Why You've Got to Pay to Play (Music): The Rules of Music Licensing for Businesses

kathryn by Kathryn Hawkins on March 21, 2011
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Do you start every day at your café by blasting your favorite Beatles tunes? Does your bowling alley host a weekly karaoke night? Do you play your favorite jazz albums over the phone when you put your customers on hold?

If the answer to any of these questions is “yes,” get your checkbook out.

It may have never occurred to you, but if your business makes any use of copyrighted music, you’re expected to pay up in the form of royalties to a variety of musicians. Three performing rights organizations (PROs) — the American Society of Composers, Authors, and Publishers (ASCAP), Broadcast Music, Inc. (BMI), and SESAC, Inc. — license performance rights for the vast majority of copyrighted music in the United States. It’s their job to make sure that every time a copyrighted song is played or performed, the original artist gets a royalty check.

PROs focus most of their efforts on big-money copyright abusers like TV shows and radio stations, but they also hire agents who specifically target small businesses like cafés, supermarkets, and fitness centers. These agents will monitor whether such venues make use of radios, recorded music, live music, or karaoke machines, and will determine licensing fees according to the venue’s capacity. Yes, you read that right: You are supposed to pay royalties for playing the radio in your bar.

Devon Baker, a BMI copyright enforcer recently profiled in a New York Times Magazine article, travels cross-country monitoring whether businesses owe money to BMI, and collecting the payments from those that do. A small business that makes little use of copyrighted music may owe $300 for an annual licensing fee, but for large operators like stadiums, the fee could be as much as $9,000. ASCAP and SESAC have similar licensing fees for businesses that make use of their artists’ music.

If business operators refuse to pay for licenses, the fines can be steep: anywhere from $750 to $150,000 per song. Generally, businesses sued by a PRO for copyright violation will settle out of court for a lower amount, but dealing with a lawsuit is far more expensive than simply paying for a music license. If your business regularly plays copyrighted music or allows performances of cover songs, purchase licenses from the relevant publishing rights groups before you get on their radar.

If you don’t want to deal with the expense of paying for music licenses, but don’t want to let the music stop, there are other options.

You could follow the International Hotel & Restaurant Association’s example: The IH&RA recently partnered with music distributor Jamendo PRO to license thousands of Creative Commons-licensed songs for just $144 a year per establishment. “The vast majority of our music content [is] not really any artists that people have heard of or famous bands,” Dan Aufhauser of Jamendo told QSR Magazine. “But we pride ourselves on supporting the independent, emerging-artists community.”

Another idea: Collect CDs featuring original music from local independent musicians and play them in rotation? They’ll be thrilled for the free exposure in your establishment, and you won’t owe a penny for the privilege of hearing their songs.

Have you paid for a music license or come up with a different arrangement for your business? Share your experiences in the comments.

kathryn

Kathryn Hawkins is a business writer for Intuit and is passionate about solving small business problems.

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