Do Restaurants Need to Pay for Copyrighted Music?

Virtually every restaurant or tavern plays some sort of music for its customers.  United States copyright law protects original works of authorship and entitles creators to various rights.  Holders of copyrighted sound recordings have exclusive rights to the reproduction, adaptation, distribution, and public performances of those works.  A purchased copy of a sound recording from a source such as iTunes or a CD only gives the purchaser limited rights to play or to further reproduce that recording and does not give the purchaser the right to distribute it or to play that recording in public.

Performing rights organizations (“PRO”s) such as Broadcast Music, Inc. (“BMI”) and The American Society of Composers, Authors and Publishers (“ASCAP”) are non-profit organizations that have been established to manage and protect musical copyrights on behalf of copyright holders.  There are some smaller organizations including  the National Music Publishers Association and the Harry Fox Agency that have banded together with ASCAP and BMI to ensure that music royalties are collected and distributed to copyright holders.   BMI and ASCAP send notices to nearly every business that plays music for its customers.  These notices request that businesses pay a licensing fee for copyrighted recordings that may play in their businesses.  These business owners are required to purchase a license, typically for a single annual fee based on the size, seating capacity and type of venue or use.  That license is intended to ensure the receipt of royalties by the copyright holder.  Small businesses, for whom legal advice may be too costly, must make a calculus as to whether to pay the PROs or disregard the letter and risk a court action for copyright infringement. 

PROs have grown increasingly vigilant about enforcing licensing agreements with business establishments in recent years.  ASCAP and BMI send anonymous investigators to roam the country and identify restaurants, bars, clubs or other establishments where music is used.  These business owners are required to produce a licensing agreement or service agreement if the investigators discover music being played.  Failure to purchase a copyright license may result in a violation and these violations can be costly.  A breach of the federal copyright laws allows the copyright holder to recover actual damages or to receive statutory damages sometimes referred to as “predetermined damages.”  The copyright owner may elect to recover an award in a sum of not less than $750 or more than $30,000 as the court considers just.  Additionally a copyright infringer may be liable to the copyright holder for reasonable attorneys’ fees. 

When do businesses need to purchase a license to play sound recordings? Business owners should consider carefully how music is used on their premises. Is the music for the benefit of the customer and would that be considered a public performance?   A sound recording performed at a place open to the public or at a gathering of a substantial number of people other than a customary circle of family and friends would normally be considered a public performance. Courts have ruled that public performance of sound recording includes the playing of recordings over a stereo system in an establishment for the entertainment of customers.  Public performance occurs even where the customers are not directly charged for listening to the music. 

Other options business owners may consider include paying for a music service, such as Muzak, or a jukebox service.  Music service companies include the costs of licensing as part of their service, however this type of service limits the individuation a licensing agreement would otherwise offer.  Business owners should be careful when using services such as satellite radio or internet radio for public performances.  The typical satellite radio contract does not allow for public performances; however, a broader license is usually available from the satellite provider. Similarly, most internet radio providers such as Pandora and Spotify also offer licensing options for public performances.   Jukeboxes provide an option that covers copyright fees by shifting the costs directly on to the customer, however establishments that rely exclusively on jukeboxes for music risk periods with no music playing in the establishment.   In some instances a typical commercial radio station being played on a radio available to the public is permitted for public performance without additional licensing.  

Should your business receive a notice of a violation under the copyright laws contact our office.  We will investigate the supposed violation and determine if there are defenses available to your business, or whether we may be able to negotiate a reduction in the liability.

– J. Ken Butera


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