Source: http://www.paaba.org/2011/10/when-should-small-business-pay-ascap-or-bmi/
Timestamp: 2019-04-26 04:40:46+00:00

Document:
When Should a Small Business Pay ASCAP or BMI?
A growing number of small businesses are being unpleasantly surprised with letters from performing rights organizations, such as the American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music, Inc. (BMI), with indirect or direct threats of copyright infringement. The performing rights organizations, or PROs, which manage musical copyrights on behalf of their owners, request that businesses pay a licensing fee for playing in their shops musical recordings from the PROs repertoires. Small mom and pop stores, for whom legal advice may be prohibitively expensive, must then decide whether to pay the PROs or disregard the letter and possibly face a court action for copyright infringement. This article focuses on the small business’ risk of incurring copyright liability for playing music in its business space without the rights owners’ authorization and suggests courses of action to minimize that risk.
– “possibly yes” for musical recordings played in any other manner, for instance, MP3 files on a computer or free Internet radio, and in public.
The right to perform musical recordings belongs exclusively to the copyright holders.
The law provides two defenses against claims of infringement of the public performance right.
Assuming that a small business is not authorized to play the recordings, the discussion below analyzes the two potential defenses against a claim of infringement: (1) whether the “homestyle exemption” applies to the situation; and (2) whether the playing of music recordings in the business can be considered a non-public performance.
Section 110(5) of the Copyright Act provides an exemption for the reception of radio or TV broadcasts in an establishment open to the public for business.[v] The purpose of the “homestyle” exemption is to release from copyright liability anyone who merely turns on, in a public place, an ordinary radio or television receiving apparatus of a kind commonly sold to members of the public for private use. The basic rationale of this clause is that the secondary use of the transmission by turning on an ordinary receiver in public is so remote and minimal that no further liability should be imposed.
The case of playing music on so-called Internet radio (e.g., Pandora) likely falls outside the scope of the homestyle exemption. The language of the statute expressly limits the exemption to “a radio or television broadcast station licensed as such by the Federal Communications Commission.” Internet radio transmissions, although seemingly fitting the same logic as radio and TV broadcasts over the air, do not require licensing by the FCC and are thus not squarely covered by the 110(5) exemption.
On the other hand, Pandora and other free Internet radio webcasters are usually licensed by the performing rights societies such as ASCAP and BMI and one could argue that the logic of the “homestyle exemption” should be extended to such radios as well. This argument, however, has not been tested in court yet and it is not clear whether courts would accept it. The safest course of action is to avoid playing Internet radio without authorization from the copyright holders.
An alternative to free Internet radio is satellite radio. In contrast to an Internet radio service such as Pandora, satellite radio subscription for businesses is covered by the homestyle exemption. SiriusXM for Business is a paid subscription service which handles copyright royalties for businesses.[viii] Through such a subscription, the business would avoid having to pay licensing fees to the different performing rights organizations. The business may choose to listen through an internet reception or through a satellite receiver. It should be noted, however, that the licensing fees for most performing rights organizations amount to an annual sum not substantially different than that charged by satellite radio. Depending on the negotiated price, a company may be indifferent between paying to one performing rights organization and subscribing to satellite radio. The advantage of a general license to play that society’s repertoire regardless of the device chosen, e.g., personal computer or another audio system, may be overridden by the need to pay a licensing fee to several PROs, not just to one.
The question arises whether the performance is public if the place where the music is played is the staff’s work space to which customers do not have access. In that case, there would be a strong argument that the performance is not a place open to the public. This argument may not be applicable to stores where, as is commonly the case with bakeries, for example, the staff’s work space is not fully enclosed but is separated from the customer space by a half-wall sales counter. Because the enclosure is only partial, the sound from the sound system located in the work space easily travels to the customer space. As long as the sound is loud enough for the music to be distinguishable to the customers, it may be difficult to argue that the playing of the music is not a public performance.
Where mom and pop stores play musical recordings, they engage in a performance of copyrighted material under the Copyright Act. If the music sound is clearly audible in the space designated for customers, the playing most likely infringes the owners’ exclusive public performance rights in the sound recordings.
Switch to broadcast radio only.
If the business switches to playing broadcast radio through one homestyle apparatus only, it may do so without risk of any copyright infringement liability. In the case of a food service and drinking establishment of less than 3,750 gross square feet or of another type of business with an area of less than 2,000 gross square feet, the business may connect any number of loudspeakers or TV monitors to the receiving apparatus. The loudspeakers and monitors may be located at any place within the business and the adjoining outside space.
2. Play music at a reduced volume.
The business may play musical recordings in the staff work space but do so at a low volume so that customers would not be able to hear the music or would hear it at a level that would not meaningfully add to the atmosphere of the customer space. Where the business has a half-wall or an open-wall counter, the wall may be built higher or into a full wall so as to prevent or decrease the traveling of the sound to the customer areas.
Such a course of action would necessarily involve a certain risk. It is possible in this case that copyright holders in the music played may choose to sue for infringement of their public performance right. In a case where the rights owners prevail, the business may be subject to injunctive relief and substantial damages.[xii] The law allows the owners to sue for either actual damages[xiii] or statutory damages.[xiv] A performing rights organization would likely sue for statutory damages as it would be difficult to prove actual losses and profits. The court has discretion to determine the amount of statutory damages in a range between $750 and $30,000 per individual copyrighted work infringed, i.e., for each song played.[xv] It must be noted, however, that a PRO will likely face challenging proof issues in identifying the pieces infringed.
Although it is unlikely that the PRO will choose the expensive path of litigation, it must be kept in mind that this option is available to them.
3. Pay the respective annual PRO license fee.
In view of the potential risks of an infringement lawsuit and the cost associated with litigation, which may run in the tens of thousands of dollars, the better course of action may be to enter into a licensing agreement with the PRO. It must be noted that businesses always have the option of negotiating a lower fee than asked based on their individual circumstances. Knowledge of the law in the area would help in such negotiations.
It must be noted that each performing rights organization manages the rights to a separate repertoire of musical works. To ensure that all music played in its space is authorized, businesses must obtain licenses from all PROs. Currently there are three PROs – the American Society of Composers, Authors and Publishers (ASCAP), Broadcast Music, Inc. (BMI), and SESAC. ASCAP and BMI control the rights to most musical pieces. If a business chooses this course of action, it will then face the decision whether to buy licenses from one, two, or all three PROs. The licensing fees will vary according to the individual circumstances of the business, such as type of business, customer space, and business hours. Typically, the cost to a small business to obtain an annual license from one of the larger PROs, such as ASCAP, is in the range of 300 to 500 US dollars.
Once the business has received a warning letter from a performing rights organization requesting a fee payment, the PRO will continue to keep track of the business and insist on payment. Failure to respond to the PRO’s letter may lead to a much greater risk of litigation and the business would be ill-advised to follow such a course of action.
[i] Copyright Act of 1976, 17 U.S.C. § 102(a).
[ii] 17 U.S.C. § 106.
[iii] 17 U.S.C. § 106(4).
[v] 17 U.S.C. § 110(5).
[vi] 17 U.S.C. § 110(5)(B)(i)(I) & (ii)(I).
[vii] 17 U.S.C. § 110(5)(B).
[viii] SiriusXM.com, Frequently Asked Questions: 15. Am I Able to Use SiriusXM Music for My Business?, http://www.siriusxm.com/servlet/Satellite?c=SXM_PageDetail_C&childpagename=SXM%2FSXM_PageDetail_C%2FOpenContent&cid=1282009827594&p=1282009729902&pagename=SXM%2FWrapper#SiriusXMForYourBusiness (last visited Apr 11, 2011).
[ix] 17 U.S.C. § 101.
[x] See Lodge Hall Music, Inc. v. Waco Wrangler Club, Inc., 831 F.2d 77 (5th Cir. 1987); Blue Seas Music, Inc. v. Fitness Surveys, Inc., 831 F.Supp. 863 (N.D. Ga. 1993).
[xi] See Bagdadi v. Nazar, 84 F.3d 1194, 1199 (9th Cir. 1996) (showing copyrighted instructional video in private language school was “public performance” where school was open to public and video was intended to be performed for students in classroom setting).
[xii] 17 U.S.C. § 501 et seq.
[xiii] In that case the copyright holder has to prove actual damages to him or her plus whatever additional profits the infringer obtained as a result of the public performance. 17 U.S.C. § 504(b). The court may also award litigation costs and attorney’s fees. 17 U.S.C. § 505.
[xiv] 17 U.S.C. § 504(a).
[xv] 17 U.S.C. § 504(c).
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Okay, I will add my comments and they may rankle a few voices, but I’m only telling my story.
A “gentleman” from ASCAP paid a visit my new establishment in the college town where I opened my first business. He presented me with some material, counted my number of TV’s, took note of my speakers and punched up some numbers on his small calculator. This left me a bit stunned and I told him that I was busy, but we could talk another time. He cheerfully left with a smile on his face and about the time he was out the door I could feel an anger rising in me.
Our college town had a Licensed Alcohol Retailers Association, so you can imagine the topic I had at the top of my list at the next meeting. After a cursory count of who was and was not paying ASCAP, it was 3 paying and the rest (about 16) cursing the entire concept. “Let them sue me, “Blank those bas…..,” I think you get the idea. The 3 who were paying the fees said it was the worse decision they ever made because BMI was in contact and sucking their blood very soon afterward.
I never saw another person from ASCAP, but I would receive 1 or 2 mailings from them each year after that, which I opened, laughed at and threw in the trash. After more than a decade in the same location a lawsuit never arrived, nor did anyone in our association receive a lawsuit.
Please don’t think I’m proud of my behavior because I am not. I was just a brash young guy who lost his cool. On the upside, it turns out that the cost to litigate was not worth their time. They were looking for the easy rubes that they could scare, then once they wrote a check they gave away their rights.
Dave and Busters have no choice but to pay all of them. But, small operators… well make your own decision. I only told you my story and it wasn’t to stir the pot or get anyone riled up.
We pay for commercial music (Mood Media) which pays our licensing fees, now ASCAP & BMI are claiming because we play live music aka “Enhanced Music” in their dialog, from time to time … we now have to pay them directly and the combined fees (BMI & ASCAP) for licensing with enhanced music is more than $7K.
Being Logical about the licensing fees, I understand the concept that the artist is entitled to be paid something for their work in a commercial situation but once is enough…this feels like extortion. Has, what I consider to be double dipping, been tested in court and if so did it hold up?
I have a question. What about small local establishments that have local musicians performing cover songs? Is that also a violation?
We have a mom and pop German restaurant. The only music we play is music by German artists, from Germany. We purchased the music in Germany. BMI will not provide us with list of artists that they represent in Germany. We have a license for Pandora Business. What do you recommend we do. We got the email from BMI saying that we are being considered for litigation.
If the music is being played inside a private club that members must pay to be a member of, then is this considered “Public”??? Anyone have an opinion or better yet a legal precedent on this?
Is there any exemption for a non-profit, community art center that has local and regional musicians performing live music; both original and covers? Our venue is small; < 2,000 sq.ft. and seats between 50-70 with tables. We operate on a BYOB policy and derive revenue from an admission fee (generally $10) of which we pay the performers 80%. We also generate revenue by selling soft drinks, snacks and food as well as a 50/50 drawing.
What was the end result of your situation? We operate on a similar basis, seat around the same amount of people and do not hire cover bands.
Paid balance in full for the year with ASCAP which was a total of over $1,700, more than I have had to pay in the past. After receiving more e-mails and voicemails then ever necessary from a business, I reached out to them. I was informed that they had made changes to my business information and bill and that I now owed and additional $1,900 for the year. This seasonal business has closed for the year and I have no revenue coming in. Perfect timing, of course. My main question is, can they change my bill after I have paid the total in full? Is this legal?
What are the laws regarding playing movies or music in nursing homes? I have BMI calling me on a daily basis about licensing my nursing home.
s sister company Soundtrack Your Brand have an international music service called Soundtrack Business that does this.
The background music service will cover your background music uses but not not live, dj and karaoke music performances in your business. You can even ask the background music provider and they will tell you the same thing.
Question: Who pays BMI or Ascap when using a juke box in a public tavern the juke box owner or the tavern? Thank you.
Do I need a license for an apt complex that holds an annual pool party for the tenants and hires a local DJ to play 4 hours of music? That is the only time we play music at the business. Approximately 400 residents and guests attend the party coming and going during a 4 hours span since they live here they come for a little while and then leave. It just seems ridiculous since we pay a DJ who has the proper licenses himself to play the music.
I paid the allotted fees for ASCAP Licensing and haven’t heard back or received any type of confirmation.
My question is if I know of a DJ/Karaoke host down loading music but not paying taxes or royalties who should I contact ?
When initially contacted be sure to listen carefully- and then play dumb. Let’s face it, most places play music from one source or the other which can -IN MOST CASES- be subject to the fess that BMI /ASCAP and other PRO’s are entitled to impose. The best way to reply to a cold call or e-mail (see play dumb above) is to let them know that you are not hosting performances or playing copy written songs. Additionally, let them know that your establishment is under 2,000sq ft. and that you just have a TV running news during open hours.
It is very unlikely they will send someone to visit or confirm… especially if you are in a remote area..GOOD LUCK!!!!
Small mom and pop bar , we have a small local band play once a month the band already pays one of the main three groups ascap as long as the band is paying the fee the bar dosn’t need to pay again in addition too them paying correct ??
Same for local bands and live music….you would be in violation.
Keep in mind the difference…personal enjoyment- you purchased the recordings for your own use and listen to them at home- you are okay.
Once you play them for the public, in a hospital, in a park no matter where- you are in violation.
Same for a Mom and Pop Business- any band playing copyrighted music in your establishment is more than likely bringing business to you…these PRO’s want their (un) fair share.
A small, local farmers market held in the park for a good cause (leg braces for a homeless war heroes kid) – they may eventually come after you and your good cause to line their own pockets.
Sorry for the harsh example- just trying to convey the seriousness of their VULTURISM….
I have a tiny little tavern in Colorado. BMI and ASCAP have started harassing me to send them money. They want to charge me if my customers dance to music not to mention all kinds of other things.
Are these people the dancing police? Taliban? Is this even slightly legal?
See my first post (above)… in your next discussion with them- let them know your establishment is under 2,000 sq. feet and that you just have a TV running news during open hours.
It is very unlikely they will send someone to visit or confirm… especially if you are in a remote area.
Do not confirm anything, if you do- you would most likely increase the frequency of harassment. Follow the advice of the above postings and hope they leave you alone. If not, you most likely could be deemed to be in violation.
There are many folks who get a percentage of the fine if they visit and can verify these violations. I know of a person who got paid upwards of $750 to visit, video and record happenings at small venues, mom and pop places and ‘taverns’. You being complicit in slightly ‘illicit’ activity (playing copyrighted music for your own profit) is why these ‘Talibanic’ leeches search for their (even bigger) piece of the pie. GOOD LUCK!
I own a small Dance Studio only a thousand square feet but I do play internet radio for music I am currently paying as cap but now after 11 years BMI has contacted me do I need to pay either one of them being under 2000 square feet or yes because I am playing music 4 learning purposes also do I have to pay BMI and ASCAP as I have been paying as cap for a couple years why now is BMI approaching me and why should I have to pay them both and why now after all this time?
ASCAP and BMI each have contractual agreements with different artists. That is why they are coming at you separately.
By playing music from FM sources, the internet, Pandora, Napster or any other source (even your own recordings!) in a public venue- you are violating federal copyright laws which can leave you open to penalties and fines of up to $150,000 for each song played.
Look for a vendor who will let you sign up for month-to-month or annual subscription. You should be able to find a great rate where they pay the royalties to those who otherwise- will come after you.
This is a lot to conclude. Thank you for making it thorough, but a shorter narrative would suffice.
any concerns; however, if not, what to do? There are so many out there wanting to play your material but not willing to compensate the original artist in return and we need memberships like this to protect. But, also just need to hear the nitty-gritty of it. Meanwhile, thank you for taking time.
When you buy a song off iTunes, you buy it for your personal use, which is very different from a business/public use. Strictly speaking, you are not paying twice. You pay for the music off of iTunes. Your business pays for a license to perform. Musicians everywhere are hurting for money and for those that aren’t, they are succeeding because of payments from PROs like ASCAP/BMI. Artists do suffer when they don’t receive this because it can prevent people from needing to purchase an artist’s music if they are able to hear it in local establishments for free.
Thanks for helping me understand that the rates will be different depending on the type of business and other elements as well. I will share this with my brother since he will be opening a pub next year. It will be established on the corner of our street since it is a busy area. This will help him to prepare financially.
I was just informed by SESAC that I have to pay all three music licensers or I will be sued. I currently pay BMI and have a DJ or band maybe 2 times a year in a very small town and a very small restaurant. Any truth to this?
Looking to put one of the internet juke boxes in my man cave, most of the ones I look at state I need a license, is that true, it will be for personal use only.

References: § 102
 § 106
 § 106
 § 110
 § 110
 § 110
 § 101
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 v. 
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 § 501
 § 504
 § 505
 § 504
 § 504