Many businesses use music to set the tone and ambience they want for their clientele. The right genre and artist can be the X factor in getting people to come in, to spend money, and leave positive reviews on social media.
But in-store music laws in the U.S. regarding licensing, legality, and fines have very clear policies on what exactly businesses can and cannot play for their customers.
Music and Copyright Law
The issue lies in copyright law, which protects music, the artists who create the music, and the record companies that promote and market the music. Copyright law allows the owners of the music to perform their songs (when it comes to artists) and to play recordings of the songs in specific circumstances (when it comes to the record companies). A person or an entity playing music without written permission is in danger of infringing on the copyright of the music, and copyright law empowers the owner to recover monetary damages lost by the unauthorized reproduction of the music.
Entrepreneur magazine explains that the damages could be $750 for every unauthorized playback or performance, up to $150,000 or more if a court decides that the person or entity playing the music knew it was illegal and did it anyway.
An entertainment lawyer explains that, like many other things in life, “music is a commodity” – a product that can be bought and sold. Like other commodities (everything from coffee to vehicles), there are laws that dictate how the product can be bought and sold. Aside from a few exceptions, a license is required to play music in a business space, like a restaurant, a coffee shop, or a bookstore.
Facing the Music
For consumers, the legal landscape when it comes to hearing music in the background can seem unnecessary, but falling afoul of the law can cost violators in a big way. In 2012, the Ninth Circuit Court of Appeals found a California business to be in violation of copyright laws when it played music without having a license to do so. The case, Range Road Music, Inc. v. East Coast Foods, Inc., involved a restaurant that has an attached bar and lounge, where live and recorded music is played. The American Society of Composers, Authors and Publishers (ASCAP) offered the owners of the restaurant a license to play music by members of the society, but the owners refused. The society contracted an independent investigator to visit the restaurant in question, document his time there, and prepare a report to determine whether the restaurant was engaging in copyright infringement. LexisNexis writes that the investigator identified a number of songs that were performed by the live musicians and played via the restaurant’s in-house CD player. For songs the investigator did not recognize, he “approached the CD player and transcribed the titles directly from the CD case as the songs played.”
Once ASCAP confirmed that the songs were being performed and played without a license from them, they took their case to the courts, which found in their favor. The restaurant chain was fined $36,000 in statutory damages and $162,728.22 in legal fees.
When groups like ASCAP sue, the entertainment lawyer told Entrepreneur, “they don’t lose.”
Performing Rights Organizations
There are exceptions to when a license is required to play copyrighted music; stores under 2,000 square feet, and restaurants and bars under 3,750 square feet, can play music over a radio, TV, or similar device, but there have to be fewer than six speakers carrying the sound. Additionally, there are limits on the placement of the speakers. Importantly, customers cannot be charged for listening to the music. Educational and charitable events are also exceptions to the rule of requiring licensing to play music in stores.
In order to obtain a license, a business will have to go to a performing rights organization (PRO), of which the American Society of Composers, Authors and Publishers is a member. Other such groups include Broadcast Music, Inc., and SE:SAC (originally known as the Society of European Stage Authors and Composers). These PROs and others like them are the bodies that license the work of songwriters, composers, and music publishers to the public; they are also responsible for passing on royalties to the copyright owners.
Getting a license from one performing rights organization does not allow a business to play music by a copyright holder doing business with another PRO.
As an example, the music of a song might be written by an artist represented by ASCAP; the lyricist might be represented by SESAC. If a band changes record labels, part of their discography may be licensed through one PRO and the rest through another.
To avoid this pitfall, some businesses can purchase a blanket license from every PRO it wants, that gives the business the right to play any song it wants from each library covered by the respective PROs. This is not a one-off payment; a blanket license can cost a few hundred dollars to several thousand dollars every year.
Licensing In-Store Music
Performing rights organizations might seem like unnecessary bureaucracy and legal red tape, especially if a store simply wants to have some background music to keep customers entertained, but they serve important roles for artists and music labels. The mission of a PRO is to ensure that songwriters, and the publishers who put the music out there, are duly paid for the use of their creative product. The losses incurred by the music industry due to decades of illegal downloading have made record labels determined not to hemorrhage any more profits than they absolutely have to. One way to close this wound is by partnering with performing rights organizations, which collect public performance royalties that are then sent to the label, who passes it on to the artists.
Hearing any piece of copyrighted music in public – whether at a coffee shop or in an elevator – means that whoever is playing the music should have purchased the appropriate license from a PRO, like ASCAP, BMI, or SESAC.
Since copyright laws differ in neighboring countries, Canadian musicians and labels will do business with SOCAN (Society of Composers, Authors and Music Publishers of Canada), and a license application to SOCAN will be subject to relevant Canadian-American legal agreements.
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What Businesses Need Music Licenses?
The kinds of organizations that request licenses are varied.
- Coffee shops
- Music venues (bars, performance halls, and amphitheaters)
- Sports arenas and stadiums
- Shopping malls
- Grocery and retail stores
- Bowling alleys
- Amusement parks
Any one of these places, or indeed any other public establishment, that wants to play music for customers must go to a PRO to secure the necessary license.
Does Streaming Music Need a License?
In a similar way that a PRO license is not necessary for certain venues (based on size, the number of speakers, and whether the music is played at an educational or charitable event), music that is streamed digitally (through Pandora or Sirius XM, for example) or through a cable music channel has to be licensed through SoundExchange, which is responsible for collecting public performance royalties through digital platforms. Spotify, one of the largest music streaming services, has made its own deals with labels and publishers, allowing them to bypass SoundExchange when it comes to royalties; Apple Music has a similar arrangement.
It is in the best interests of artists and labels to sign up with a PRO.
It is how the content creators and copyright holders get the royalties due to them every time one of their songs is played at a restaurant or a sports stadium, or in a coffee shop or bowling alley. Given the ubiquity of Spotify and other streaming services, filing a claim through SoundExchange will also ensure that royalties are received for digital public performances.
Similarly, if a business owner has a private music-playing device (like an MP3 player), and has legally bought the songs on that device, they would still need to pay a licensing fee.
The purchase of digital music files for personal playback does not give a person, or a business, the right to play those files for the benefit of customers or the general public. The business owner can still use a personal device to play music in a business, but it then becomes a public performance, and subject to the regulations of licensing and penalties if no licensing is obtained.
Exceptions and More Exceptions
At a certain point, the rules become surprisingly specific. The National Restaurant Association notes that if an establishment has a Pandora (or Sirius XM) business account, and the music being played is only intended for background listening, then customers cannot dance to the music. Following from this, the business cannot charge a cover fee for customers to enter the premises. If these conditions are satisfied, the provider of the music (Pandora or Sirius XM) will pay the royalty fees to the respective PRO.
Another little-known fact about in-store music laws is the exception made for businesses that offer music only for their employees. In general, licensing obligations come into play if the business wants to play music for the benefit of the general public. If the music is communicated only to the employees (preferably in part of the premises that is clearly off limits to customers, such as an office), then an argument could be reasonably made that the music is not intended for customers, and PRO guidelines would not come into play.
However, this exception has its own exceptions. If customers can still hear the music, even if it is not meant for them, then a PRO could make a claim that the general public still receives the music, and licensing obligations would apply, notwithstanding the attempts by the business to restrict the hearing of the music.
A PRO could also make the case depending on the number of customers present in the establishment.
The federal Copyright Act looks more at the square footage of a place of business than it does the number of seats in order to determine any radio and TV exemptions; however, a court might find in favor of the PROs if they can make the case that total occupancy exceeds reasonable standards, to the point where the general public overhearing music intended for employees is both inevitable and willful.ASCAP, for example, calculates its fees based on the fire-code capacity, and the number of nights a week that the venue offers (live) music.
For the most part, a small business of less than 3,750 square feet, with only one transmission device of acceptable size (for example, a single television set with a screen under 55 inches) will likely be granted an exemption if the other criteria are met.
Does Public Domain Count?
The National Restaurant Association acknowledges that determining the relationship between different PROs, for different music, for different applications, “can be very difficult for restaurant owners and operators.” Making the process slightly easier is that all PROs offer searchable online databases, with the necessary disclaimers that the information on those databases may not be updated and does not constitute protection from claims of copyright infringement.
An additional exception is if the music being played is in the public domain. The National Association for Music Education explains that such songs are no longer protected by copyright law, and a license would not be required to stream or perform the music in a store or business.
For music to be in the public domain, any of the following conditions must be met:
- The rights to the music must have expired, and were not renewed by the artist’s estate or publisher.
- The creator of the music explicitly put the music into the public domain.
- No copyrights were ever applied for.
The burden is on the business owner to ensure that the desired music to perform or play is in the public domain. This can be done by searching the online databases of PROs, contacting them directly, or retaining the services of an entertainment lawyer to make that determination.
As a rule of thumb, the intention to play licensed music should always be followed by the purchase of a license. The exposure to risk of copyright violation, legal action, financial damages, and loss of reputation is substantial.
From Licensing to Litigation
For customers, the songs they hear in their favorite coffee shop or retail store might be literal background noise; for PROs and businesses, this is serious business. In 2017, for example, ASCAP filed lawsuits against 10 bars and restaurants across the U.S., alleging “unauthorized public performance of its members’ copyrighted musical works.” In response, two locations in Cleveland stopped playing music for its patrons; the co-owner of another location said that the combined weight of all three major PROs coming down on local businesses is daunting, especially for bars, clubs, and restaurants that are already struggling.
For their part, ASCAP pointed out that litigation is the last resort, usually following years’ worth of attempts to work out a deal in favor of the artists for whom music being played is their livelihood. But business owners are reluctant to pay the thousands of dollars in licensing fees, with some believing the money should go to the local musicians who perform the music.
The debate can be a bitter one. Music is very personal for many people, and the idea of a favorite song or band being a commodity – bought and sold, protected by intricate laws regarding when and how it can be played – might seem ridiculous. But music is also a business, and the people behind that business are very keen to ensure that they are appropriately compensated for the use of the music they represent. In a best-case scenario, this means licensing; sometimes, it means lawsuits.
- What You Need to Know About Music Licensing for Your Business. (March 2012). Entrepreneur.
- Beware the Copyright Boogeyman: He Might Be Listening in Your Restaurant.” (March 2012). LexisNexis.
- How Is a Blanket License Used in the Music Industry? (July 2018). The Balance Careers.
- Music Licensing 101: What Is A Performing Rights Organization? (September 2015). BandZoogle.
- The True Cost of Sound Recording Piracy to the U.S. Economy. (2018). Recording Industry Association of America.
- What Is SoundExchange? (November 2016). The Music Entrepreneur.
- Leading-Edge Law: Don't Open Pandora at Your Business.” (March 2012). Richmond Times-Dispatch.
- Pandora Partners With DMX on Legal, Personalized Streaming Music for Businesses. (November 2011). Rolling Stone.
- 11 Questions About Music Licensing. National Restaurant Association.
- Licensing and Other Copyright Questions. (August 2010). National Association for Music Education.
- Venues Refuse to Pay Songwriters While Profiting From Their Music. (January 2017). American Society of Composers, Authors and Publishers.
- ASCAP Licensing Fee Lawsuits Spark Debate And Fear in Local Live Music Scene. (May 2017). Cleveland.com.