Article
Paying the Piper: Restaurant Music Licensing Fees
Not too long after the launch of this magazine, one of our readers contacted our publishing offices to inquire about an organization that told her she would have to submit an annual fee for her guests' entertainment.
"Are they serious?" she asked. If the organization was one of several U.S. performing rights organizations, which include ASCAP (American Society of Composers, Authors and Publishers), BMI (Broadcast Music Inc.), SESAC (SESAC Inc.) and relative newcomer GMR (Global Music Rights), the answer to her question is very likely 'YES.'
These are "performing rights organizations" (PROs), which serve as middlemen on behalf of their composers, lyricists and publisher members. The PROs issue blanket licenses, described by ASCAP as "a license which allows the music user to perform any or all of [the] songs in the [PRO's] repertory as much or as little as they like. Licensees pay an annual fee for the license.
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As I noted in a member post in the RestaurantOwner.com Discussion Forum, operators still have questions about PROs and their licensing fees. Musical entertainment is an increasingly important part of the guest experience for many concepts, from local taverns to fine dining.
During a recent episode of the Corner Booth, the podcast of RestaurantOwner.com and this magazine, Alexander Smith, founder and president of the Atlas Restaurant Group emphasized the importance of live music to his 25-concept business in Florida, Maryland, Pennsylvania, Texas, and Washington, D.C. His budget for live music is in the millions of dollars.
For many concepts, food alone is no longer enough to attract on-premises diners. And you know better than anyone, there's no such thing as a free lunch so your best strategy is to know how the music licensing game is played.
The blanket license saves music users the paperwork, trouble and expense of finding and negotiating licenses with all of the copyright owners of the works that might be used during a year and helps prevent the user from even inadvertently infringing on the copyrights of [the PROs'] members and the many foreign writers whose music is licensed by [the PRO] in the U.S."
Particularly, folks who are new to the restaurant and bar business have trouble with the notion that you have to pay a third party to entertain your guests with music played over a sound system or performed by a band. After all, you purchased the CDs and paid the band. Everybody is covered, right?
Not quite. U.S. federal copyright law generally gives songwriters and publishers the right to collect royalties whenever their songs are played in public. When you purchase a CD, you purchase a license for private use. When you play that CD in your business for the entertainment of your guests, you may need to obtain a separate license for the public performance of the music on the CD.
The PROs' reason for being is articulated in a 1979 U.S. Supreme Court case, "CBS v. Broadcast Music, Inc.," as follows:
[T]he blanket license developed... out of the practical situation in the marketplace: thousands of
users, thousands of copyright owners and millions of compositions. Most users want unplanned,
rapid, and indemnified access to any and all of the repertory of compositions and the owners want
a reliable method of collecting for the use of their copyright...
A middleman with a blanket license was an obvious necessity if the thousands of individual
negotiations, a virtual impossibility, was to be avoided. Also, individual fees for the use of
individual compositions would presuppose an intricate schedule of fees and uses, as well as a
difficult and expensive reporting problem for the user and policing task for the copyright owner.
Historically, the market for public-performance rights organized itself largely around the
single-fee blanket license, which gave unlimited access to the repertory and reliable protection
against infringement.
For example, ASCAP collects performance royalties on behalf of its more than 850,000 composer, songwriter, lyricist and music publisher members. Your ASCAP licensing annual fee entitles your business to play any of millions of copyrighted songs and compositions in its repertoire (i.e., musical works licensed by the organization).
Unless exempted (as will be explained below), restaurants (or any business that plays copyrighted music to the public) are required to pay the organizations a licensing fee, which, again, typically amounts to around a few hundred dollars a year, and is based on factors such as the size of the venue and whether the business uses live or recorded music. Refusal to pay a licensing fee to the performing rights society (or directly to the songwriters or publishers who own the songs) may constitute a violation of U.S. copyright law.
As addressed later in this story, the PROs mean business. Large companies have challenged the PROs, including their fee structures, in court; however, your restaurant most likely does not have the resources to outlast the PROs in a legal battle. Your best strategy, perhaps, is to know how the music licensing game is played, which is the purpose of this article.
A Significant Cost for Operators
Blanket licenses have become a significant cost for restaurateurs with ASCAP, BMI, GMR, and SESAC lining up for fees. The PROs use formulas based on occupancy, number of seats, whether the music played is recorded or live, played by a DJ, played for the purpose of karaoke, and even categories of live music, among other factors. Even small restaurants can wind up paying hundreds of dollars a year to each PRO for a blanket license to offer music to guests. Fees are determined by each PRO at the time you enter into a licensing agreement.
Whether you offer recorded or live music – or both – the number of days you have live music entertain and the size of your venue can affect your licensing fees. You have every right to question the figure at which the PRO arrives after reviewing your application, and there might be ways to reduce the fees, such as eliminating live music on days of the week when it doesn't really help your sales.
While some restaurateurs resent the fees, which can be a couple of thousands of dollars or more a year depending on the business, operators who refuse to pay fees risk even more costly legal damages, as in the case of one well-publicized lawsuit against a Raleigh, North Carolina, restaurant, which in August 2011 was ordered to pay BMI $30,450 for playing four songs without a license and another $10,700 in court and attorneys' fees. Unfortunately, the restaurant shuttered that same month.
For many concepts, food alone is no longer enough to attract on-premises diners. And you know better than anyone, there's no such thing as a free lunch so your best strategy is to know how the music licensing game is played.
According to news reports, BMI attempted to contact restaurant management by calling 56 times and mailing 29 letters; BMI said the Raleigh restaurant ignored its requests to get a license to play music, suggesting that the lawsuit was only necessary due to the restaurant's unresponsiveness. PROs insist that litigation is not their "preferred route" and they "only pursue lawsuits as a last resort after multiple attempts to negotiate with the licensee in question." However, in the case of the Raleigh restaurant, ASCAP did not leave any doubt regarding its willingness to file suits. It sends a clear message across the proverbial bow of businesses that "ignore the legal rights of the music creators" with the following:
"We do have a successful track record in the lawsuits we take out against bars, restaurants and clubs that infringe the copyright of our members. In past cases, several venues that could have paid ASCAP a license fee of between $1,000 and $7,000 a year ended up paying between 25 and 100 times that amount in damages. It's not a surprise that judges would decide in favor of ASCAP songwriters in these cases – after all, Federal law is on their side."
Where Do They Get the Right?
Indeed, composer and songwriters' rights come from the supreme law of the land: the Constitution. Article 1, Section 8 of the U.S. Constitution gives Congress the power "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." Thus, U.S. copyright is governed almost exclusively by federal law. The current statute is the Copyright Act of 1976. Under current laws, copyright protection generally lasts for the life of the author plus 70 years.
The Copyright Act gives copyright owners a number of exclusive rights over their works. For the purpose of this article and the restaurant industry, our main concern is the owner of a musical works' right "to perform the copyrighted work publicly." Under the Copyright Act, to perform a work "publicly" means "to perform at a place open to the public or at any place where a substantial number of persons outside of a normal circle of family and its social acquaintances is gathered," or "to transmit or otherwise communicate a performance by means of any device or process, whether the members of the public capable of receiving the performance … receive it in the same place or in separate places and at the same time or at different times."
That means a public performance of a copyrighted song can include a live band performance, playing music to your guests on your sound system via a CD, radio broadcast (in most situations), or making copyrighted music available to visitors of your website. (While this article is focused on music performance, similar copyright laws apply to television broadcasts as well.)
The Copyright Act protects both the lyrics and music, as well as sound recordings; however, sound recordings have a limited public performance right, which is beyond the scope of this article. To complicate things even more, consider that a song could be written by two writers who each has a publisher who jointly owns the song. Again, you can see why performing rights societies became necessary.
As previously mentioned, the penalties and award of damages for infringing a copyright by unlawfully publicly performing music without permission can be stiff.
Under U.S. copyright law, an infringer may be liable for actual damages and profits, or statutory damages of $200 to $150,000 per infringement, as well as for court costs and attorneys' fees.
What About Commercial Music Services?
Restaurants may avoid dealing with obtaining licenses from all the PROs by subscribing to a commercial music service such as SiriusXM Music for Business, which offer packages for commercial use, with all the necessary PRO licenses secured. If you obtain recorded music for your guests via services offered by these services, the license to offer the same music performed live is not covered under the subscription.
Again, if you hire a musician or band to entertain your patrons, and they only play their original songs, then you have no obligation to the PROs. That said, most live music played in bars and restaurants are "cover" songs. In general, guests want to listen and dance to music with which they are familiar, not the love song penned by the lead singer for his wife.
Take-Home Points
First and foremost, it does not pay to ignore communication from the PROs. If they believe you owe them licensing fees, they will not go away and are willing to litigate on behalf of their members.
If you find yourself at odds with one or more PRO, an attorney who specializes in music or copyright law might be able help you fall under an exception to the Copyright Act, as addressed earlier, or guide a resolution with the organization. If you intend to have music played or performed in your restaurant, it will pay to learn about your obligations regarding music licensing law.
Please note: Legal articles are for your general information only. Confer with a lawyer in your
state to assess your legal rights in a particular situation.
Jesse E. Morris is the founder of Morris Music Law. A Santa Monica native, Jesse has a B.A. in
philosophy from UC Berkeley and a J.D. (cum laude) from UC Hastings. Jesse is also a musician
with skills on drums, piano, and trumpet, and understands the needs of musicians firsthand having
been in several rock acts himself. Jesse was a co-chair of the LA Chapter of the Copyright Society
of the USA, and has spoken at various events for UCLA, USC, the Association of Independent Music
Publishers, California Lawyers for the Arts, Digital Entertainment World, and SXSW.
Open Mic Night Is Not Quite a 'Free for All'
By Barry Shuster
"Open microphone (mic)" events are lots of fun for local amateur musicians and restaurant patrons. I enjoy getting in front of an audience at a local pub with friends to sing and play music. Operators benefit from free entertainment and the food and drink tabs of family and friends, who come to watch performers live out their rock star fantasies after a day at the office. It's all good, unless the venue has not paid its licensing fees and the performers play cover tunes rather than original sets.
Even if the venue isn't paying the musicians a dime, the free performances would be covered under the Copyright Act, given they are held "at a place open to the public or at any place where a substantial number of persons outside of a normal circle of family and its social acquaintances is gathered." A venue in my town found out about this the hard way, when a representative from one of the performing rights organizations (PROs) contact- ed its owners.
There's nothing like hearing your accountant perform a soulful rendition of "Tequila Sunrise" to a full house. Just remember that federal law gives composers Glenn Frey and Don Henley a right to get paid for their part.
The rules are not suspended for karaoke, as well. You should make sure you are covered with PROs if you offer this form of entertainment. You may sing Katy Perry's "Firework" with your daughter at the top of your lungs in your garage with impunity. The same karaoke device intended for private homes will likely require a license from the PROs when it is used in your bar to entertain patrons.
