By Clayton Burton, AMTC
Successful restaurateurs would agree almost unanimously that background music is an essential part of the dining experience. Given that music is a nearly universal restaurant need, this article addresses the things an operator should know about the use of background music from a legal perspective.
Federal copyright law, which governs use of music in a restaurant, is one of the most arcane, complicated and misunderstood areas of the law. When you play background music in your restaurant, it’s considered a public performance of that music, and in general you are legally required to pay licensing fees for the privilege. It doesn’t matter if you have paid for the underlying source of the music, whether by buying CDs or paying for a subscription service such as Pandora. That only gives you the right to use the music for personal use. When you play it in your restaurant, it changes everything.
The “Small Business Exemption”
Some restaurateurs have a vague notion of a “small restaurant exemption,” and assume that this frees them of the burden of paying licensing fees. There is, in fact, a limited exemption provided by Section 110(5) of the Copyright Act, but in real life it’s rarely helpful. While many smaller restaurants meet the “physical” requirements of the exemption, in terms of the square footage of the premises and the number of speakers playing the music, the exemption covers only broadcast radio (and TV). Not CDs, your iPod, satellite radio or streaming music services like Pandora. Few restaurateurs would consider broadcast radio, replete with rude DJ banter and obnoxious car dealer ads, to be conducive to a positive dining experience.
“I’ll Take My Chances”
If you want decent music for your restaurant, it’s not free. Can you get away with not paying? Sure, at least for a while. Tens of thousands of restaurants play music illegally. A majority get away with it. A minority get sued by the “music police”: the “performing rights organizations” that collect licensing fees on behalf of the copyright owners. These organizations know they catch only a small portion of “bootleggers”, so they need to make examples of the ones they catch. Federal law entitles them to damages as high as $150,000 per song played illegally. Frequently these lawsuits result in bankruptcy and closure of the restaurant. Don’t believe it? Google “ASCAP lawsuit” or “BMI sues”.
Ten years ago, when Muzak dominated the market, music cost as much as $100 per month, with five-year contracts, forcing many operators to “take their chances” playing music illegally. Today, there’s absolutely no reason for a restaurant to pay more than $20 per month for a business music service, and there’s no need to sign a term contract. Most operators now conclude that the devastating downside of being caught using music illegally is simply not worth the risk.
Options for Paying Licensing Fees
Practically speaking, you have two choices for paying your licensing fees. Legally, you could obtain licenses from the copyright owner of each song you play. Assuming that your song playlist will be large and diverse, that’s not a practical option. Instead, you can pay the performing rights organizations who collect on behalf of the copyright owners. ASCAP and BMI were mentioned previously, and there are two more: SESAC and GMR. To be safe, you must get licenses from all four organizations. The copyright on any given song may be held by many parties, each belonging to a different performing rights organization.
The second option is to subscribe to a business music service and let it pay on your behalf. Business music services have “blanket” agreements with the performing rights organizations that allow them to build your license fees into their service rate. Because of their large subscriber counts, they pay lower fees on your behalf than you’d pay directly. In many cases, what you pay a business music provider will be equal to or less than you’d pay directly, meaning the music service itself is essentially free or even profitable! Obviously, paying one bill instead of four is also less hassle. So why would a restaurant pay directly? I have no idea.
Other Uses of Music
A common misconception is that, once a restaurant subscribes to a business music service, they’re “covered” for any use of music in the establishment. Not so. The license you get with a music service covers only that service. If you sometimes feature live music, a DJ spinning, karaoke, etc., additional, separate licenses must be obtained from the performing rights organizations.
In general, if you want to play background music in your restaurant and stay out of legal trouble, you must pay for it. At less than $20 per month, the simplest, most cost-effective option is a business music service.
Clayton Burton is the CEO of Applied Media Technologies Corporation, the third largest U.S. provider of business music, audio/video messaging, digital signage and audio/video equipment. He is an attorney and an expert in music copyright and licensing.