Playing Music at Your Small Business under Copyright Law

Today, music is cheap, easy, and everywhere.  

Sound recordings can be instantaneously accessed via terrestrial, Internet or satellite radio, YouTube, online streaming, or downloading.  Nearly all of us carry around a mobile device that gives us access, whenever we desire, to vast catalogs of recordings. We play our music in the car, at home, and at work, and when we go out, it’s played for us at coffee shops, bars, gyms, stores and restaurants.

Perhaps because music has become so ubiquitous, many have a hard time understanding when and why anyone would have to actually pay for it.

Public Performance Licenses

A growing number of small businesses and nonprofits are thus unpleasantly surprised when they receive a letter, phone call, or even a personal visit from a performing rights organization (“PRO”) agent warning that they are playing music without the proper license and are thus participating in copyright infringement.  

These business owners may be hostile to the idea of paying for something that they perceive to be free or to already own. Music sales among American record labels have plummeted since the early 2000s and in 2008, 40 billion songs were downloaded illegally.  It is also estimated that 95 percent of music tracks are downloaded without payment to the artist or music company that produced them.  

Nevertheless, under U.S. copyright law, owners of copyrights in sounds recordings have the exclusive right to reproduce, adapt, distribute and publicly perform the recordings.  This means that under the law, purchasing a copy of a sound recording, whether an entire album or downloading one digital track from iTunes, does not permit the purchaser to further reproduce, distribute or perform the recording in public.  

Performing Rights Organizations

PROs are responsible for licensing the music of the songwriters and music publishers they represent, collecting royalties whenever that music is played in a public setting, and distributing quarterly royalty checks to the copyright holders of their catalogs.  

There are three PROs in the U.S.:  (1) the American Society of Composers, Authors and Publishers (ASCAP); (2) the Broadcast Music, Inc. (BMI); and (3) Society of European Stage Authors and Composers (SESAC).   A copyright holder can only sign up with one of the three PROs, which means each PRO holds rights to completely different catalogs of musical works.

PROs spend much of their time negotiating with television and radio broadcasters and large entertainment companies who operate stadiums, clubs and theaters.  However, a not-insignificant amount of time is also spent educating small business owners all across the country that they are legally required to pay for the music they use.  

Today, researching small businesses has never been easier for PROs thanks to the Internet.  PRO agents watch for small businesses who advertise live music, karaoke or dancing, but under the law, any business that plays music is likely responsible for paying PRO licensing fees, including grocery stores, hair salons, sports venues, retirements homes, and funeral parlors.  

Although “education” is the key word as far as how PROs view their work with small businesses, individuals who get a visit or phone call may remain resistant to the idea of paying fees to play music.  Some small business may find PRO’s license fees to be cost-prohibitive.  However, many simply believe that playing music is free or that we should be able to do whatever we want with the music we already own.  

As an example of such resistance, the owner of Roscoe’s House of Chicken and Waffles ignored ASCAP for seven years before they finally sued him for copyright infringement The 9th Circuit Court of Appeals eventually found Herbert Hudson and his corporation liable for nearly $200,000 in damages and attorney’s fees for playing eight unlicensed songs that were held by ASCAP!

This risk of lawsuit is real.  ASCAP files between 250 and 300 copyright infringement lawsuits annually and BMI files between 100 and 200 lawsuits annually.  

Do I Need a License?

Any store or other small business playing musical recordings through a playback device or radio receiver is engaged in a performance under the Copyright Act.  Those who “participate in, or are responsible for, performances of music are legally responsible” for obtaining permission from music copyright holders.  The law applies very broadly, so it is safer to assume you do need a license than don’t!

If a PRO is bringing a charge of copyright infringement against a business owner, generally there are two defenses:

  1.   Section 110(5) Exemption (the “Homestyle Exemption”)

The Copyright Act provides an exemption for the reception of radio or television broadcasts in an establishment open to the public for business.  This means a business can switch on the radio or TV and play broadcasted music performances without paying for a license.  This exemption does have more nuanced rules that consider gross square footage, number of loudspeakers, number of devices, etc., and does not explicitly include Internet radio or streaming serves like Pandora.

  1.   No “Public Performance”

Under current copyright law, a “public performance” occurs when music is played “in 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.”  

This means that playing music from a purchased CD at your 500-attendee family reunion is not a public performance, but playing the CD for just 2 patrons sitting in your bar on a Wednesday afternoon is.  Courts have ruled public performance occurs even where the customers are not directly charged for listening to the music.  Gray areas are “semi-public” places such as factories or condominium common rooms.  The legislative history of the 1976 Copyright Act makes it clear “semi-public” performances are to be treated as “public performances” under the statute, but this language did not actually make its way into the final law.  

As such, arguably music being placed for relatively-small work staff, say, the kitchen employees at a restaurant, that is not distinguishable to customers is likely not a public performance.

How to Avoid Copyright Violations for Playing Music

  1. Play music broadcasted from radio or television only.

As stated above, this could fall under the Homestyle Exemption, but care must be taken that your performance falls within the boundaries of the exemption rules.  If your location is more than 3,750 square feet for a food or drinking establishment or 2,000 feet for any other type of business, you may be subject to additional rules that impact whether you need a license or not.

  1. Pay the annual PRO fees.

Licenses can range from $200-$500 up to $8,000 annually, depending on the type and size of business, how many speakers or playback devices are in the establishment, and the prominence of the music to business operations.  Again, because there are three different PROs, businesses must either obtain three separate licenses or be carefully selective of the music played to ensure only one PRO’s catalog is used.

  1. Use music licensed from the Creative Commons.

Music publically performed from the Creative Commons typically still requires a license, but costs significantly less than the PRO fees.  However, music under this license includes primarily less well-known songs from independent and emerging artists.

  1. Play only original content.

A business can host live bands and musicians, but generally the performers must be instructed that they cannot play cover songs unless the performer has already formally obtained permission from the original songwriter to play it.  

A business owner can also write his or her own original compositions to be played at the establishment.

  1. Enroll with a music service provider.

Music services providers like PlayNetwork or SiriusXM for Business do the dirty work.  They charge service fees that include the public performance licenses from all the necessary PROs.

Have you received a letter from ASCAP, BMI or SESAC?  Are you opening a new business and need help navigating the licensing process or rules?  Contact the Law Offices of Daniel T. Goodwin today to speak with an attorney.

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