district court arrived at Yahoo!'s royalty rate by relying on benchmark agreements for blanket licenses that ASCAP entered into with Music Choice, terrestrial radio stations, the broadcast television networks, and cable television providers, as well as the rates that Yahoo! itself pays to the major record companies for music-video rights. The district court's factual findings that support selecting these benchmarks were not clearly erroneous. After reviewing the district court's analysis of these benchmarks in relation to this case, however, we hold that the district court unreasonably arrived at its decision to apply a uniform 2.5% royalty rate and that, in setting the royalty rate, the district court must follow an approach more tailored to the varying nature and scope of Yahoo!'s music use.

Beginning with the Music Choice benchmark, the district court found that Music Choice provides channels of music to listeners on a subscription basis via cable and satellite television and the Internet. Music Choice's channels are organized around genres of music, and, on the Internet, listeners have the option to create up to ten personalized audio channels. ASCAP's current blanket license with Music Choice, for the period January 1, 2006 through December 31, 2010, calls for payment of a royalty rate that is 2.5% of Music Choice's gross revenues, where gross revenue is defined as all revenues derived from the licensed services.

We conclude that the royalty rate agreed to by Music Choice provides strong support for applying a 2.5% royalty rate to those Yahoo! sites and services that provide access to music channels organized around music genre, similar to those on Music Choice. Additionally, it provides a basis for a 2.5% royalty rate, or higher, for Yahoo! sites and services that permit an interactive music experience, in which the user may control the selection of music he is hearing, for example if a user tunes into a more customized station or uses Yahoo! Search to listen to songs on-demand. See RealNetworks and Yahoo! II, 559 F.Supp.2d at 413.

However, the Music Choice benchmark does not justify applying a 2.5% royalty rate to all of Yahoo!'s music uses, because Yahoo! offers numerous sites and services that are less music intensive than Music Choice's offerings. The district court finessed the Music Choice benchmark's limited relevance by concluding that there are other benchmarks in the record that support applying a 2.5% royalty rate to all of Yahoo!'s performances of the ASCAP repertory. Because we conclude that these other benchmarks do not adequately support an across-the-board 2.5% royalty rate, we remand for reconsideration of a reasonable royalty rate.

Turning to the major broadcast television networks' agreements with ASCAP, the district court found that these agreements differed from Yahoo!'s because the major networks pay a flat rate for their ASCAP usage without regard to revenue (as specified in Yahoo!'s application) and that "[a similar] flat-fee structure is unsuitable for the online music industry," RealNetworks and Yahoo! II, 559 F.Supp.2d at 401. The district court nevertheless concluded that, by comparing the percentages of broadcast revenue that the television companies pay ASCAP under their flat royalty rate to the percentage of licensed services revenue that Yahoo! would pay if a 2.5% royalty rate (as well as a MUAF) were applied to its license, the networks' agreements could be "useful to gauge the reasonableness of the fee range ASCAP seeks from ... Yahoo!, and [Yahoo!'s] ability [627 F.3d 82] to pay the blanket fees rather than resorting to less efficient licensing options or foregoing the use of ASCAP music altogether." Id.

The district court found that "[t]he three television networks, ABC, CBS, and NBC, have annual revenues in the range of $3 to $4 billion [,] comparable to current ... Yahoo! revenues" and that the networks pay a percentage of broadcast revenue for their ASCAP license that is comparable to the amount Yahoo! would have paid if a 2.5% royalty rate (as well as a MUAF) was applied to the total domestic revenue from the licensed services for the same period. From this finding, the district concluded that, to the extent that music is not much less important to Yahoo! than it is to the television networks, a 2.5% royalty rate is reasonable.

The district court similarly looked to percentage of total revenue when assessing ASCAP's agreements with the general-entertainment and music-intensive cable television networks. The district court found that the general-entertainment cable television networks pay 0.375% of total revenue derived from licensed services and that the music-intensive cable television networks pay 0.9% of licensed-services revenue derived from licensed services. As it did with the major broadcast television networks, the district court compared the percentage of total revenue that Yahoo! would pay under the court's formula to the 0.375% and 0.9% paid by the cable television networks to conclude that a flat 2.5% royalty rate, when multiplied by a MUAF, is reasonable for Yahoo!'s license.

We are unconvinced that percentage of revenue comparisons between broadcast and cable television networks, and Yahoo! are useful in determining a reasonable fee for Yahoo!'s public performances of the ASCAP repertory. Nearly every program on a television station somehow utilizes musical works. In contrast, only a fraction of the traffic on Yahoo!'s website uses music; much of Yahoo!'s website does not implicate any music use whatsoever. Given that Yahoo!'s revenue base relies far less on ASCAP content than the television networks' revenue base, we believe that comparing percentages of overall revenue bases is of little probative value in this benchmark analysis.^[20]

These comparisons, moreover, indicate a deeper flaw in the district court's analysis: its inclination to lump all of Yahoo!'s varying musical uses together, instead of looking to the nature and scope of Yahoo!'s different types of uses and applying a rate that reflects (or rates that reflect) the varying nature of Yahoo!'s music use. See United States v. Am. Soc'y of Composers, Authors & Publishers ( Application of Nat'l Cable Television Ass'n.), No. 41-CV-1395 (WCC)(MHD), 1999 WL 335376, at *12 (S.D.N.Y. May 26, 1999). The district court's finding that cable television networks pay 0.375% of their revenue for their ASCAP licenses is a good example. The most direct conclusion to be drawn from this benchmark is that providers of cable-style television will pay 0.375% of their revenue, in a competitive market, to license ASCAP music.^[21] However, the district court looked past this conclusion in setting the royalty rate and instead used this benchmark to justify applying a 2.5% [627 F.3d 83] rate to all of Yahoo!'s music use based on an imprecise comparison of the percentages of overall revenue. We think a better approach would be to attempt, if practicable, to set a royalty rate that requires Yahoo! to pay a rate for its cable-style programming that is similar to that in the cable market.^[22]

Our view that a reasonable royalty rate should reflect the varying values of Yahoo!'s differing music uses is supported by Yahoo!'s license with BMI.^[23] As previously noted, BMI is ASCAP's principal competitor in licensing the performance rights for musical works. The two rights organizations control approximately 90% of all on-line music performances, with roughly equal shares of the market. Because these two companies operate in the market in such similar manners, BMI's agreements are instructive. See e.g., United States v. Am. Soc'y of Composers, Authors & Publishers ( Application of MobiTV, Inc.), 712 F.Supp.2d 206, 248-49 (S.D.N.Y.2010).

In its negotiated agreement with BMI, Yahoo! agrees to pay the following license fees: (a) 1.75% of "Direct Revenue" from "Preprogrammed Radio"; (b) 2.5% of "Direct Revenue" from "On-Demand Streams"; (c) 2.15% of "Direct Revenue" from "User-Influenced Programming"; (d) 1.0% of "Direct Revenue" from "Audio-Visual Programming"; and (e) 0.6875% of "Yahoo! Music Advertising Revenue and Yahoo! Music Run of Site Allocation." This agreement, providing for a so-called "bucket" for each different use, supports the conclusion that the other benchmarks also suggest: the market assigns different values to Yahoo!'s different music uses and is capable of yielding a royalty rate that reflects the varying intensity of Yahoo!'s music uses.^[24]

The district court found that effectuating the BMI structure is quite complex, because Yahoo! is required to subdivide its sites and services into 17 separate revenue categories that are apportioned into "5 buckets" and that, to report the revenue under these categories, Yahoo! is required to make dozens of calculations and collect numerous data points. "Because most of these data [points] are not ordinarily collected for other business purposes," the district court concluded that "their accuracy [i]s suspect and auditing [Yahoo!'s] reports [627 F.3d 84] [i]s difficult and expensive." The district court found that the BMI method is additionally complicated by how the parties decide what revenue is "directly attributable" to the streaming of music. RealNetworks and Yahoo! II, 559 F.Supp.2d at 411. We neither endorse nor challenge these conclusions, and we leave it to the district court on remand to decide whether a bucket system is feasible with alterations, or whether another system is preferable in light of our guidance today.

We further acknowledge the requirement that fee structures and the proceedings used to arrive at them comport with the provisions of the Second Amended Final Judgment, see, e.g., United States v. BMI ( Application of Muzak LLC), 275 F.3d 168, 176-77 (2d Cir.2001) (assessing whether a rate structure that included "carve outs" for songs licensed by the Applicant directly from the copyright holder was within the rate-setting court's blanket-license authority), and the district court's concern that the setting of different rates for the Internet Companies' various services would be in some tension with prior case law regarding blanket licenses, see RealNetworks & Yahoo! II, 559 F.Supp.2d at 406-08. We note, however, that the district court's own proposed MUAF would have involved "reporting or ... keeping track of ... music use," notwithstanding the court's observation that such tracking is generally not a feature of blanket licenses, see id. at 407, and that a recent rate-setting opinion has made use of multiple rates as part of a blanket license, see MobiTV, 712 F.Supp.2d at 231-32, 247-49, 254-55. Moreover, our own precedent indicates that non-traditional fee structures can be compatible with blanket licenses. Muzak, 275 F.3d at 177. It is for the district court to consider, in the first instance, what options are available to it in setting a reasonable rate or rates in this case.

For the foregoing reasons, we remand to the district court to redetermine the royalty rate (or rates) that Yahoo! must pay ASCAP for its license, in light of our holding that the district court's valuation of Yahoo!' s use of the ASCAP repertory must reflect, as well as practicable, the varying nature and scope of Yahoo!'s music use. We do not, however, suggest that the specific royalty rates set forth in the BMI-Yahoo! agreement must be accepted by the district court on remand, nor do we suggest that a bucket system is the only method by which a reasonable fee could be calculated. Instead, we believe that there are other ways to proceed, including possibly using a "blended" uniform rate^[25] (e.g., taking a snapshot of Yahoo!'s current music use, valuing the different uses independently, averaging them into a blended, uniform royalty rate, and then revisiting that rate periodically), or perhaps using a modification of the BMI bucket system to avoid some of the reliability problems noted by the district court, or employing some third method not yet discussed. We leave it to the district court to determine the best way to proceed consistent with the concerns we have discussed.

The district court applied the Music Choice and radio station benchmarks to RealNetworks. The court found that Music Choice's 2.5% royalty rate supported applying a 2.5% royalty rate to RealNetworks because, inter alia, many of RealNetworks' [627 F.3d 85] music uses are equally or more music intensive than Music Choice's uses, specifically referring to RealNetworks' on-demand, music-video, and music-stream uses. The district court also found that the radio station benchmarks supported a 2.5% royalty rate for RealNetworks.

We do not take specific issue with the district court's analysis as it may pertain to uses by RealNetworks that are analogous to those of Music Choice and the radio stations. However, RealNetworks objects to the district court's analysis on the basis that RealNetworks' services include music uses that are less music-oriented than those of Music Choice or the radio stations, such as uses in video games, television shows, and ring tones. We find this objection persuasive to the extent that it tracks the flaws we have identified in the district court's analysis underlying Yahoo!'s royalty rate, and we remand so that the district court may conduct a more complete analysis of the various uses of ASCAP musical works by RealNetworks and may determine, in light thereof, the appropriate method for determining RealNetworks' royalty rate (or rates).

With respect to the district court's fee calculation, ASCAP cross-appeals one issue: whether download revenue should be included in the revenue base, even though downloads are not public performances, because public performances of music are used to generate the downloads of music. Although the district court recognized some relationship between the ability to stream music and download revenue, it made no formal factual findings about the extent and implications of that relationship. In an analogous context, the district court found that the ability to preview ringtones (via streaming) "undeniably increase[d]" the sale of ringtones (via download). United States v. Am. Soc'y of Composers, Authors & Publishers ( Application of AT & T Wireless f/k/a Cingular Wireless), 607 F.Supp.2d 562, 565 (S.D.N.Y.2009). We leave it to the district court on remand to determine the extent of any such relationship in this case.

Finally, ASCAP cross-appeals the district court's admission of the Internet Companies' alleged late evidence. This issue is moot in light of our remand to the district court for further proceedings, at which additional evidence may be considered.

For the foregoing reasons, we AFFIRM the district court's ruling that downloads of musical works do not constitute public performances of those works, and we VACATE the district court's assessment of reasonable fees for the blanket ASCAP licenses sought by the Internet Companies and REMAND for further proceedings in light of this opinion.

[1] Yahoo! provides audio and audio-visual content in the following areas of its website and through the following services: the Yahoo! homepage, Yahoo! Music, My Yahoo!, Yahoo! Movies, Yahoo! Video, Bix, Yahoo! Kids, Yahoo! TV, Yahoo! Games, Yahoo! Tech, Yahoo! Autos, Yahoo! Finance, Broadway on Yahoo!, Yahoo! Food, Yahoo! Search, Yahoo! Toolbar, Yahoo! Messenger, and the Yahoo! music widget.

[2] At the time of oral argument in this case, the RealNetworks sites and services that publicly performed music included, inter alia: the following: RealNetworks.com, Real.com (including its sub-domains such as Real Guide, and affiliated sites such as Rollingstone.com and Film.com), Rhapsody, Rhapsody.com, Rhapsodydirect.com, SuperPass, and Listen.com. Public filings, of which we take judicial notice, see Kavowras v. New York Times Co., 328 F.3d 50, 57 (2d Cir.2003), report that RealNetworks has since spun off Rhapsody as an independent venture. See RealNetworks, Inc., Current Report (Form 8-K) (March 31, 2010), available at http:// www. sec. gov/ Archives/ edgar/ data/ 1046327/ 000095012310 032214/ v 55452 e 8 vk. htm. Because this case involves the setting of license rates for the period of January 1, 2004 to December 31, 2009, however, Rhapsody's spin-off is not relevant to our analysis.

[3] Advertising on websites can take numerous forms, including, inter alia, display advertising, rich-media advertising, and sponsorships. Display advertising may be displayed, inter alia, as an item on a web page, in a pop-up or pop-under window, on an interstitial page (an ad page that appears between two content pages), or in a floating window that moves across the user's screen. Rich-media advertising, consisting of streaming audio or video, is generally played in the audio and audio-visual players in which the musical works are performed, either before, during, or after the performances of the musical works.

[4] In 1941, the United States brought a civil action against ASCAP for alleged violations of the Sherman Antitrust Act based on the fact that ASCAP's members license their songs collectively, thereby enhancing their market power. The action was settled by the entry of a consent decree, see United States v. Am. Soc'y of Composers, Authors & Publishers, No. 13-95, 1941 U.S. Dist. LEXIS 3944 (S.D.N.Y. Mar. 4, 1941), which has subsequently been amended from time to time. The most recent version, entered on June 11, 2001, the Second Amended Final Judgment ("AFJ2"), currently regulates how ASCAP may participate in the music industry and gives the United States District Court for the Southern District of New York jurisdiction as the rate court to oversee the implementation of the AFJ2. United States v. Am. Soc'y of Composers, Authors & Publishers, No. 41-1395(WCC), 2001 WL 1589999 (S.D.N.Y. June 11, 2001). In its capacity as the rate court, the district court determines a reasonable fee for an applicant's ASCAP license. Id. at *6-*8

[5] Judge Conner passed away during the pendency of this appeal. Judge Denise L. Cote, who has succeeded to Judge Conner's responsibilities for administering the ASCAP consent decree, will conduct further proceedings on remand.

[6] We review a district court's grant of summary judgment based on its interpretation of the Copyright Act de novo. See Larry Spier, Inc. v. Bourne Co., 953 F.2d 774, 775 (2d Cir.1992).

[7] Section 101 of the Copyright Act, its definitional section, fully defines "[t]o 'perform' a work" as "to recite, render, play, dance, or act it, either directly or by means of any device or process or, in the case of a motion picture or other audiovisual work, to show its images in any sequence or to make the sounds accompanying it audible." 17 U.S.C. § 101.

[8] Because we see no ambiguity in the language of the Copyright Act, we need not reach ASCAP's arguments regarding (i) parallel provisions, (ii) legislative history, or (iii) secondary authorities.

[9] The one definition that, if applicable, would support ASCAP's position is the definition of "to render" that is "to hand over to another (as the intended recipient): deliver, transmit." Id. We do not, however, find this definition to be applicable in the context of the Copyright Act's definition of "to perform." "To render" does not stand alone in the § 101 definition of "to perform"; it is contained within a list of words that, by association, give content to the term within the context of the statute. See Jarecki v. G.D. Searle & Co., 367 U.S. 303, 307, 81 S.Ct. 1579, 6 L.Ed.2d 859 (1961) (noting that often "a word is known by the company it keeps"); see also City of New York v. Beretta U.S.A. Corp., 524 F.3d 384, 401 (2d Cir.2008) (stating that "the meaning of one term may be determined by reference to the terms it is associated with" (internal quotation marks and alterations omitted)); Black's Law Dictionary 1160-61 (9th ed. 2009) (defining noscitur a sociis as "[a] canon of construction holding that the meaning of an unclear word or phrase should be determined by the words immediately surrounding it"). In addition to the fact that "to recite" and "to play" require contemporaneous perceptibility, the remaining terms in the § 101 definition of "to perform"-"to dance" and "to act"-are also actions that are necessarily perceptible by sight and sound.

[10] Our opinion does not foreclose the possibility, under certain circumstances not presented in this case, that a transmission could constitute both a stream and a download, each of which implicates a different right of the copyright holder.

[11] Several amici suggest that our obligations under the 1997 World Intellectual Property Organization Copyright Treaty ("WIPO Copyright Treaty") require us to find that downloads of musical works constitute public performances. The WIPO Copyright Treaty provides authors with the following right:

[T]he exclusive right of authorizing any communication to the public of their works, by wire or wireless means, including the making available to the public of their works in such a way that members of the public may access these works from a place and at a time individually chosen by them.

WIPO Copyright Treaty art. 8.

Congress has recognized that this treaty does not "require any change in the substance of copyright rights," see H.R.Rep. No. 105-551(I), at 9 (1998), in part because the Copyright Act already permits copyright holders to control the reproduction and distribution of their musical works over the Internet. To the extent that a download implicates these rights, the conclusion that a download does not also trigger the public performance right does not infringe on Article 8 of the WIPO Copyright Treaty. The other policy arguments raised by ASCAP and amici-regarding global harmony of doctrine, and adequate compensation-are better addressed to Congress, which has the power to amend the Copyright Act. See Eldred v. Ashcroft, 537 U.S. 186, 205-07, 123 S.Ct. 769, 154 L.Ed.2d 683 (2003).

[12] If designed and calibrated properly, a single formula incorporating a MUAF should produce a fee reasonably equivalent to the fee produced by a set of formulae that applies a different reasonable rate to the revenue derived from each of Yahoo!'s different music uses, as is attempted in Yahoo!'s agreement with BMI, infra. (Thus, the single formula will be sensitive to the different intensities of Yahoo!'s various music uses.) The MUAF (if suitably constructed) calculates and accounts for the contribution that music makes to the overall service that Yahoo! sells to its customers, and makes the rate formula sensitive to relative changes in that contribution over time.

At the same time, the MUAF, because it is a third factor in a rate-formula structure that usually includes only two factors (revenue base and rate), complicates any benchmark analysis. The MUAF must be grouped with another of the factors to render the three-factor formula comparable to the two-factor benchmark formulae:

In line with our discussion above, the district court at times grouped the MUAF with the revenue base factor; however, at other times, the district court grouped the MUAF with the 2.5% factor. There is no dollar difference in result, and which grouping is appropriate depends on what is being compared.

For instance, if one is benchmarking a formula that multiplies licensed-services revenue by a rate (as most two-factor formulae do), one might not group the MUAF with the revenue base factor (Grouping 1 above). The benchmark rate cannot be compared to the 2.5% factor alone if the factors not being compared are not equivalent:

In such an instance, the problem disappears if the MUAF is grouped with the 2.5% factor (Grouping 2 above):

With this grouping, MUAF x 2.5% is the rate to which the benchmark rate is compared.

As mentioned, the alternative groupings are mathematically equal. The reasonableness of the Yahoo! formula can be established by comparing benchmarks to either grouping.

[13] One reason a district court may use a less precise metric is because it is impracticable to use a more precise one, for example if relevant statistics are unobtainable or unreliable. See Capital Cities, 831 F.Supp. at 156-57 (using the amount of music use in television programming as an "adequate proxy" for the value of the music to the network, "in the absence of any other yardstick"). However, the district court did not make a sufficient showing that this was the case.

[14] The district court, recognizing the imprecision of its metric, offered, inter alia, the following rationale for using it: "Although the streaming time is increased by visitors who stream music as a 'background' while they are engaged in other activities on the website, such as searches or e-mailing, that effect is largely if not wholly offset by the myriad incidental performances of music in movies, advertisements, user-uploads and elsewhere, which are not counted as music streaming time (against Yahoo!)." RealNetworks & Yahoo! II, 559 F.Supp.2d at 413. We find this sort of rough estimation, with no basis in the record, unreasonable because there appears to be a much more precise metric available to the district court.

[15] We are not suggesting that the amount of time music is played has no correlation to the revenue attributable to music on Yahoo!'s licensed sites and services. Streaming time likely bears some relation to the importance of music on Yahoo!. Furthermore, we recognize that music can enhance a user's experience on Yahoo! even when he navigates away from the streaming page to another Yahoo! webpage. For example, music may be driving advertising revenue on the non-music page to the extent that the music is making Yahoo! experience, as a whole, more appealing. The district court may take this into account in the formula it adopts on remand. We find the district court's reasoning unreasonable not because streaming time bears no relation to the value of music to the revenue of the licenses sites and services, but because there is a more accurate metric available-page impressions-that the district court chose not to use without providing a sufficient reason.

[16] We recognize that revenue is generated from music use by other methods as well, such as through site sponsorship or sponsored search results. However, the district court gave no rationale supporting the conclusion that streaming time is a better measure of the value created by these forms of advertising than it is for display advertising, nor did it indicate that these alternative forms of advertising were a significant part of its analysis. On remand, the district court may wish to address how its metric for calculating music-use revenue will interact with these alternative forms of advertising and whether they are significant in terms of its ultimate fee determination.

[17] comScore is an Internet audience measurement firm that measures traffic to, and time spent on, Internet sites and services.

[18] The district court found that Rhapsody is an unlimited on-demand music subscription service that offers subscribers access to over four million songs. In addition to streaming music and selling permanent downloads of music, Rhapsody subscribers can also conditionally download music. A conditional download is a download that may be accessed by the user for a limited duration or number of uses.

For a monthly fee, a Rhapsody subscriber can play as much or as little music as he wants. Regardless of the actual amount of music played, however, the Rhapsody subscriber must still pay the full subscription fee. If the subscriber continues to pay the subscription fee, then neither the amount nor the type of music actually played by the subscriber affects the amount of revenue received by RealNetworks.

[19] The district court found that SuperPass is a subscription service that offers, for a monthly fee, access to news, sports, movies, games, music, and other entertainment content; short films, video clips, and music; music downloads (at $0.99 per song) and streaming previews of music; access to the majority of RadioPass services; and CD burning and other features for the RealPlayer. As with Rhapsody, SuperPass subscribers pay the full monthly fee regardless of the amount of content they access, and the amount of subscription revenue that RealNetworks receives does not depend on the subscriber's behavior or actual usage of the subscription's offerings.

[20] The district court's analysis of the terrestrial radio stations's licensing agreements with ASCAP suffers from the same flaw.

[21] This conclusion is supported by the fact that the major broadcast television networks, which perform a blend of cable-television style programming, as well as less music-intensive programming such as news and sports, pay between 0.24%-0.34% for their ASCAP licenses.

[22] The district court's analysis of Yahoo!'s agreement with the major record companies is erroneous for the same reason. The court did not use this benchmark to assess how much Yahoo! should pay for its right to perform ASCAP musical works in music videos. It instead used this benchmark to make a far more general conclusion concerning how much Yahoo! should pay for all of its various music uses.

[23] The district court concluded that the royalty rates used in the BMI-Yahoo! license are not probative of what the market would yield for Yahoo!'s license in this case because, it concluded, the BMI-Yahoo! license is a "per-segment" license that confers a different set of rights than the "blanket" license Yahoo! seeks from ASCAP. Yahoo! contests this finding. In light of our remand, it is not necessary to rule on this issue. We leave it open to the district court, however, to revisit this finding on remand.

[24] ASCAP's licensing agreement with Turner Broadcasting further supports the conclusion that the market is capable of yielding a royalty rate that reflects the varying intensity of Yahoo!'s music uses. Turner owns numerous types of television stations that use music differently from one another-including, by way of example, general entertainment cable television stations such as TNT and TBS, and a cable news station, CNN-all of which are covered under a single license with ASCAP. Similar to Yahoo!' s agreement with BMI, Turner's license with ASCAP includes different rates on a per-network basis, thereby reflecting the economic reality that Turner's different channels use ASCAP's repertory in manners that the market values differently.

[25] We also do not mandate that, if the district court were to use a blended uniform rate, the rate would have to be lower than 2.5%. We only hold that the district court's application of the benchmark agreements in its opinion does not support an across the board 2.5% rate.