A Battle Royale over Music Royalties
by Glenn Jochum
A North Fork restauranteur shuts down live music less than a year after starting it, citing the inability to pay performance rights royalty companies in excess of $2,000 in annual fees for playing copyrighted music.
A Southold tavern owner who no longer features live music decides it is in his best interest to pay all three performing rights organizations, because he has more than two televisions that routinely broadcast copyrighted music and he doesn’t want to be fined.
These are the choices faced by any business that broadcasts live or recorded music, and they are choices that can confound even the most seasoned business owner.
A pitched battle over how to compensate intellectual property rights is playing out behind the scenes in most towns across the United States — although it rarely makes headlines. This struggle pits musicians and venue owners against performing rights organizations, whose mission is to ensure that music copyrights are honored and songwriters receive their royalties.
Sometimes the music-loving general public pays the ultimate price, when music suddenly disappears at a beloved corner pub or nightclub. But it doesn’t have to be that way.
The policies of the royalty companies are clearly stated and available online.
In the United States, three agencies — ASCAP, BMI, and SESAC — collect royalties on behalf of their members in accordance with the U.S. Copyright Act for each time that a song is played in public, on a radio (AM/FM or streaming and satellite), or on television shows and commercials.
The digital PRO SoundExchange collects royalties when music is streamed at venues using a service such as Pandora or SiriusXM®.
Representatives from these agencies contact venues through email, telephone or letter and inform them that they must comply with the Copyright Act and pay annual fees so that royalties can be distributed to songwriters or publishing companies.
But the process of contacting venue owners can seem random. What’s more, the three organizations do so independently of one another, which can be the cause of a great deal of confusion.
These rules apply not only to restaurants but to sports arenas, bowling alleys, golf courses, amusement parks, airports, hospitals and even funeral parlors.
“I don’t mind paying. That’s a personal decision,” said Eric Russell, owner of Founders Tavern in Southold.
Mr. Russell’s decision to pay is largely based on the fact that his patrons are routinely glued to his six televisions.
“My (cable) sports package alone is a hefty $7,000 a year,” he adds.
Mr. Russell pays the minimum combined rate charged by the three royalty companies, which amounts to just more than $1,000.
He featured live music early on when he bought Founders in 2006, but decided to stop hosting musicians after realizing it would more than double his royalty fees.
“I discontinued live music here because it’s a tiny place. The music was too loud in one room and you couldn’t hear it well in the other,” he says.
Performing rights organizations send venue owners a form in the mail asking them to indicate how music is played at their establishment, so if they do not have live music, they need to check a box at the bottom of the form.
Mr. Russell became convinced it was in his best interest to pay the fees for the televisions after he read an article about a bar in Providence, Rhode Island that ignored repeated requests for payment.
One night, an undercover agent popped in on the establishment unannounced. Seeing that live music was playing, the club was fined $10,000 on the spot. The owner took the royalty company to court and lost.
“I recommend that restaurant owners don’t put themselves in that position,” he says. “It’s easy. I get my bill online and I pay it by email.”
An owner of another North Fork restaurant — who wishes to remain anonymous — says that when her establishment first opened, she was advised by a colleague to pay BMI an annual fee. Unfortunately, she thought she was in the clear to hire live musicians because she was unaware there was more than one royalty company.
“I had a solo act play and he must have belonged to ASCAP because an ASCAP agent called me and demanded $765,” she said. “I was told I could pay $100 per performance, but I never heard from that representative again.”
However, when SESAC, which represents Bob Dylan, Neil Diamond and Mariah Carey, surfaced and asked to be compensated, she balked. The SESAC representative told her that if she paid $150 she could have music four times a year.
Jodie Thomas, executive director of Corporate Communications and Media Relations at BMI, says that factors determining the cost of a BMI music license include the size of the establishment, the type of music (recorded, live, DJ, karaoke etc.), and how often the music is played.
“Music didn’t make me a dime,” says the owner of the North Fork restaurant who decided to to forgo hiring bands. “And when I had it, I didn’t charge a cover charge.”
“Most business owners recognize the value that music brings to their establishments and comply with U.S. copyright law by obtaining a music license. It’s why these business owners often advertise live entertainment on social media, their websites or in local media and sometimes charge a cover for admittance,” said Ms. Thomas.
This owner also says she felt that she was getting hammered twice, because she had to pay a fee to have live music and then had to pay the musicians who provided it.
When the North Fork restauranteur asked the SESAC agent for a list of all the performers SESAC represents, she says she was told it didn’t work that way. So, she tried a different tack, saying she would hire only musicians who played original music.
“The representative asked me how I knew someone else didn’t help them write the songs,” she says.
Frustrated with this conversational thread and the frequency and increasingly urgent tone of the phone calls, she demanded the company explain how the copyright holders and songwriters were compensated. Eventually, the representative simply asked her to discuss it with her own lawyer.
“I just want to know if Neil Diamond is really compensated every time that people sing along to “Sweet Caroline,” she says.
BMI’s Jodie Thomas says that anyone can search www.bmi.com and go to http:llrepertoire.bmi.com/StartPage.aspx to see which artists belong to BMI, which collects royalties for 12 million works created and owned by more than 750,000 songwriters, composers and music publishers.
“BMI operates on a non-profit-making basis, and 88 cents of each dollar collected goes back to those three groups in the form of royalties,” says Ms. Thomas.
North Fork composer George Cork Maul has a unique perspective — as a member of ASCAP, he receives royalty checks for his performances — but he was also once the owner of the Music Box in Bellmore, from 1975 to 1983.
“I remember being at the bar at 10 a.m. sweeping the floor after closing up at 4 in the morning and some guy walked in the door, pointed to a poster and asked who played there the night before,” he says.
After that, to be proactive, Mr. Maul would ask for set lists from the bands he hired in case a rep from the royalty companies stopped by. But he said that he did what many bar owners did back then. He would pay occasionally when he felt pressure, but was never taken to court.
Today, as a composer, Mr. Maul generally plays at non-profit venues such as libraries, which have licenses from the royalty companies, and saves a program for the event, which he sends to ASCAP. He is compensated for his compositions on a quarterly basis.
Ultimately, he says he believes musicians should work with the owners of the venues to make sure they have an economic formula that works for everybody.
There are three categories of music, in terms of rights issues: music that is public domain, music that is protected by copyright and music that is brand new and not yet copyrighted. Local songwriters can easily copyright their work and join a performance royalty company.
“All songwriters deserve to be fairly compensated whenever their music is played in a public place, regardless if they’re established icons, unknown songwriters, or somewhere in between,” Ms. Thomas says.
She adds that all works published before January 1, 1923, are in the public domain and may be performed without a license.
So what happens if a venue ignores repeated requests to acquire a copyright license?
“The cost of featuring music without a license can range from $750 per musical work or up to $150,000 in damages if the copyright infringement is determined to be willful, although most cases are settled out of court,” says Ms. Thomas.
“We never want to see these things escalate to a lawsuit,” she adds. “And that is why we spend a lot of time, sometimes years, trying to educate businesses on why they need a license. We want to work with them to ensure that everyone benefits from the music.”
Requests for responses from SESAC and ASCAP were not acknowledged.
