Whether played as background everywhere from shopping malls to health spas, or used to impart a special feel and ambience to boutiques and trendy restaurants, music has become an integral part of most modern retailing. Operators and owners of businesses large and small often assume that providing a melodic milieu for their enterprises costs no more than wiring their store with speakers and a radio receiver or installing a tape system to pipe in special uninterrupted musical programming. As a result they are often surprised and skeptical when representatives for performing rights licensing organizations tell them that if they want to play they have to pay.
When faced with demands that they buy one or more licenses to perform music in connection with their business or face the threat of a lawsuit, many people in business come to realize that they haven’t considered the fact that most of the music they play is protected by copyright. Moreover, the music copyright holders have the constitutionally created and federally protected right to demand royalties for public performances of their music, whether by live musicians, recordings or broad-casts. Their legal rights under the Copyright Law are substantially the same as those given authors or creators of literary works, dramas, choreographic works, films, pictures, graphics and sculptures.
In order to effectively and efficiently enforce their rights under the copyright laws, American composers, lyricists and publishers usually join one of three “performing rights societies,” organizations that grant licensees the right to publicly perform the works of all their members or affiliates, for whom the societies collect and distribute fees for the licenses granted. More than 80 of the fees collected by the two largest organizations are paid to composers and publishers as royalties for the performance of their copyrighted works. Foreign writers and publishers are also represented by these organizations. Under this system, composers and publishers are relieved of the burden of policing their copyrights throughout the world. Moreover, those who wish to publicly perform copyrighted works need not negotiate royalties with each composer or publisher whose works they want to use.
This Advisory is intended as a general explanation of the nature and functions of these performing rights organizations and a guide for businesses that use music in any way in their dealings with the public in under-standing their rights and obligations under the Copy-right Law. It is not intended to be legal advice and should not be considered a substitute for legal counsel on specific copyright issues.
Performing Rights Organizations
ASCAP, BMI & SESAC
Three organizations license performance rights for most of the music copyright holders in the United States. They are: the American Society of Composers, Authors and Publishers (ASCAP); Broadcast Music, Inc. (BMI); and SESAC, Inc. formerly the Society of European Stage Authors and Composers. ASCAP and BMI are by far the dominant organizations in the field. Their repertories include nearly all of the world’s copyrighted musical works.
ASCAP, which is headquartered in New York City with licensing representatives throughout the United States, is the oldest of the organizations. It was founded in 1914 by composers, lyricists and music publishers, led by Victor Herbert, as a membership association. Its over 68,000 members and many foreign writers and publishers of music use ASCAP as a clearinghouse for collecting royalties on over four million copyrighted musical works, which include pop, rock, Broadway, movies, jazz, soul and symphonic music. In addition, ASCAP has agreements with most foreign organizations that license the right to perform copyrighted works in their countries that allow ASCAP licensees to use the works of the foreign societies’ members not licensed by BMI.
BMI was formed in 1939. It is a not for-profit corporation headquartered in New York City with five regional offices in the U.S. and Puerto Rico. Its roster includes over 180,000 songwriters, composers and publishers. BMI’s repertory includes more than three million copy-righted musical works, which run the gamut of musical types from pop, rock, country and folk to gospel, Broadway, jazz, rhythm and blues and popular ballads. Like ASCAP, BMI acts as a clearinghouse for its affiliates’ royalties and has agreements with licensing organizations around the world enabling BMI license holders to perform the works of the foreign organizations not licensed by ASCAP.
SEASAC is a for-profit corporation headquartered in Nashville, Tennessee, with a second office in New York City. It was founded in 1930 and is the smallest of the three performing rights organizations identified in the Copyright Act of 1976. It primarily follows performance activity of its works by tracking independent databases that contain information on broadcast and live performance activity. Like BMI and ASCAP, it does have international agreements with foreign per-forming rights organizations. SESAC has become more active in seeking to license performance of its music by businesses.
The performing rights organizations serve as clearing-houses for the royalties collected on their writers’ and publishers’ copyrighted works. A composer or publisher who owns the copyrights to musical works grants the right to license performances of the works, and the right to prevent others from doing so without permission, to the organization. The organization, BMI, ASCAP or SESAC, then will issue for a fee a license to individuals and organizations that use music in public places whether live, recorded or broadcast, to use the copy-righted music in the organization’s repertory.
ASCAP’s and BMI’s performance rights are non-exclusive; individuals or entities that wish to may negotiate separate royalty agreements with individual composers and/or publishers to perform their music. However, when faced with the prospect of expending considerable time, effort and money in trying to negotiate separate licenses with each composer or publisher whose music will be performed, most of those who use publicly performed music will choose to obtain from one or more of the performing rights organizations a blanket license, which permits the license holder to perform any or all the works in the organization’s repertory. If you choose to publicly perform only music that is in the public domain, that is, music that is no longer or never was protected by copyright, no license is necessary.
Why Do I Have to Pay Royalties?
The short answer to this question is: “Because the law says you do.” But, clearly, some further explanation is needed as to why, for example, a merchant has to pay to play radio music in his or her store, when playing the radio or listening to tapes at home or in one’s car is “free.”
The long answer starts with the U.S. Constitution, which gives Congress the power to grant patents and copyrights. Pursuant to that power. Congress has en-acted and amended various copyright laws. The Copy-right Law of the U.S. today gives copyright owners the exclusive right to publicly perform or authorize performance of their works.
Generally speaking, public performances are very broadly construed under the law and are defined as performance “at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered.” This has been interpreted to mean that most performances at so called private clubs and fraternal organizations are “public” under the Copyright Law.
Early versions of the copyright law limited the exclusive right to performances given “publicly for profit.” Today, however, the “for profit” limitation has been repealed and only an explicit list of exempt performances do not require a license from the copyright owner. These include performances by instructors or students in the course of face-to-face teaching activities of non-profit educational institutions, performances of music in the course of religious services at a place of worship, and performances by the public reception of a transmission on a single receiving apparatus like those commonly used in private homes when no charge is made to hear or see it and the performance is not further transmitted to the public. An example of this last exception would be a store that uses a typical home radio connected to two or three “home-style” speakers to provide radio programming to employees and customers. Some courts have held that the important factor in determining qualification for the exemption is the kind of radio equipment, i.e., “home-style,” rather than the size of the facility or the fact that the store is part of a large chain.
Performances at charitable functions are exempt from license or royalty requirements only if the performances are without any purpose of direct or indirect commercial advantage and if no one involved with the performance, including the performers, organizers or promoters, is paid, and there is no direct or indirect admission charge.
Given the broad scope of the protection given copyright holders and those assigned their rights, anyone whose business in one way or another performs music for its customers or members should be aware that they may be called upon by one or both of the major performing rights organizations to license the performance of copy-righted works in their respective repertories. And buying a license from one organization, say BMI, does not protect a business from liability for unauthorized performance of songs in ASCAP’s or SESAC’s repertories.
A list of places and events at which licensing could be required includes, but is not necessarily limited to: restaurants, bars, clubs and hotels where live or re-corded music is played; shopping malls; stores that play broadcast or recorded music; spas, gyms or other sites that offer exercise to music; trade shows; conventions; dance studios; skating rinks; private clubs or fraternal organizations; offices and stores that use “music on hold” for telephone customers; factories; summer camps; and, schools.
In addition, licensing is also required for those businesses traditionally associated with the performance of music such as radio and television networks and stations, concert promoters and the like. The organizations license only the “non-dramatic” performance of their writers’ and publishers’ music. They do not have the right to license public performance of “non- dramatic musical works” such as operas, musical comedies or other forms of musical theatre, which are licensed directly through publishers or other copyright holders. A business person should consult his or her attorney with any questions as to whether the music he or she plans to publicly play is exempt from liability for royalty payments.
The proprietor of the business in which the copyrighted music is performed is liable for any infringement of copyrighted music in his or her place of business. Technically, everyone responsible for an infringing performance can be sued as an infringer, including musicians and independent contractors. However, when copyright owners sue, they usually go after the owner of the establishment rather than members of the band or the disc jockey who actually gave the unauthorized performance.
Federal courts have rejected a wide range of defenses in copyright infringement cases brought against music users. For example: courts have held that it is no defense in an infringement suit to claim that performers were hired as independent contractors, or were not paid by the club owner and worked only for tips; or that the owner specifically instructed the musicians not to play copy-righted music, or not to play specific songs, or not to play music in the repertory of a particular performing rights organization; or even that the owner did not know the music actually performed was copyrighted.
If a business contracts for a music service that “pipes in” background music, either by providing tapes or transmitting to subscribers’ premises through radio or satellite special equipment, the service, which collects its fees from subscribers, is responsible for obtaining the appropriate licenses, unless the establishment itself charges for admission, in which case the owner must obtain the licenses.
BMI and ASCAP each operate under federal consent decrees that prevent them from charging discriminatory fees for licenses. While the two organizations’ fee schedules and methods of fee computation may differ, each must treat like entities alike. ASCAP and BMI maintain standard fee schedules for different classes of businesses and organizations that set out the bases for fees and from which businesses can determine their cost of an annual license. For example, BMI fee schedules for Retail and Commercial Establishments base annual fees on square footages of single floor premises—the larger the area the higher the annual fee, with a flat fee for each additional floor regardless of space. In 1996, for example, the annual fee for a retail establishment of from 1500 to 2000 square feet was $120.
Other BMI schedules, such as those for restaurants and bars, base fees on room capacity, the type of performance, that is, whether it is live or recorded, and the establishment’s entertainment costs. The 1996 fee for a restaurant that features live music, with a $35,000 annual entertainment bill was $610. If a business plays “music on hold” for telephone customers, the BMI contract bases charges on the number of trunk lines the company has coming into its offices. The annual fee for fewer than ten trunk lines is $160: for 10 to 29 lines, it is $280.
ASCAP has similar fee schedules and license agreements. For example, its license for restaurants, taverns, nightclubs and the like sets fees by seating capacity and other variables, including whether the music is live or recorded, the number of instrumentalists and whether or not admission is charged. Users have the right to use a federal court in New York to determine a reasonable fee if they think ASCAP’s fee is unreasonable.
In 1990 both BMI and ASCAP accelerated their efforts to enforce copyright laws in connection with conventions, trade shows and meetings. Working with industry and association representatives, they each developed uniform agreements that may be used to obtain what-ever licenses an organization or association may find necessary for such events. The agreements base fees for live and recorded music on the number of attendees.
Once an annual license is signed, the association must contact ASCAP and BMI when an event is planned and pay a minimum fee. Both BMI and ASCAP model agreements have minimum fees schedules, but signers who don’t hold events with music during the license term pay no fees. For example, under the ASCAP license agreement, the 1996 daily license fee for live music performed at a meeting of from 501 to 750 attendees was $90; the minimum daily charge (250 or fewer attendees) was $30.
Are There Alternatives ASCAP/BMI Licenses?
Proprietors who wish to may negotiate separate licenses with the individual owners of the copyrights, i.e., the composers or publishers, for each piece of music they want to use. Businesses may also limit music performed to works in the public domain (where the copyright has expired or the works were never copyrighted). This alternative of avoiding playing copy-righted music may not be as easy to achieve as one might think. While classical symphonic pieces or traditional folk songs may have expired copyrights or may never have been copyrighted, arrangements of the pieces may have copyrights in effect. Using a copy-righted arrangement requires the payment of royalties, too.
Another option often considered by businesses seeking recorded music for use in an advertising message or at meetings is to license music from a company that represents one or more music libraries. A music library is a collection of copyrighted works owned or con-trolled by the music library company, just as any publisher owns or controls the copyrighted songs in its catalog. Most music libraries are affiliated with one or more of the performing rights societies. It is a common misconception to think that using themes from a music library will avoid the performing rights issue. Unless a business owner has negotiated a separate license with the library that owns the copyrights, he or she will still be required to obtain a performance license from the society that represents the library.
What Happens If I Don’t Get a License?
The cost of performing copyrighted musical works without a license can be far greater that the cost of the license. Failure to obtain a license to perform publicly copyrighted music is copyright infringement under the U.S. Copyright Law. The copyright infringer is subject to a civil suit in federal court. Sanctions against an infringer can include an injunction and the copyright owner’s actual damages, as well as the infringer’s profits, or “statutory damages” of up to $20,000 for each copyrighted song performed without a license (up to $100,000 if the infringement is willful). The infringer can also be required to pay the copyright owners’ legal fees. The law further provides for criminal sanctions against those who willfully infringe on a copyright for commercial advantage or private gain. Criminal violations are punishable by up to a $25,000 fine and/or up to a year in prison.
Will I get Caught?
In the past decade new technologies, pastimes, and merchandising techniques have been accompanied by the performance of music in nontraditional places such as malls, aerobic studios, restaurants and all types of retail establishments. Performance licensing organizations have responded to this music explosion by contacting more and more businesses using music on a regular basis in an effort to educate them to rights of the copyright holders and to see to it that their members get paid for the performance of their copyrighted works. It is undoubtedly true that, because of the difficulty of policing the millions of performances of copyrighted music that take place every day; royalties are not paid by all small and large businesses. But, given the changes in the commercial use of music, business owners should not be surprised if they are contacted by BMI and ASCAP representatives, either by mail, phone or in person, offering music licensing agreements.
Besides fearing the possibility of having to pay large judgments for copyright infringement, business owners, of all people, should be sympathetic to the notion that those who create and produce things, whether they be books or bath towels or songs, are entitled to payment for their work. The copyright laws and the performing rights societies exist in furtherance of this premise. Anyone with questions about the performing rights organizations, their license agreements, or rights and responsibilities under the United States Copyright Law should contact their attorney or the performing rights organizations at their headquarters:
Broadcast Music, Inc.
10 Music Square East
Nashville, TN 37203
55 Music Square East
Nashville, TN 37203
American Society of Composers, Authors and Publishers
3350 Cumberland Circle
Atlanta, GA 30339
This publication has been made possible, in part by grants from the American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music. Inc. (BMI).
A Better Business Bureau Publication
Supported by Business in the Interest of Consumers Published by:
Council of Better Business Bureaus, Inc.
4200 Wilson Blvd.
Arlington, VA 22203
Council of Better Business Bureaus offers this publication to businesses as a public service. It is not an endorsement of any kind and may not be used for sales purposes.
Better Business Bureaus are not-for-profit organizations. They serve the public interest through their efforts to promote ethical practices in the marketplace.