How "Free" Is Your Music Now?

Most of us are generally aware of the scandal in the music industry triggered by the Napster music “file-sharing” service, which began in 1999 and was continued by other websites for a number of years. The “free” access to music online was a clear violation of U.S. copyright law, which protects the creative rights of composers and music performers. The music industry was warned that this new technology would enable anyone to have open access to music. Yet, the industry took a shortsighted approach and neglected to invest some of its ample profits in the defensive technology needed to block open access to music. This failure has had a dramatic and lasting adverse effect on the traditional model of the music industry, and the creators and performers of music have seen their stream of income suffer.

Now, following years of litigation and new technology, consumers generally purchase their music from services like iTunes or satellite radio. This development provides consumers with more focused and less expensive ways to purchase music. Of course, we also listen to free commercial radio and accept the commercial breaks as our fee for the music. This gradual evolution has reduced the royalty fees which artist and composers now receive. This phenomenon has contributed to the seemingly endless tours by veteran performers, who must continue to perform live and charge what the market will bear in selling tickets to support their lifestyles.

In a relatively recent development, the rights of artists and composers now are more aggressively assisted by the American Society of Composer and Artists and Producers (ASCAP). ASCAP has mobilized a campaign to collect more fees for music played in business establishments. It comes as a surprise to many owners to learn that playing music in their business locations is very likely subject to the payment of a license fee to ASCAP. The fact that the music being played was purchased from iTunes (or similar service) or satellite radio does not exempt businesses from the additional license fee collected by ASCAP. Numerous state and federal court decisions have upheld this interpretation of the copyright law.

Many representatives of ASCAP are contacting businesses on a random basis, usually by telephone. ASCAP representatives are surfing web sites of businesses to identify those businesses which are likely using protected music in their business locations. Typical examples include restaurants, lounges, clubs, gyms, spas, sport venues, hotels and retail stores, which are all likely to play music in their venues. In their “cold calls,” ASCAP suggests that it wants to assist the business by supplying music. While technically correct, the ASCAP representatives really want to learn if (and to what extent) the business currently uses music in its business. Once a business admits it plays music, the ASCAP representative will advise that it must either sign a License Agreement and pay a fee to ASCAP, or face litigation. The ASCAP license fee is negotiated based on the approximate number of customers who may hear the music during the course of a week or month.  The number of customers is computed based on the size of the business establishment, its days of operation, and the style of music used. For example, rates will differ based on whether music is live, on a jukebox, iPod, TV, or radio. Annual license fees range from $500 to $1500. There are a few exemptions available which depend on the ability of a business to qualify based on particular circumstances.

Anyone receiving a call from an ASCAP representative asking questions about your use of music in a business setting should defer any discussions until your consult with an attorney who can provide some practical advice.

Article written by Ralph Kessler, Esq.  For more information, contact Mr. Kessler at (914) 694-4102 or via email at rkessler@hhk.com.

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Article reprinted from the June 2013 HH&K Newsletter (Volume 5, Issue 2).

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