Playing Music in Your Restaurant? What You Need to Know About Licensing to Avoid a Lawsuit
Article authored by Ilse Scott, an experienced attorney at Michelman & Robinson, LLP (M&R), a national law firm with offices in California, Chicago and New York. Ms. Scott focuses her practice on complex litigation and intellectual property matters involving trade secrets, business torts and contracts, and trademark and copyright infringement. She can be reached at firstname.lastname@example.org or 415.882.7770.
In the digital age, music is omnipresent and access is immediate. Restaurateurs often use music to draw in customers, and improve the dining experience. But along with the rise of online streaming, satellite radio and curated playlists comes the risk of copyright infringement – and the restaurant industry is an easy target for such claims.
Do I Really Need to Pay Money to Play Music In My Own Restaurant?
A restaurant generally must have a license in order to legally play music to the public, regardless of the method of play (which may include hosting a live band, streaming a playlist from an Internet music service, or even playing music that you bought and stored on your own iPod).
This license requirement is both administered and enforced by performing rights organizations (“PROs”). There are four such organizations in the United States: BMI, ASCAP, SESAC and GMR. The PROs act as licensing intermediaries for songwriters; in exchange for a fee, they issue blanket licenses that grant permission to use the entire catalogue of music that each PRO represents. On the enforcement side, BMI and ASCAP are the two largest PROs, and these two alone file approximately 400 to 500 lawsuits every year for violations of the Copyright Act by restaurants, hotels, bars and other public venues.
Among other methods, PROs employ professional musicologists who visit businesses, and make note of any unlicensed songs they hear. The PROs will then typically issue a license demand, insisting that the owner pay some amount of past royalties, and obtain a license for any future use. Sometimes owners who receive these demands mistake them for “shakedown” scams, and simply disregard them – but restaurateurs ignore such demands at their peril.
How Much Is This Going to Cost Me?
Obtaining a license to play music can cost a few hundred to a few thousand dollars per year, depending on multiple factors, including the size of the establishment. On the other hand, playing music without a license can quickly become very costly. The penalties for violation of the Copyright Act are up to $30,000 per work infringed, and if the infringement is willful (e.g., if the restaurant has been notified of its failure to license music and nonetheless continues to play it), the penalty is increased and can range up to $150,000 for each infringed work. Thus, playing just four unlicensed songs could result in a $120,000 penalty (or up to $600,000 if the infringement was willful), plus the infringer may be required to pay the opposing side’s legal fees and costs.
The Living Room Steak House in New York learned this lesson the hard way. In February 2016, judgment was granted in favor of BMI, which had brought a lawsuit alleging that the restaurant played just five songs without license. The court awarded $16,000 in statutory damages, noting that the judgment was “approximately four times the amount Defendants would have paid in licensing fees.” Broad. Music, Inc. v. The Living Room Steak House, Inc., No. 14-CV-6298, 2016 WL 756567, at *6 (E.D.N.Y. Feb. 26, 2016). The Court also ordered the defendants to pay all of BMI’s attorney’s fees and court costs. Clearly, no five songs are worth such a consequence; businesses attempting to dodge the music licensing requirements are taking a substantial and unwarranted risk.
I Want to Have Music at My Restaurant, But Is It Really Worth It?
Although it would certainly be cheaper to just stop playing music altogether, music has long been a draw to customers, and an essential part of a diner’s night out. So what are restaurateurs to do?
One option is to use a paid, third-party music service, several of which will handle both the licenses necessary to play music to the public, as well as curate playlist content tailored to your business. Although paying a service is more expensive than obtaining the licenses directly from the PROs, these full-service providers are one way to take the burden of managing multiple licenses off the restaurateur’s shoulders.
Additionally, there are some limited exemptions, which generally apply to smaller businesses that play music transmitted only by radio or television, do not charge to hear the music, and have a limited number of speakers or televisions. However, the application of these rules can be complex. If you are not sure if you qualify for the Copyright Act’s licensure exemption, you should consult an attorney with knowledge of music licensing requirements.
Before investing a great deal of money and time into incorporating music into your restaurant, it is important to consider the following:
- Determine what you are trying to accomplish by playing music in your restaurant. A restaurant must consider its primary goals: Atmosphere? Background noise? Customer engagement?
- Talk to an intellectual property attorney. Consider speaking with legal counsel who understands copyright and, in particular, is familiar with the requirements for music licensing. Your restaurant may qualify for the Copyright Act’s licensure exemption, depending on the method of play and the physical characteristics of the establishment (including its size, and the placement and number of speakers). Even if you are not exempt, counsel can help you determine the most cost-effective way to acquire the license(s) you need for your business.
- Negotiate appropriate license fees. Make certain the PROs consider and fully understand how music is used at your restaurant, the square footage of your property, how often music is played, and the amount of customer traffic you receive. PROs will be more willing to work with you in reaching an agreeable license fee if you are proactive, as opposed to negotiating to avoid a lawsuit after you have been warned.
Do not let your eagerness to entertain and engage your diners cloud your better judgement. If you intend to play music at your restaurant, it is important not to cut corners. In the era of custom playlists and streaming radio, access to music may be immediate, but it still comes at a price.
This article is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.