Recently I came across two news articles (here and here) that raised some interesting legal issues with regards to playing recorded music at a bar. The articles concerns two bars in Atlanta, Moondogs in Buckhead and Twisted Tavern in Buford, which are being sued by ASCAP due to their failure to “purchase licenses in order to legally perform music for their customers.”

On a side note, I was interested in the news articles for both professional and personal reasons. I grew up in Atlanta and I remember when Buckhead was the party capital of the world. It was the area where I would meet my friends for a beer in my younger days, and Moondog’s was usually the starting (and ending) place of the evening. In recent years Buckhead has undergone a dramatic renovation, and the fact that Moondog’s is one of the few remaining watering holes of my youth to survive the wrecking ball gives it a special place in my memory. (In case you are wondering, Moondogs in Atlanta is not the same Moondawg’s made famous by a Todd Snider song).

The articles states that the bars had failed to purchase licenses to perform music, and notes that under copyright law, “perform” has a broad definition that includes “playing music live, from a CD or computer and more”. Indeed, Section 101 of the Copyright Act defines “perform” to mean:

[to] play…either directly or by means of any device or process or, in the case of a motion picture or other audiovisual work, to show its images in any sequence or to make the sounds accompanying it audible.

So the article raises the question-do I need to obtain a license and pay money to perform recorded music in my business? The answer is yes.

The article does not state in what format the music was being performed, but according to the wording of the Copyright Act above there is no difference between a jukebox, phone, tablet, computer, CD, vinyl record, cassette tape, 8 track or whatever. The Copyright Act itself clearly states “any device or process“. This led to an interesting discussion among friends on social media that inspired this post. Many people nowadays simply plug their phone or tablet into the house speakers and let music stream through the bar via iTunes, Pandora, or Spotify. Is this legal? Do you need to pay money to do this? The short answers are no, it’s not legal, and yes, you do need to pay a license. Let’s explore this issue by looking at ASCAP’s policies as well as the policies of iTunes, Pandora, and Spotify, and finally some legal authorities.

ASCAP

ASCAP is short for the “American Society of Composers, Authors and Publishers:” They are a Performing Rights Organization (“PRO”) whose mission is to “protect the rights of ASCAP members by licensing and distributing royalties for the non-dramatic public performances of their copyrighted works.” Similarly the Supreme Court has defined ASCAP as “a nonprofit organization that licenses the music of its members and collects royalties whenever that music is performed publicly.” Broad. Music, Inc. v. Columbia Broad. Sys., Inc. 441 U.S. 1, 4–5 (1979).

ASCAP is just one of several PRO’s, with the other notables being Broadcast Music, Inc (BMI) and Society of European Stage Authors and Composers (SESAC). On their website, ASCAP has a “FAQ” section regarding music licensing. According to their answers, ASCAP defines a “public performance” of music as:

one that occurs either in a public place or any place where people gather (other than a small circle of a family or its social acquaintances). A public performance is also one that is transmitted to the public; for example, radio or television broadcasts, music-on-hold, cable television, and by the internet. (Note the exclusion for a small group of “social acquaintances” in reference to my previous post about House Concerts.)

ASCAP then adds that the general statement that “those who publicly perform music must obtain permission from the owner of the music or his representative.”  The reason for this is simple. Royalty payments are how copyright holders make money.

A brief aside-ASCAP notes several “limited exceptions” to this rule such as: music played or sung as part of a worship service and performances as part of a face to face teaching activity at a non-profit educational institution. The first exception is noteworthy in that most churches will have a hymnal featuring hundreds of religious songs, most of which are copyrighted. You don’t need a license to sing or play these songs in church unless you are broadcasting the service over television or radio.

Of particular note to the dilemma of the Atlanta bars, the ASCAP website contains this FAQ:

I’m interested in playing music in my restaurant or other business. I know that I need permission for live performances. Do I need permission if I am using only CD’s, records, tapes, radio or TV?

According to ASCAP, yes you will need permission to play records or tapes in your establishment. So if you own or work at a bar and you are playing music, you need licenses. You can contact ASCAP’s “Jukebox License Office” (yes that is its real name) and find out how to obtain such licenses here.

What if a bar doesn’t have an actual “jukebox” but simply streams music from Pandora, iTunes, and/or Spotify? I’ve been in many bars that do this, we’ve probably all seen a bartender attach his/her phone or tablet to a cord behind the bar and play songs off a playlist. But do you still need to obtain licenses? Again, the answer is yes. The answer lies partially in a review of the fine print contained within the Terms and Conditions of three popular music services- Pandora, iTunes, and Spotify.

Pandora

On their website, Pandora states with regards to playing music in a “commercial setting”:

Due to the terms of our music licenses, the consumer version of the Pandora service (including Pandora One) cannot legally be used to play music in a commercial setting, such as retail stores, restaurants or spas.

However, we have partnered with DMX to provide a legal, licensed way to use the Pandora service in the vast majority of businesses and commercial establishments.

So there you have it. Pandora specifically states in their Terms that the user cannot use Pandora in a commercial setting, however, Pandora does provide a commercial service in conjunction with DMX. Presumably this commercial service has already worked out the licensing issues with the various PRO’s, thus you are paying not only for the licenses but also the convenience of not having to worry about paying for licenses through the PRO’s themselves. This is both good business and a smart way for Pandora to avoid any legal issues stemming from users playing Pandora music in commercial establishments. So if you are a bartender and play your music at a bar through your own personal Pandora channel, the bar is not paying licenses and you could place your bar into legal situation wherein a PRO might come looking to collect royalty monies. You should probably contact Pandora and inquire about their commercial services if you plan on using Pandora to play music at your business.

iTunes

The Itunes terms and conditions state explicitly under “USAGE RULES” that:

(i) You shall be authorized to use iTunes Products only for personal, noncommercial use.

Again, there you have it. Music that you purchase via iTunes is for your own personal use. It cannot be used to play over the loudspeakers at a bar.

Similarly, the terms and conditions for Apple Music (Apple’s competitor to Spotify) states specifically that “You shall be authorized to use the Apple Music Service and Apple Music Products only for personal, noncommercial use, except as otherwise authorized by Apple.”

Bottom line-playing music from your iTunes list over the speakers at a bar without obtaining a license is a public performance, constitutes copyright infringement, and can subject the bar to fines and/or injunctions (see below).

Spotify

Spotify’s Terms and Conditions are, in my opinion, more user friendly than Pandora or Apple’s. For starters, they number their paragraphs. This sounds like a no-brainer (it is) until you realize that Apple does not number their paragraphs and they are one of the most profitable companies ever. Also, I like that Spotify gives their contract sections simple titles and easy to understand language. For instance, Paragraph 4 get into the details of licensing and is entitled “Rights We Grant You”. It states in pertinent part

We grant you a limited, non-exclusive, revocable license to make use of the Spotify Service, and a limited, non-exclusive, revocable license to make personal, non-commercial, entertainment use of the Content (the “License”). This License shall remain in effect until and unless terminated by you or Spotify. You promise and agree that you are using the Content for your own personal, non-commercial, entertainment use and that you will not redistribute or transfer the Spotify Service or the Content.

You agree to abide by our User guidelines and not to use the Spotify Service, the Content, or any part thereof in any manner not expressly permitted by the Agreements. Except for the rights expressly granted to you in these Agreements, Spotify grants no right, title, or interest to you in the Spotify Service or Content.

Just like Pandora and iTunes, Spotify is clearly telling its users that music obtained via their service is only for personal, non-commercial use. So playing music in a commercial setting via your personal Spotify account could also place a business in jeopardy of a potential lawsuit from a PRO over royalty payments and licenses.

As an interesting aside, Spotify’s Terms and Conditions Paragraph 24 entitled “Choice of law, mandatory arbitration and venue” states that in the event of “any dispute, claim, or controversy”, users in the United States agree that the dispute will be governed by the laws of the State of California and lawsuits will be brought in the “State and Federal Courts of San Francisco County, CA or New York, NY”. You can read my previous post regarding choice of law/choice of forum clauses here.

Legal Authority

So the ASCAP website says that a commercial establishment has to pay for a license to play music, and the terms and conditions for various music providers say that you can only use the music for personal use. Big deal? What legal authority do they have?

Section 102 of the Copyright Act grants Copyright protection to “original works of authorship fixed in any tangible medium of expression”, with “works of authorship” including “musical works”. The Copyright Act provides that “[a]nyone who violates any of the exclusive rights of the copyright owner…. . . is an infringer of the copyright . . . .” 17 U.S.C. § 501(a); see also Broad. Music, Inc. v. McDade & Sons, Inc. (D. Ariz., 2013). As indicated above, playing copyrighted music at a bar without acquiring a license constitutes copyright infringement. So what penalties exist for infringement?

Some initial case research indicates a score of Federal District Court cases in which various PRO’s were able to secure injunctions and/or monetary awards due to the failure of a bar to secure licenses to play music. An injunction, as defined by Black’s Law Dictionary, is “a writ or order requiring a person to refrain from a particular act”.

For instance, in Broad. Music, Inc. v. Station House Irish Pub & Steakhouse, Ltd. (M.D. Pa., 2014), the Court granted BMI’s injunction to prevent the awesomely named Station House Irish Pub & Steakhouse in Gouldsboro, Pennsylvania from playing copyrighted music, and also awarded BMI $28,900.00 in damages. In so holding the Court noted that Section 502(a) of the Copyright Act allows a Court to grant injunctions in order to “to prevent or restrain infringement of copyright.” In other words, a PRO can file an injunction asking the Court to physically restrain you from playing any copyrighted music in your establishment that you have not paid a license for. Since nobody likes to drink in a silent bar, this could definitely mean trouble for your business if there’s no music. (In addition to the trouble that comes from having to pay $28,900.)

There are a host of other similar cases, and in most of them the Courts award monetary damages and/or grant injunctions against the bar, preventing them from playing copyrighted music.

Some of you may be thinking, “What’s the big deal?” Certainly it doesn’t seem like a big deal to just stream some songs in a commercial establishment, especially a bar. Don’t ASCAP’s tactics seem a bit heavy-handed?

First off, it is a big deal. In the event that a bar does not pay license fees to play copyrighted material they can be sued by a PRO and face serious monetary fines as well as Court imposed injunctions preventing them from playing music in the future. Also, royalty payments are how copyright holders (including songwriters) earn money. While there are certainly other revenue streams such as album sales, touring, etc., for an independent musician, royalties payments are crucial and can mean the difference between having a full-time career as a musician or not. I don’t want to get on a soapbox here (probably too late) but if you enjoy music and musicians you should understand that making an album is an expensive endeavor, musical equipment is extremely expensive, and your favorite musicians have bills to pay just like you do. This is how they earn their living.

Anecdotally, I have heard stories from many bar owners about PRO’s and their “tactics” used to collect royalty monies and solicit payments for licenses. I don’t doubt that some of these stories are probably true, but I can also tell you that I have counseled clients who, like Moondog’s, have faced legal action from a PRO due to failure to obtain a license. I can say from personal experience that while the PRO’s may come on strong at first to try and get someone to pay, they generally don’t take legal action until after they have utterly exhausted all attempts to negotiate with the business owner. I remember once meeting with the owner of a bar who was in this exact situation due to an unlicensed karaoke machine in his bar. I asked him if he had ever tried to negotiate with the PRO (I think it was BMI) regarding license fees, and like a broken record he kept saying “I don’t want to pay them”. I asked if he tried to reach a settlement with the PRO, to offer them “pennies on the dollar” for what they were seeking just to make the case go away. Again, he said “I don’t want to pay them”. Over and over he went, until I told him he was facing a serious lawsuit and needed an attorney to represent him (quite literally, as an LLC is required to have an attorney represent them in Court under Nevada law). Not surprisingly, his response to this information was that he did not want to pay for an attorney. I tell this story to emphasize the point that the business owner simply didn’t want to spend the necessary money to run a business, and ultimately his penny-wise and pound-foolish antics got him into a lot of trouble.

So my advice is this-if you are a business owner, you must view music licensing as simply another cost of doing business. Just as you have to pay to get a business license, liquor license, inventory, etc., you must also pay music licenses if you wish to play music. It’s that simple, and it’s also the law. So before you start playing music at your bar, contact ASCAP, BMI, and/or SESAC and negotiate your license rates BEFORE you start playing music. Not only will you cover yourself legally but you may be able to negotiate a better rate if you address the issue early rather than too late. Good luck and since it’s Friday I hope everyone makes a point to have a beer and listen to legally licensed music at their favorite local bar this weekend! Or better yet, check out some great local artists playing live!

Note: Here are some more links to some other articles regarding music licensing.

https://www.yogaalliance.org/music-licensing-information

http://www.entrepreneur.com/article/226049

http://www.daytondailynews.com/news/news/crime-law/area-bars-sued-for-lack-of-music-licenses/nSsqX/

http://www.wral.com/news/local/wral_investigates/story/9984679/

https://www.techdirt.com/articles/20110815/11503015533/restaurant-owner-ordered-to-pay-bmi-30450-illegally-playing-four-unlicensed-songs.shtml

http://www.restaurant.org/Manage-My-Restaurant/Operations/Regulatory-back-office/11-questions-about-music-licensing

Advertisements