Everything You Need to Know About a Music License for Restaurants

Music License for Restaurants: Everything You Need to Know

Music has the power to mold the perfect dining environment. It adds the ambiance needed to enhance the customer experience.  But did you know that when restaurants simply plug in a Spotify playlist, or any other personal music service including Apple Music, YouTube, Amazon Music, SiriusXM, or Tidal, they may violate copyright laws? It might seem insignificant, but ignoring the proper music licenses for restaurants can be costly for business owners. 

Here’s the good news: setting the mood, while being compliant, can be easy and less expensive when leveraging a music streaming for business service that helps eliminate the risk of fines. In this article, we’ll explore the essentials of music licensing for restaurants and why compliance is important, yet easy when bundled into a single business streaming service solution.

Posted on September 28, 2023

Music Licensing for Business Laws Simplified

The soundscape is integral to the dining experience. It sets the tone, creates an atmosphere, and softens the clinking of silver or glasses with cheerful melodies. But playing background music in a commercial setting like a restaurant requires proper licensing. In the U.S., copyright infringement is a federal crime, and violating music licensing laws can be penalized with hefty fines ranging from $750 to $30,000 per infraction, although “willful” infringement can climb to $150,000.

It’s a common misunderstanding that playing your personal music service constitutes a music license for restaurants. Consumer music streaming services like Spotify, Apple Music, YouTube, Amazon Music, Tidal, and Pandora are designed for personal, non-commercial use. Their terms of service explicitly state that these services can’t be used publicly or in a business setting. If you misuse these services for commercial purposes, you may be engaging in copyright infringement—which could make you liable for fines.

Two Copyrights Within Each Recording

In music licensing laws, every recording comprises two copyrighted works: the underlying musical composition (musical work) and the actual recording (sound recording). The songwriter (or the writer’s music publisher) usually owns the copyright in the musical work. The recording artist (or the artist’s record label), usually owns the copyright in the sound recording. 

Proper licensing ensures that these creators and music rights holders are properly compensated for their work, just as you would pay an employee for their contribution to your business. 

It’s worth noting that separate licenses are needed for a venue to play live music and /or include a cover charge. 

Licenses Required to Play and Stream Music in Your Restaurant

The Copyright Act of 1976, is a United States copyright law and remains the primary basis of copyright law in the U.S., protecting original works of authorship including musical, artistic works and intellectual property. 

There are three different licenses required to play background music legally in your restaurant:

  • The Sound Recording: This covers the right to reproduce and play a sound recording of a song in your business. The license is usually obtained from the copyright owner of the sound recording, which is typically the record label (also known as a "Mechanical" licensing providing reproduction, distribution for musical works, and digital transmission).

  • Publishing License: This covers the right to use the original composition.  

  • Public Performance License:  These licenses allow you to play the song in a public environment. This license is usually obtained from performing rights organizations (PRO). There are four PROs in the U.S. who manage, collect, and distribute public performance royalties: ASCAP (American Society of Composers, Authors, and Publishers), BMI (Broadcast Music, Inc), GMR (Global Music Rights), and SESAC (Society of European Stage Authors and Composers). In Canada, the performing right society is SOCAN . 

Streaming licensed music recordings require a license for both the sound recording and the underlying musical work or publishing. This means you must pay for the sound recording, publishing, and the public performance license holders (PRO) or collective management organization (CMO), depending on the country you're in, separately. You may also need to renew your licenses annually when paying separate licensees. 

Remember, if you’re paying PROs directly in the U.S. and Canada, keep a record of license agreement and the music you are playing in the event they ever audit you.

Songwriters and publishers sign with PROs and rely on them to collect any applicable royalties when one of their songs is played in a public venue. When a composition is publicly performed, the music rights holders must be paid. If you’re playing a PRO’s catalog without a license, they can and will pursue legal action. 

Soundtrack Your Brand covers the all three licenses in US and Canada, and the first two licenses in the other 70 countries where we provide licenses for business use, however the public performance licenses are obtained through local performing rights or collective management organizations.  Here’s a list of PRO’s / CMO’s by country.

The Cost of Music Licensing (and Noncompliance)

While it’s one of the most cost effective ways to differentiate your brand, music licenses for restaurants are a necessary expense if business owners play music for their guests. These fees are typically based on factors such as your type of business, square footage and/ or capacity of the venue, whether the music is live or recorded, and the frequency of the music use. The cost of a music license can range from a few hundred to several thousand dollars per year, depending on the specific circumstances of the restaurant.

Although music licensing fees may seem like an additional cost for restaurant owners, non-compliance and unlicensed music poses a significant financial risk. Refusing to pay a licensing fee or ignoring communication from PROs can land you on the losing side of a fine or a lawsuit, and the costs could shutter a business. 

According to local news sources, a Raleigh, NC restaurant owner was ordered to pay more than $40,000 in fines and legal fees to BMI for illegally playing music in their establishment. The restaurant folded shortly thereafter. 

Another PRO, ASCAP, warns small businesses that ignore the copyrights of its member artists: “In past cases, several venues that could have paid ASCAP a very reasonable and affordable license fee ended up paying far more in damages in accordance with the law. It’s not a surprise that judges would decide in favor of ASCAP songwriters in these cases given Federal copyright law.”

The All-In-One Music Licensing Solution

Creating the perfect backdrop for your guests’ dining experience is about more than just serving mouth-watering dishes. It’s about crafting an atmosphere that transports them away from their everyday troubles and into a universe of culinary delights. Music is pivotal in this transformation, but you must ensure what you’re playing is compliant and pay music creators and copyright owners. Having only an ASCAP or BMI License is insufficient, unless you’re carefully tracking and only playing music covered by each specific PRO.

Soundtrack Your Brand offers a comprehensive solution for businesses to play music in their restaurants legally. Monthly and yearly streaming subscriptions covers both sound recording and PRO licensing fees in the U.S. and Canada, including tracking, reporting and some incredibly helpful made for business tools. This means you don’t need to worry about the complexities of licensing. Instead, focus on what you do best—serving up delicious food and exceptional service—and let Soundtrack Your Brand provide the perfect music.

Discover the benefits of Soundtrack Your Brand for your restaurant today!

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