Many bar and restaurant owners are aware of the need to enter into licensing agreements for the music they play over the speakers in their establishments. But with shrinking profit margins due in part to rising food and labor costs, music licenses often get put on the back burner, which could create problems down the road. If an establishment inadvertently lets a license lapse, the establishment could end up facing a lawsuit—the last thing any bar or restaurant owner needs. When it comes to music licensing, an ounce of prevention is worth a pound of cure. Establishment owners would be well served to take the time to self-audit their music licenses and consult an attorney with any questions.

Why Bother With Copyright Law?

The purpose of U.S. copyright law is to incentivize creators to create by allowing them to economically benefit from their creations. The argument is that if a work automatically entered the public domain as soon as it was created, and anybody could use the work to make money without paying a royalty to the creator, the creator would have less incentive to keep creating. As a society, we want to enable creators to keep doing what they do best: making great art. If we view copyright law through this lens, the law in general, and the licensing rules discussed below, will make more sense.

Under U.S. copyright law, a copyright holder has the exclusive right to perform their works publicly and to authorize others to perform such works publicly. A “public performance” for copyright purposes includes a song being played in a public place over the radio or using a streaming service, and it is not limited to the song being performed live by musicians. For example, let’s say a bar plays Dua Lipa’s “Illusion” over its speaker system while patrons are drinking and dancing—a seemingly likely proposition considering that song is one of Spotify’s “Global Top 50 2024 Hits.” For copyright purposes, the bar has publicly played “Illusion,” and the copyright holders of that song are entitled to royalties for that public performance.

How Do Public Performance Royalties Get Paid?

In the U.S., a performing rights organization (“PRO”) collects royalties on behalf of copyright holders and music publishers when a song is publicly broadcasted or performed. There are five major PROs in the U.S.: Broadcast Music, Inc. (“BMI”), American Society of Composers, Authors and Publishers (“ASCAP”), SESAC, Pro Music Rights, and Global Music Rights (“GMR”). Copyright holders (often the songwriters or their heirs or assignees) become members of one of the PROs and become part of that PRO’s repertoire. Each PRO collects and distributes royalties for its own repertoire, including working with copyright societies all over the world to collect royalties for public performances abroad. For our Dua Lipa example, ASCAP’s website lists Dua Lipa as a member of its repertoire (and as a writer for “Illusion”), meaning ASCAP collects and distributes Dua Lipa’s royalties for that song.

Fortunately for establishment owners, the five major PROs each issue blanket, annual licenses for bars and restaurants. In order for the establishment to avoid potential liability for infringing on the vast majority of copyright-protected songs, all the establishment has to do is make sure they are current on five licenses (i.e., one for each major PRO). The paperwork tends to be relatively minimal, and the licensing fee calculations are typically transparent and fairly reasonable.

The PROs sometimes send “secret shoppers” to establishments to take a sample of the music being played over the speakers, or, if the establishment has live music, a sample of music being played live. The secret shoppers use software programs to verify and keep track of the songs being played in the establishment, and if an artist in the PRO’s repertoire has been publicly played, but the establishment is not current on their license, the PRO can go after the establishment. The PRO could sue for copyright infringement on behalf of the publisher whose song was played without a license, and the PRO could also, in theory, sue the establishment for breach of contract (i.e., breach of the license). But that would depend on the language in the license, among other factors. The PRO could also take less drastic action such as sending a cease-and-desist letter with a demand for the establishment to immediately pay the delinquent licensing fees.

What Happens When You Don’t Pay the Piper?

Using our Dua Lipa example, if ASCAP were to send a secret shopper to a bar that plays “Illusion” over its speaker system while the secret shopper is there, and the bar has paid its fees to ASCAP and kept its license current, ASCAP has no claim against the bar for that public performance. On the other hand, if the bar in question has let its ASCAP blanket license lapse by not paying the fees, ASCAP could send a cease-and-desist letter to the bar or sue for copyright infringement.

Although it may not seem like a big deal in terms of the actual infringement, damages for copyright infringement can be surprisingly steep. Copyright holders can elect to recover either actual damages or statutory damages, which are damages specifically provided in the language of the U.S. Copyright Act itself. In order to win a copyright infringement lawsuit for situations like this, the copyright holder (or PRO) has to prove that the establishment played a song publicly without a license. As a practical matter, actual damages could be difficult to prove, so copyright holders often elect to recover statutory damages instead. Statutory damages for copyright infringement range from $750.00 to $30,000.00 per infringement (i.e., for each song played without a license) and can be as high as $150,000.00 per infringement if the court determines the infringement was committed “willfully,” meaning the defendant knew it was infringing on the copyright holder’s copyright. Importantly, the U.S. Copyright Act also allows the court to award a prevailing party its costs and “reasonable” attorneys’ fees in connection with the copyright infringement lawsuit.

Bottom Line

While there are certain exceptions to the licensing rules above, it is worth every establishment owner’s time to examine their music licensing practices and consult an attorney with any questions or concerns. And if the establishment receives a cease-and-desist letter, be sure to consult with counsel as well to make sure any defenses are properly presented.