Playing music in your business without the right license means you not only must pay licensing fees to the performing rights organization, which could be $200 or more every year, but you will also pay additional financial penalties based on United States copyright laws.
For example, Chapter Five of the U.S. Copyright Law specifies statutory damages and fees starting at $750, which is the smallest possible amount you will pay on top of licensing fees. The highest these fees can go is up to $30,000.
These amounts represent penalties just for playing music without a license. If the court decides that you intentionally or willfully broke the law, you can incur further financial penalties of up to $150,000.
A PRO can argue that you willfully broke the law if you ignore letters they send you with information about their licensing fees, when and how you broke these agreements, and how you can contact them to pay.
What Are PROs?
The acronym PRO stands for performing rights organization. These are organizations created to protect the intellectual property rights of musicians and composers based on national and international law. Some are privately owned businesses, while others are owned by the member artists.
ASCAP was the first PRO in the world, founded in 1914 in reaction to struggles between artists and other businesses over how best to negotiate payment based on the 1909 U.S. copyright law. Other PROs have been founded since then, representing artists in specific new genres, using new technology or using new types of licenses for new types of public performance.
A performing right is defined by the U.S. Copyright Act and granted to owners of the intellectual property of a published musical work. This includes the original composer and, in some cases, the publisher of the musical work, an artist who developed a cover of the original work, and some other artists with a stake in the copyright.
By defining intellectual property and how that is copyrighted, U.S. law should help musical artists and composers publish their work and generate income based on this. However, with so many methods for playing music for the financial gain of other businesses, new methods for negotiating and distributing royalties must continually be developed and scrutinized.
PROs use different types of licenses, including public performance, mechanical reproduction, and blanket licenses, to gather money from businesses that want to use music. This contract revenue, usually paid every month or every year, is distributed to artists who are members of the PRO in the form of royalties. Each contract determines the size of the potential audience, how often a song is likely to be played, and how much money the business will likely gain while the music is played.
Since there are several PROs in the modern world, each one represents a large and diverse catalogue. Sometimes, musicians work with a few PROs, or songs may be published across different PROs. In fact, popular recording artists may publish some songs on an album with one PRO and others with a different PRO.
For a business owner, this can become confusing. You will need to sign contracts with multiple PROs to gain access to a wide range of music you want to play in your business. Although PROs are important entities for protecting intellectual property rights, they may not be the most effective method for you, as a business owner, to get the music you want.
However, it is important for you to find out how to license music in a legal way that works best for your business. PROs not only negotiate contracts, but they monitor businesses at random to see if anyone is violating U.S. copyright law. If a business has not paid licensing fees for music, the PRO will send letters informing the business of the violation and how much money they owe the PRO.
What Is Copyright Infringement?
In U.S. copyright law, copyright infringement is defined as the use of copyright-protected works without appropriate permissions. This infringes on the intellectual property rights of the creator, including the rights to:
Create derivative works
Copyright violations are most famous as piracy, including downloading movies or music from online sources without paying for a licensed home copy through a streaming service, on a hard copy like a DVD or CD, or other similar violation. However, playing music in your business without the right type of commercial license (for example, using a personal music streaming service like Spotify or Apple Music rather than paying for a business-focused streaming service like Cloud Cover Music) is a violation of copyright law.
What Are the Fines I Could Incur?
If you violate U.S. copyright law, you potentially face tens of thousands of dollars in fines. A PRO will send you a letter when they note your first offense. Costs you incur can range from a few hundred dollars if you are a small business and you violate with one song, up to thousands of dollars if you are a large business or violate the PRO’s licenses multiple times in one instance.
Ignoring these letters will not make them go away. Instead, you will continue to incur fines and penalties and will eventually be taken to court. The total bill won’t just include the PRO’s licensing fees and penalties as dictated by U.S. copyright law. It will also include the cost of your attorney, court fees, and other fines determined by the judge. Ultimately, violating copyright law could put you out of business.
How Are Fees Collected?
There are some business owners that reach out to PROs with information about their businesses, and they set up agreements before the business opens their doors to customers. But there are some businesses that never reach out to a PRO. When that happens, PROs can send out scouts to detail how a business is using music.
That happened to a Washington business, according to the Peninsula Daily News. On one night in 2017, a private investigator sat inside a bar and wrote down the names of the songs heard. The business owner didn't know the investigator was there. She only found out about the visit when the lawsuit arrived. Soon after, the PRO filed a lawsuit for $3,000 to $120,000 for those four songs alone.
A lawsuit like this can seem like an overreaction, but it is important to know that PROs are protected by copyright law. As a lawyer writing for Law 360 points out, the copyright holder is not required to send a cease-and-desist letter and give the company time to change course. The very first time a PRO might reach out to a company could be through a lawsuit, and that is legal.
Even though PROs are not required to reach out to businesses, they often do so. For example, in a press release published by ASCAP (a major PRO), the company points out that they reached out to a set of businesses named in a lawsuit multiple times, and when no response came back, they chose to go to court.
PROs in Court
It is not at all uncommon for PROs to take businesses to court. In fact, according to USA Today, BMI (another PRO) sued more than 160 businesses in 2015 alone. This BMI lawsuit resulted in fines of $24,000 for playing four unlicensed songs. The PROs are aware that the law is on their side, and they are not afraid of using the law to get the financial support the law entitles them to.
In one case from 2015, a restaurant owner in New Jersey was sued by a PRO for the use of four songs played one night. According to the New York Post, the damages awarded in that case (which the restaurant owner lost) was $24,000. Since the restaurant owner lost the case, he is required to pay attorney's fees for the PRO, which came to $8,200.
In an article published by The Plain Dealer, a PRO representative claims that lawsuits are a last resort, used only when businesses will not comply. Even so, it could be a smart strategy. A PRO representative could document each:
Ignoring the law means playing with fire, and it could have severe financial consequences. There is a better way. At Cloud Cover Music, we have relationships with the PROs, and we have extensive libraries that contain the songs you want to play. We can give you access with one small charge, so you can rest easy knowing that you are in compliance with the law. We can get you set up in minutes. Call us to find out more.