Restaurant and alcohol beverage service operators are often caught off-guard when they receive a letter or phone call from a representative from a performing rights society – such as ASCAP or BMI – informing them that they owe fees for using music in their establishments. Many operators assume that playing a radio station is free or that music CDs or MP3s are theirs to do with as they wish post-purchase. However, these operators are unaware that by broadcasting music publicly, they incur liability under the United States Copyright Law.
“Open to the public” is considered “any place where a substantial number of persons outside a normal circle of family and its social acquaintances is gathered.”
The U.S. Copyright Law protects the rights of music writers, composers and publishers by providing for the payment of royalties each time their music is performed publicly during the copyright period, whether a direct charge is made or not. Copyright terms are for the life of the author plus 70 years. After the copyright term expires, the music is considered “in the public domain” and no royalty liability is created by its use. Note that classical compositions such as Beethoven or Mozart don’t necessarily fall into the “public domain” exclusion. If the music has been re-orchestrated or re-charted for modern-day instruments, liability has been created and royalties are due to the arranger of the musical work.
ROLE OF PERFORMING RIGHTS ORGANIZATIONS (PROS) Royalty payments are usually made through a licensing agreement that establishes a fee or rate. Because of the large number of composers, publishers and songs, it would be economically impossible for all concerned to arrange for a separate license of each use. So, songwriters, composers and publishers have banded together in performing rights organizations (PROs), which then represent the membership collectively in licensing the right of public performance of the members’ work.
The largest of these organizations are the American Society of Composers, Artists & Publishers (ASCAP) and Broadcast Music, Inc. (BMI). There are also two smaller groups in the U.S. – the Society of European Stage Authors & Composers, Inc. (SESAC) and Global Music Rights (GMR).
The music licensing organizations all operate similarly by issuing licensing agreements with operators who use music of the organizations’ members. These contracts or licenses permit the operator to use all of the works in the repertory of the PRO without accounting separately for any of the uses and without obtaining specific permission for each song in advance.
Each organization has a schedule of rates that may be based on a number of factors. These factors may include:
posted fire code occupancy
square footage of the premises
number of days of operation
shows or acts in conjunction with the music
live or recorded music
addition of audio-visual music performances (e.g., music on TV, DVDs, videos or karaoke)
In accordance with antitrust laws, an organization’s rates must be uniform. They are not permitted to discriminate among users similarly situated. ASCAP, BMI and SESAC all publish fee schedules to make sure similar music users pay similar prices.
California law requires performing rights societies to provide written details about fee schedules at least 72 hours before a contract is signed, including specifics on the rates paid by comparable businesses. The law also requires these organizations to make electronically available to proprietors the most current available list of members and affiliate representatives by the societies (BMI, for example, has a searchable database on its website that fulfills this requirement). The 1996 legislation sponsored by the California Restaurant Association (CRA) also requires representatives to identify themselves before discussing royalty contracts with the proprietor or his or her employees.
To comply with copyright law, most hospitality industry operators sign contracts with both ASCAP and BMI, as each organization covers a separate catalog of artists, and because limiting liability to only one organization would prove an excruciating endeavor.
EXEMPTIONS TO ROYALTY LIABILITY Operators who meet one of the following requirements are exempt from paying royalties provided:
The establishment has less than 3,750 gross square feet of space and plays solely radio or television broadcasts for which no admission is charged to patrons.
If the establishment is more than 3,750 gross square feet and plays solely radio or television broadcasts for which no admission is charged, it can’t have more than six sound system speakers, with no more than four in any one room; or no more than four televisions with a diagonal screen size of 55 inches or less, with no more than one in any room. Note that music television networks, as well as theme songs and commercial jingles, are also covered under the copyright law.
OTHER APPLICATIONS OF THE LAW Remember that with the exception of the exemptions outlined above, the law treats most uses of music in a restaurant or hotel as a public performance even if no direct charge has been made for the music. Specific applications of the law are as follows:
Jukeboxes. Obtained through the Jukebox Licensing Office (a licensing clearinghouse for jukebox users), a jukebox license agreement permits the public performance of all musical compositions in the repertories of ASCAP, BMI and SESAC. It does not cover the repertory of GMR. The yearly license costs varies, depending on the number of boxes licensed by the business or jukebox vendor. If you lease a jukebox, the vendor is responsible for licensing. The agreement must be submitted before March 15 of each year. If the jukebox license agreement is not obtained on a timely basis, separate agreements are required from each of the organizations. The jukebox license agreement covers music only from the jukebox and not from other sources, such as live entertainment, recorded music or tapes (or a video jukebox). Licensing additional uses and music from other sources is always the responsibility of the operator whether the jukebox is leased or owned by the operator. Separate agreements from each of the organizations are necessary if there is an admission or cover charge, or if a jukebox is operated in any manner other than coin activation by patrons, or as specified in the copyright law. For more information, contact the Jukebox Licensing Office at 2 Music Square West, Nashville, TN, 37203 or email@example.com or 615-727-5366.
Live performances. Whenever live musical entertainment is performed, the operator of the establishment, not the entertainer, is liable to any and all organizations whose music is played. This is true even if the operator has no voice in the selection of songs and even when musicians play an organization’s songs after being instructed not to. Thus, when live entertainment is provided, it will always be more difficult to limit the liability to only one organization.
Audio-visual. Audio-visual performances of recorded music – including those on music videos, big-screen television or multiple television screens – are subject to the same copyright compliance requirements as other types of recorded music. Unless covered by the exemption above, all other audio-visual uses, including the use of DVDs displayed on a single television monitor, regardless of size, must be licensed. This exemption also covers any copyrighted music (e.g., commercial jingle, television series theme song, etc.) contained within a television broadcast. Failure to obtain such a license will constitute copyright infringement. Performing rights organizations cover this use in their contracts, with surcharges ranging from 35 percent to 50 percent of the base rate purchase. Note: Chain restaurant operators may obtain a “blanket license” from a performing rights society that will cover music use by all units in the restaurant’s chain.
Audio recordings. If a restaurant operator buys an audio recording (whether a record, cassette tape, CD or DVD or other digital recordings), he or she must have a licensing agreement with a performing rights organization to broadcast that music to the public. When an operator selects his or her background music, it is possible, by careful management, to limit liability to only one performing rights organization. Both ASCAP and BMI will answer brief questions about specific songs over the phone. They will respond within about a week if you submit a longer list of songs in writing, including the song’s name and composer.
However, if an operator wants to make his or her own tape of various songs and “synchronize” it onto a master tape, CD or DVD that is then broadcast to customers in the establishment, a two-step permission clearance is required. First, an operator needs to obtain permission from each record company that produced each individual song being used on the audio cassette, CD or DVD. If the record company in question is no longer in operation, the operator is free of this requirement. Such use falls under the “synchronization rights” of record companies – it does not fall under the jurisdiction of the performing rights societies. Such use of music cannot be negotiated in licensing agreements. Second, the operator must still pay royalty fees to publishers or composers of the songs being used on the audio tape. For this purpose, royalty collection agencies exist to represent song publishers whose works are being used mechanically. The largest is The Harry Fox Agency. To contact it, write or call The Harry Fox Agency 40 Wall Street 6th Floor, New York, NY, 10005 646-487-6779, or visit their website at www.nmpa.org.
Background music. In most major cities, firms provide background music for establishments either by wire or special equipment (AEI and Muzak, for example). The music is specially programmed and the firm providing the music negotiates directly with the performing rights organizations. The user of the service pays a fee to the contractor, including a factor for royalties, but incurs no liability to the organizations. Any use of music beyond that provided by these companies will require some form of licensing. Also, the restaurateur should verify that fees for such services do include all copyright royalties and liabilities.
Karaoke entertainment. Operators who install karaoke systems must obtain a “blanket” license from the appropriate licensing organizations. If the operation is already paying licensing fees and adds a karaoke system, the karaoke “performances” may be included in the existing contract. To ensure compliance, advise the licensing organization of the addition of the karaoke system, particularly if it involves audiovisual support (such as music videos), which have their own fee category.
Telephone hold music. Even this form of music is subject to copyright liability. The fees are generally assigned according to the number of trunk lines the telephone system has.
Sporting events. CRA members sometimes ask if they have copyright obligations when airing sporting events, such as football games, at their establishments. As long as the broadcast falls into the exemptions outlined above, the operator does not have to make special payments. One of the problems facing the restaurant operator as a user of music is protecting him or herself from litigation involving infringement of copyright or becoming liable to all three performing rights organizations.
It’s important to note that intention to infringe is not essential under the copyright law and ignorance of the law is no excuse. Under the copyright law, copyright owners are entitled to damages of as much as $30,000 plus legal fees for each composition that has been performed without authorization. Usually, however, an organization will attempt to get the establishment to agree to a contract before resorting to these measures. In summary, if an operator elects to provide background music or entertainment for guests, some costs for the right to use the music selected must be expected.
This report was reviewed for legal accuracy and updated in 2017 by BMI.
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