Can I Press Play Or Must I Pay? Music Licensing Requirements for Businesses

Business.com / Legal / Last Modified: February 22, 2017

Get up to date on the music licensing requirements before installing a sound system for your business, or you could be in trouble.

You walk into a store that has a great playlist cranking out tunes, people are happy, heads are bopping to the music, when all of a sudden, the music comes to a screeching halt!

Why? 

Because the owner of the store was just sued for copyright infringement for playing music in the store without the proper licensing.

Mood killer? Definitely. 

The reality is that this scenario is common, especially in the bar and restaurant industry, and business owners are often caught off-guard when they are held liable for copyright infringement (the unauthorized use of a person’s copyrighted work, see 17 U.S.C §501) due to simply playing music in their establishment. 

There are many ways that businesses can avoid copyright infringement, including different exceptions to copyright listed under §110 of the U.S. Copyright Act, but usually obtaining a license to play music through a Performing Rights Organization (PRO) is the route chosen by many small businesses.

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What Is a Performing Rights Organization (PRO)?

PRO’s are organizations responsible for collecting royalties on behalf of copyright holders (e.g. singers, songwriters, music publishers, etc.) when a song is publicly broadcast in locations such as restaurants, department stores, or shopping malls.

By purchasing licenses from PRO’s, businesses obtain a license to publicly broadcast the work, the PRO collects the royalties on behalf of the copyright holders, and the copyright holders are paid out their portion of the royalties. The two largest PRO’s in the United States are The American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music, Inc. (BMI).

ASCAP and BMI are PRO’s that collect license fees for the public performance of musical works, whether via a broadcast or live performance and then pay the proper royalties to the rights holders. This includes the collection of licensing fees paid by radio stations, concert venues, nightclubs, etc. for performing music in public.

Both ASCAP and BMI are affiliated with different artists, authors, composers, and publishers, so unless you know that the music being played in the establishment is specifically under the copyright licensing of one of the PRO’s, it’s safest to have licensing agreements with both in place.

SoundExchange, which emerged as a leader in digital performance royalties, is a PRO that collects royalties for featured artist and sound recording copyrights holders (typically, record labels). SoundExchange is different from ASCAP and BMI because SoundExchange collects royalties solely for digital public performances, which includes satellite, Internet radio, and cable television music channels.

In addition to music, SoundExchange also collects royalties for comedy and spoken word recordings, such as TED Talks. Due to the difference in the types of royalties collected by SoundExchange, it is advised to have a license with them in addition to licenses with ASCAP and BMI.

Do I Need a License?

All businesses who use more than a single radio or television apparatus and are over the square foot parameters delineated under §110(5) (3,750 sq. ft. for food/drinking establishments or 2,000 sq. ft. for any other establishment) will need to obtain the proper licensing.  This includes yoga studios, retail outlets, bars, restaurants, etc., and applies even if the music is part of a television broadcast (i.e. music channels on t.v.). 

The Copyright Act provides two narrow exemptions, typically referred to as “homestyle exemptions,” in which a business would not have to pay licensing fees.  Businesses can take advantage of these exemptions so long as, in addition to the requirements discussed below, they 1) do not charge patrons to see/hear the transmission, and 2) do not broadcast beyond their establishment.

§110(5)(A), commonly referred to as the Aiken exemption, applies if the establishment broadcasts through a single radio or television that is of the type that is commonly used in one's home.   

Example: Twentieth Century Music Corp. v. Aiken, 422 U.S. 151 (1975). 

Mr. Aiken, owner of George Aiken’s Chicken, played music in his fast-food restaurant using a home radio with four speakers. When ASCAP insisted he pay licensing fees, Mr. Aiken refused. The Supreme Court held in Mr. Aiken’s favor, stating that picking up radio signals and re-transmitting them through equipment similar to what may commonly be found in a household was not a public performance and did not require a license.

§110(5)(B) provides an exemption when the broadcast is received by the general public in a food or drinking establishment or another establishment (e.g. a store), so long as the transmission is made over less than seven loudspeakers (no more than 4 loudspeakers can be in the same room or adjoining outdoor space), and the gross square feet is less than 3,750 for a food/drinking establishment or less than 2,000 square feet for any other establishment. 

Example: BMI v. Claire's Boutiques, 949 F.2d 1482 (7th Cir. 1991)

Claire’s Boutiques, a retail chain of women’s accessories, used small sound systems to play the radio in their stores.  BMI sued Claire’s for copyright infringement for refusing to pay licensing fees. Here, the 7th Circuit took a step-by-step analysis of the requirements and found in favor of Claire’s. 

The Court established that at the time, Claire’s used a single apparatus with only two speakers attached in each store, each establishment was within the 2,000 sq. ft. or less marker, the transmission was free of charge, and the transmission was contained to the customers in each store. 

The Court emphasized that the Act did not care about a corporation's ability to pay for the licenses, only that each individual establishment fit the criteria stated in §110(5). 

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As previously mentioned, for businesses that do not fit the narrow “homestyle” requirements of §110(5), licensing is likely required to avoid infringement liability. Each PRO has different licensing structures to help meet business owners’ needs. For example, ASCAP generally licenses establishments with a "blanket license," which is a flat fee license paid annually by the business. Because PRO’s are notorious for sending out their “watchdogs” to enforce licensing requirements, consulting with your attorney is advisable before hitting “play” on any music, videos, or radio in your establishment. 

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