Royalties Unpaid: Small Businesses Unknowingly Break the Law
Walking into a new, hip coffee shop, you will probably be greeted by some of the latest hits playing through nearby speakers. Most customers would not stop to think where the music is coming from. Did the shop owners download the music from iTunes? Are they playing it straight from a CD? Or are they just streaming the music from a service like Spotify? Most small businesses that choose to play background music typically go with the streaming option.[1]
Streaming music from Spotify in a small business is often not as innocent as it seems. For starters, Spotify’s Terms and Conditions of Use limit an individual’s streaming to “personal, non-commercial, entertainment use.”[2] To make these limitations even more clear, the Terms go on to prohibit “performing or displaying to the public, broadcasting, or making available to the public any part of the Spotify Service or the Content.”[3]
The biggest issue arising from businesses streaming music goes beyond the apparent breach of contract. Under the United States Copyright Act, the owner of a copyright has the exclusive right to perform the copyrighted work publicly by means of a digital audio transmission.[4] In the context of the Copyright Act, to “perform” a work means “to recite, render, play, dance, or act it, either directly or by means of any device or process.”[5] This definition seems to include streaming music in a coffee shop, retail store, or other similar locations.
According to a study conducted by Nielsen and commissioned by the licensing service Soundtrack Your Brand, the global music industry loses approximately $2.65 billion annually from such public “performances.”[6] One cause for these losses is a widespread lack of education in copyright and licensing law.[7] A majority of small business owners wrongly believe that having a personal streaming account grants them the right to play the music in their stores.[8] While 86 percent of these businesses claim they would pay for the proper music licensing, the billions of dollars in forfeited fees suggest otherwise.[9]
How does a business even get the rights to play music for their customers legally? Most of the time, a business will need to get a Public Performance License (PPL), either directly from the copyright holder or from a performing rights organization (PRO).[10] The main PROs include BMI (Broadcast Music, Inc.), ASCAP (American Society of Composers, Authors and Publishers), and GMR (Global Music Rights).[11] Intermediary services, like Soundtrack Your Brand, also provide more curated methods of licensing various tracks directly to businesses.[12]
While businesses should ideally purchase a PPL, PROs like BMI, ASCAP, and GMR often take on the burden of enforcement and suing businesses for alleged copyright violations.[13] Discovering each instance of an alleged violation is not always easy, and the music industry’s general lack of technology in tracking prohibited uses further complicates the problem.[14] Soundtrack Your Brand has recognized the need to be more proactive and created a platform that makes it easier and more attractive for businesses to legitimately license background music, rather than face the risk of violating copyright laws.[15]
Arguably, Spotify could be doing more to remind users that the service is for personal use only. Services like Soundtrack Your Brand may gain more momentum in showing users a risk-free way to broadcast music in their establishments. The solution may even lie in a technology that is better able to track illicit uses of streaming services. With $2.65 billion left on the table, it is just a matter of time before more creators in the music industry seek their dues.
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