Although music streaming is a relatively new industry, it has radically changed how the average consumer listens to and accesses music.

Internet-based and mobile app streaming services allow users to listen to songs they love, create playlists or “stations” based on their favorite genre or artist, and even download entire albums quickly and cheaply.

Between 2010 and 2016, music streaming services became better, more varied, and much more popular. By the end of 2015, they made more money than other kinds of digital music downloads and physical music purchases.

The History of Music Streaming and Licensing

The MP3 was created in the late 1980s as a method of compressing sound sequences into small files for easy digital storage and transmission. While this format was not widely used until a decade later, it is a file extension that most people are now familiar with. In fact, many new sound compression formats have been developed based on the MP3’s popularity through MP3 downloading services, of which Napster is the most famous.

Although Napster was developed as a peer-to-peer (P2P) file-sharing service, the program was quickly used to share music. Millions of people all over the world downloaded their favorite songs separate from artists’ albums.

They found rare recordings, cover songs, and live versions of music that they craved, all for free. The music industry quickly came after P2P services with Napster as their focus. Due to lawsuits regarding the licensing of music, Napster stopped its free sharing service in 2001.

However, there was a clear market for music online, specifically acquiring individual songs. Apple seized this opportunity in 2003 when they unveiled iTunes, which could be used on their new iPods and, eventually, through other Macs and Apple products. The personal computer company needed to charge for songs, but set the price at a low 99 cents per song. They paid for personal use music licenses, their customers paid very little for each song, and everything was legal.

The portability of the iPod led to a boom in personal digital devices, eventually influencing how smartphones are used.

Many modern streaming services have apps for phones, tablets, and laptops, so users can access their playlists, stations, or music libraries from nearly anywhere, on whatever device they want.

With easy access to music, however, comes a new concern about music licensing and royalties – using a streaming service in a business to provide background, or even foreground, music for customers. As more people start small businesses, and brick-and-mortar stores become popular again, it is important for potential business owners to know how to license music, which is possible with some business-focused streaming services.

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Music Streaming Options Are Booming

Streaming services account for 75 percent of all music consumption in 2018; two years earlier, streaming was only half of all music consumption. Meanwhile, listening to physical albums, digital albums, and individually purchased digital tracks continues to decline.

The most popular streaming services for personal use today are:

These services often have a free option and a subscription plan. The free version of the service forces ads on the listener every few minutes, which helps pay for the service. The subscription plans are intentionally cheap. Some services offer several types of plans and allow you to enjoy music without listening to advertising.

There are also associated devices that work with smartphones or mobile music players to broadcast the sound. Bluetooth speakers and connections to hook into larger sound systems are almost everywhere. This makes a high-quality personal sound system easy to purchase and set up, including in your small business.

However, you cannot use your mobile phone to stream a consumer music streaming service through a Bluetooth speaker to create ambiance for your customers. This violates music copyright, and you could face a major lawsuit.

Instead, there are several streaming services devoted to managing the licenses needed for companies and commercial operations to use music.

Music Licensing and Why It Is Important for Business

Composers, musicians, and music copyright holders work with performing rights organizations (PROs) to have their copyrighted music disseminated into the world appropriately, so they can receive payment for their work. Each PRO manages a different catalogue of music. While they may manage hundreds of thousands of songs and compositions, they do not have everything.

The biggest PROs are:

  • Broadcast Music, Inc. (BMI)
  • American Society of Composers, Authors and Publishers (ASCAP)
  • Global Music Rights (GMR)
  • SoundExchange

BMI and ASCAP are the two largest PROs, so purchasing licenses through them to use specific music can cover most legal issues while giving you access to the biggest catalogues.

The reason you must get licenses to cover playing music in your business is due to the legal definition of public performance. The term seems like the band should be playing their songs live, but in fact, a public performance of a song occurs when it is played in front of a substantial group of people, like a group gathering in a bar or shopping outlet. Each time the song plays, a small royalty must be paid to the artist or their estate. Most businesses are considered to have a substantial number of people or the potential for a large group, so offices, restaurants, and retail stores are all required to license the music they play through PROs.

For businesses, there are several music streaming services that offer licensing to play songs through their program. These services, in a similar manner to personal streaming services, gather licenses from several PROs, allowing you to create playlists and moods for your business while legally playing music.