Many small business owners learn the ins and outs of licensing background music for business uses on an unfortunate occasion, either getting a recently unexpected letter from a performing rights organization or being questioned during a business audit. It can be confusing, but once business owners have a general understanding, they can be informed as business owners, and avoid costly mistakes.
Business owners generally think that they can play the music they enjoy in their personal lives and show it in their business without any knowledge to the contrary, and may be a paid subscriber to this music if it is streamed. Unfortunately, being a personal music listener and being a commercial music user is simply different, and consumers can get into trouble unbelievably fast if they don’t adhere to what the music law says.
The confusion comes from music rights and how we think about it. When an artist creates a song, they own it, and they have rights of all third parties of a variety of different types. They can sell, license or assign these rights to others, which is a complicated structure of ownership.
The Two Types of Music Rights That Matter
Performance rights cover the actual “performance” of music in public, which essentially covers any commercial space, whether it is a retail space, a restaurant, an office, or another public place where customers and employees can listen to the song. Performance rights are typically licenses provided to a business by performing rights organizations (PRO’s) that collect a licensing right fees and distribute the fees in royalties to the artists and songwriters.
Synchronization rights are applicable if a business is using the music for advertisements or promotional videos or for any other use of music that has visuals being synchronized. These licenses are generally negotiated with record labels or music publishers directly and are typically far more expensive than performing rights.
Most small businesses will only have to acquire performing rights for simple background music. However, if the business produces videos for marketing, television shows or commercials, they will also have to acquire synchronization rights.
The performing rights landscape consists of several large organizations that will collect fees on behalf of the artist. The three largest performing rights organizations (PROs) in the United States are ASCAP, BMI, and SESAC, and they offer different catalogs of music. Unfortunately, for the business owner, the most popular songs are often split between several organizations, which means that businesses may need licenses from multiple PROs to have comprehensive coverage to be able to use popular songs.
Understanding the Costs
Licensing fees can vary significantly depending on business type, size, and how the music is used. A small retail store might pay several hundred dollars a year for basic background music, while a larger business that uses music more prominently may face thousands of dollars a year in licensing fees.
The fee structure usually considers things like the square footage of the space or number of seats, number of locations, and separation of whether the music is a primary form of entertainment or merely background ambiance. A restaurant that hosts live music for dancing will have a different fee structure than an office that just plays quiet music in the background.
Many business owners will begin to seek solutions for how to avoid traditional musical licensing upon seeing how expensive and difficult it can be. For some, they discover that alternatives designed to Save On Business Background Music can allow the business to remain compliant while paying substantially less than if they had to acquire money licenses for each PRO separately. Payment structures can differ as well, with some organizations providing monthly payment options and other asking for annual payment. Organizations can greatly increase the base licensing costs with late fees and fees for being non compliant.
What About The Compliance Requirements That No One Is Talking About
In addition to paying licensing fees, businesses also are required to maintain appropriate licenses, documentation and often receive licensing requirements for the use of their music,including what music they actually played. Some PROs will ask businesses to keep a log of every song they played, while others are broader and the licensing requirements are for entire catalogs of music.
For small business, this often represents a paperwork burden on the small business proprietor, especially if they do not have the personnel to do administrative work. If the business loses invoices, the reporting mechanism is flawed or maintains bad records, it could result in disputes and fines or penalties even if the business had legitimately paid for a license.
Compliance also means that you must ensure that you are licensing for music ALL music sources. If a business plays music from the business owners personal Spotify and/or Apple Music accounts in a for profit business setting, that does not comply with the terms of use provisions from those streamers; therefore it does not give the right to use it in another commercial business. If a business plays music from a personal cd, that also requires proper performance rights licensing.
These enforcement efforts are becoming more and more aggressive. PRO auditor and representatives regularly visit and audit business, with those visits resulting in worked event justifying the need of music licensing and charging back in time for having operated a business without proper licensing. Real-World Problems Associated with Small Business
Poor small business owners often feel caught between the high cost of licensing and the proven requirement for music in their businesses. Customers want to hear music in restaurants, stores, and service businesses, but the licensing costs can become a significant expense in an already thin margin of profitability.
Proactively managing a licensing agreement with two or more PROs can create colossal headaches in terms of administration that most small business owners are not trained to handle. Each organization has different forms, payments, and reporting periods. What should be a straightforward business expense becomes a time-consuming, administrative expense.
Some businesses try to eliminate licensing by solely using royalty-free music or using works that are sufficiently old to be in the public domain. This legal loophole may work, but finding preformed music that wants to stimulate an ambient feel to service and customers expect can also be challenging.
Steps to Take to Help Business Owners
The first step is to determine the actual music usage the business needs. A small office may have different needs than a dining needing dinner music, or a retail store seeking to create a shopping atmosphere to energize customers.
Next, you need to research which PROs own the music that will mostly cover the needs of the business. This research can be time-consuming, however, research can serve the business because a business should not pay for unnecessary licensing without covering all needed rights.
Business owners need to consider their long-term music needs when obtaining licensing in order to cover all needs over time, but also for possibly different music licensing options as to future growth or greater uses of licensing.
It certainly refined in thinking about regularly revisiting music licensing agreements given that a business may have new growth, updates, or changes in how they will use music.
Making Informed Decisions
Understanding music licensing will allow business owners to make informed decisions on how they are going to administer a background music strategy that is music compliant. After the time or initial effort, the outcome can leave most businesses with valued options without overwhelming costs.
The goal is to know exactly what has rights and analyze possibilities of options rather than simply see the first PRO licensing unsolicited proposal. After barriers have been broken by spending committed time to seek out alternatives to know the plan, ordering some appropriate licensing should be understandable.
Smart business owners manage music licensing like any other expense they may have. They are specific to evaluate costs and benefits at the same time to determine answers that will cover the need throughout the details that may always change.