Demystifying The Music Industry: What’s This About Public Performance Rights?

Over the last few weeks, I have been in discussions with one of my clients trying to help them understand the concept of public performance (and the associated licenses and fees) when it comes to playing music in their business establishment.

Like many businesses owners, my client values music as part of their in-store environment; and uses music to enhance their customers’ shopping experience. Music is a key lifestyle component of their target youth customer, so my client aligns their brand to music in many ways.

But also like many business owners, my client does not know much about the legal implications of playing music videos and sound recordings in a business establishment or for commercial use. This has made it difficult to move forward with a service request from my client, since the service requires additional costs related to the way in which my client would like to use music. The additional cost is derived from public performance fees.

Most people do not think of playing music in a public setting (in a way that transmits sound to many people; the “general public”) as a right that must be granted by a license. But that is exactly what it is to play music in a business establishment. When you walk into your local coffee shop or mall clothing store and hear your favorite song, if all is done legally, the business owner of that establishment has obtained a public performance license and pays a public performance fee for the right to play the music you hear in his/her store.

In this article I address and demystify public performance rates, licenses and fees.

QUESTION: Where does public performance rates, licenses and fees come from and go?

SHORT ANSWER: United States public performance rates are set by the Copyright Royalty Board which is appointed by the Library of Congress of the United States Congress. Public Rights Organizations (PROs) administer public performance licenses and collect public performance fees from licensees (businesses that use music commercially) to distribute back to songwriters, publishers and record labels in the form of royalties. Public performance royalties compensate copyright owners (songwriters, publishers, and record labels) for the public performance of their copyrighted works defined by the US Copyright Act of 1976.

A public performance license grants business owners the permission to play copyrighted music in their establishments. Business owners must pay public performance fees to US PROs ASCAP, SESAC, and BMI in order to play music in their establishments. These law-mandated fees do not include content license fees (digital downloads) or content ownership fees (CD or DVD) that may be due to copyright owners to obtain original copyrighted works.

LONG ANSWER: This diagram reveals the general legal structure and relationships behind the concept of public performance as law.  (Note: I purposefully omitted the details of the relationship between Public Performance Organizations and Copyright Owners including the flow of royalties as this will be discussed in a later blog.)

(Click to enlarge image)

Public performance is a unique yet important aspect of the copyright law. Understanding what it means to a Copyright Owner and the end-user of copyrighted works is an important responsibility when using music commercially.