Public Performance Licenses and Music for Your Small Business

Music and musical performances have been essential to many small businesses for creating an engaging customer experience. Establishments such as coffee shops, fashion retailers, and restaurants offer music to enhance the ambiance of their businesses and entertain their customers. These amenities, however, may not come free. Performing rights organizations (PROs), entities that collect performing rights royalties on behalf of copyright holders of musical works, target businesses for unauthorized public performance of copyrighted music. Notably, small business owners are not immune from having to pay public performance licensing fees or being sued for copyright infringement.

Public Performance Licenses
Federal copyright laws apply when copyrighted music is played in a public place. 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.” Copyright infringement arises when music is played without the proper licenses from copyright holders or their representatives. Playing copyrighted music from a CD or MP3 player or allowing bands to play “covers” of songs they do not own in your store or restaurant without obtaining necessary public performance licenses are common examples of how copyright infringement can happen.

Those who “participate in, or are responsible for, performances of music are legally responsible” for obtaining the required permissions to play the music. As the business owner with supervisory authority over and financial interests in having the music played, you are responsible for ensuring that public performance licenses are acquired or otherwise you would be liable for copyright infringement.

Performing Rights Organizations (PROs): ASCAP, BMI, and SESAC
The three major PROs that enforce the public performance rights of songwriters, musicians, and other copyright holders and manage copyright holders’ royalties are the American Society of Composers, Authors and Publishers (ASCAP), Broadcast Music, Inc. (BMI), and the Society of European Stage Authors & Composers (SESAC). Each PRO holds rights to different repertoires of musical works. While larger establishments such as television and radio outlets are the focus of these PROs, small businesses are still subject to paying licensing fees to PROs for copyrighted music.

Fees and Exceptions
Public performance license fees for each PRO vary and are based on different factors, including: type of business, venue capacity, business hours, method of music transmission, and number of live performances. On average, the annual license fee can range from $300 to $500 for a small business. For very large establishments, these fees can be as much as $9,000 per location per year. Furthermore, if you are interested in playing music from multiple PROs, you will have to negotiate public performance licenses with each PRO separately.

Public performances related to educational activities at nonprofits and unbroadcasted worship services are exempt from licensing requirements. Additionally, public performance license fees do not apply if the business is playing music from a radio or television broadcast, subject to certain venue size and music player restrictions and no admission fees charged to customers.

Recent Lawsuits Against Businesses
ASCAP files between 250 and 300 copyright infringement lawsuits annually and BMI files between 100 to 200 lawsuits annually, with penalties in court ranging from $750 to $30,000 per song. In 2012, the Ninth Circuit upheld a district court’s ruling that East Coast Foods Inc., operator of Roscoe’s House of Chicken and Waffles restaurants, and its owner, Herbert Hudson, were liable for copyright infringement, awarding $36,000 in statutory damages and $162,728 in attorney’s fees to the plaintiff ASCAP. Between 2001 and 2007, ASCAP contacted East Coast on numerous occasions to request payment of public performance license fees for music being played in its restaurants. After being ignored by East Coast, ASCAP conducted a site visit in 2008 at one of the restaurant locations and noted eight songs played in violation of copyright law. ASCAP then filed suit for eight counts of copyright infringement, one count for each of the eight ASCAP-represented songs publicly performed at the restaurant on the date of the site visit. In 2011, similar events developed between BMI and Foster’s, a North Carolina restaurant. After failing to respond to BMI’s multiple attempts to collect public performance license fees, Foster’s was sued, subsequently found liable for copyright infringement of four songs, and ordered to pay BMI $30,450 in damages.

What Your Business Can Do To Play Music and Avoid Copyright Violations
To protect yourself from lawsuits, some of the options you have as a business owner are as follows:

1.    Play music broadcasted from radio and television
If you want play music to enhance the customer experience at your business, but do not want to pay annual fees to PROs, you can play music broadcasted from radio and television, under specific space and transmission requirements.

2.    Use music licensed from Creative Commons
Your business can license music from Creative Commons at the relatively low rate of approximately $144 year. The music under Creative Commons licenses primarily includes less mainstream songs from independent and emerging artists.

3.    Play original content
Your business can still host live bands and musicians, so long as the artists perform only their original songs and not unauthorized “covers” of copyrighted material.

4.    Make sure your service provider holds PRO licenses
If your business employs a service provider that plays music for you, make sure their service fees include public performance licenses from the necessary PROs.

5.    Pay licensing fees annually to PROs
If you still want to play music from copyright holders represented by PROs, you must negotiate and pay the annual fees to the PROs. Contact ASCAP, BMI, and/or SESAC to obtain licenses.

As a business owner, learn from what happened to the businesses involved in recent lawsuits, timely respond to communications you receive from PROs about public performance licensing, and decide on how you want to legally deal with music played in your business.

How is your business handling music and public performance licenses? How has your experience been working with PROs like ASCAP and BMI? Let us know on Twitter and Facebook.