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Apr 05 2012

Bar Owners Beware! Not Paying for Tunes Can Be Costly!

Owners of bars, nightclubs, restaurants and other venues that play background music or have live music at their establishments should take note of the Ninth Circuit’s decision last month in Range Road Music v. East Coast Foods where it held up a large award against a restaurant that refused to pay a licensing fee for the music it played in its business. Even more frightening than the $198,000.0 award for misuse of eight (8) songs, was the court’s decision that the owner and operator were personally liable for the fees and damages.

The case involved a jazz club named Roscoe’s in Long Beach California, which opened in 2001. Shortly after it opened, ASCAP contacted East Coast Foods, the operating company of the bar, to offer it a license to perform music by ASCAP members at the restaurant and lounge. ASCAP is a “performing rights society,” a nonprofit organization that licenses the music of its members and collects royalties whenever that music is performed publicly. BMI and Soundscape are the other two prominent ones that composers and musicians use to collect licensing fees for their works. East Coast did not purchase a license, and between 2001 and 2007 East
Coast ignored repeated requests from ASCAP to pay licensing fees.

In 2008, ASCAP sent a private investigator to visit Roscoe’s and write down some of the music he heard being performed there. (OK, so, how do you get THAT job?). The investigator went in one night and saw the band play four John Coltrane songs, and heard the DJ play four songs from a group called Hiroshima. The investigator testified that the band announced the names of the songs they played during their “Coltrane” set and that he jotted the names of the Hiroshima songs from the CD jewel case next to the DJ station. All eight songs are licensed through ASCAP. And that’s all the evidence it took for ASCAP to win.

Th court set damages at $4,500 per song. This number was likely so high because the bar was making revenue off the music and was not just using it for personal use. The court also likely took into consideration the size and business volume of the venue to determine what would be an appropriate penalty. But the real whammy came when the judge concluded that because the defendants had ignored repeated attempts by ASCAP to have the bar pay its licensing fees, the infringement was willful and therefore the plaintiffs were entitled to their attorney’s fees, which came to $162,000.00. Moving on to the bar owner, the court said that since he had direct control and managerial authority over the venue, bought the liquor for the place, signed the liquor license, etc., he was personally responsible for the infringement as well.(ASCAP could have also sued the band that played the four Coltrane songs but did not do so).

ASCAP generally charges around $900 per year to play its licensed music. Multiply that by 3 (for BMI and Soundscape ) and bars are looking at $2,700 per year in licensing fees. Occasionally, they may also want 10% of the gate if you are regularly charging entrance fees and live music is played. Venues all around the country have been receiving demand letters from one of the three (or all three). In the cases I have been involved in, I have always recommended reaching an amicable resolution of an appropriate annual fee to pay and be done with the issue. It is impossible to claim that you had no idea that music was copyrighted and protected by licensing agencies, especially when you are in the business of providing music at your venue and you get letters from the agencies demanding fees!

Pay a little now, or pay a lot later. Hardly music to a bar owner’s ears.

25 comments

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  1. Singh

    This is obscured. ASCAP is a acting as a tug no different than a criminal committing a crime.
    Such a sad affair, with phony laws, judges and attorneys in this country. It sucks.

  2. Jim

    This is such a sad and disgusting display of how greed, money, and corporation can literally kill one of the most basic forms of human art. So bands are liable now for playing music live and should be paying royalties?? to play someone else’s song live (not recording it and making money off of it) playing it live. So if you’re a coffee shop hosting a live jam session for people to network, interact, play music, and enjoy a common song – some Icehole in the corner will be looking to take a cut of that and make money off of it. I’m a musician. That is the most disturbing thing I think I have ever read. So lawyers and corporations tax everything now – even our emotions, feelings and musical communication ?? – THIS IS GOING OVER THE EDGE. Way too far. Ruined my day.

  3. Terra Travail

    BMI & ASCAP work on behalf of YOU, the artist. If your song is getting played in bars and clubs across the nation, they collect royalties for YOU the musician. As a musician, if you want to cover someone else’s song, famous or not, you can write a simple letter, and the artist (or rep) almost always agrees, and it’s almost always free, especially if you are not a cover band touring and recording, then of course you pay, but it’s not outrageous. All you have to do is ask, and in this day & age it’s pretty quick via email. DJs can do the same to play a cut, or remix something. I have been surprised how easy it is. If you are an artist who WRITES songs, the benefit is you a. get paid & b. have some control over the use of your art. ASCAP & BMI cannot collect royalties on any artist who isn’t their client. Artists join to reap the benefits they offer. Many artists choose smaller representation, or a self- copyright, or do not license their work at all. If you are a bar or club owner who does not want to pay licensing fees, you can employ bands who play all original songs all the time, and/or play songs that are public domain. If you are planning on running a business that relies heavily on modern musical influence, licensing fees should be an expense consideration written into the business plan. Less than $3000/yr.? Most bars make that on St. Patrick’s Day alone. Smaller business can get away with “ambient” music for free. If a songwriter wants to retain control over their intellectual property, there are few choices besides these organizations. I don’t mind feeding the jukebox, and artists getting paid is the difference between music being a job, or a hobby.

    This particular bar had been contacted several times in an attempt to collect the lower, regular fee, but they refused to pay. The article also mentions that the fee is sliding scale, based on the sales volume of the venue.

    Also if you are hosting a jam or whatever and they catch you, they give you several warnings. It would have to be a big, fancy jam to attract their attention, though!

    I say: I’ll pay if you pay, that way we all get paid.

    1. Oscar Michelen

      Well stated!

    2. Jim Benelisha

      You make it sound like musicians will get paid by Ascap. This is almost never the case, unless you get played on the radio. I own a club where touring musicians play every night (and I pay my license fees) very, very few of the musicians and bands that play at my place ever see a dime from Ascap, BMI, or Sesac. Not only do they never get paid from them, they also find it more difficult to find places to play because club and restaurant owners choose not to offer live music so they won’t have to pay the fees.

      1. Oscar Michelen

        I think I made it pretty clear that its usually only well-known artists who actually see ASCAP checks. If not, let me say it now – I agree with you most musicians don’t see money form ASCAP unless they have regular radio play

  4. John Sizemore

    Oscar, I am curious as to what your definition of copyright “trolling” is? How can you categorize a well established non-profit rights management organization warning a bar on probably dozens of occasions, for over half a decade, and using litigation as a final resort, as “copyright trolling?” I look forward to your response.

    1. Oscar Michelen

      John: I did not use that word in my article. In fact I find the article overall very fair and accurate to ASCAP. I also state in the piece: In the cases I have been involved in, I have always recommended reaching an amicable resolution of an appropriate annual fee to pay and be done with the issue. It is impossible to claim that you had no idea that music was copyrighted and protected by licensing agencies, especially when you are in the business of providing music at your venue and you get letters from the agencies demanding fees! I was more responding in general to the comment and as you can see from the comment below, I supported the commenter Terra Travail who approved of ASCAP’s method in this case. That being said, I agree with you that this is not copyright trolling and I should not have applied that term to this case. It was not only the wrong term, it did not even reflect the nature and tone of my article which was a warning to bar owners to pay their licensing fees or else face litigation. Thank you for properly calling me out on it I have deleted the comment where I used the term.

  5. Jerry D. Tiberi

    Is ASCAP required to make “public” the payments they have made to the artists they are collecting for? If so, where can we find such records to confirm ASCAP is compliant with with paying their artist’s? If not, shouldn’t they be required to do so? No one seems to be able to verify that the artists owed money are actually getting paid.

    1. Oscar Michelen

      The artists can ask for an accounting – that’s part of their agreement with ASCAP. The general public cannot; these are private agreements between private parties

  6. Dennis

    I am a bar owner and I get hit with this issues every year. My question is, if I only use original bands NOT cover bands am I still required to pay the licensing fees to these agency’s? It is my understanding that original bands own the rights to their own music and can play it anytime and anywhere. I have been told by BMI that I still have to pay the fees regardless. That does not make any sense to me.

    1. Oscar Michelen

      If you don’t have a jukebox or other music system that plays copyrighted music and the bands can only perform originals, no covers, then you would not need a BMI or ASCAP license unless the bands were signed with them. But BMI is likely saying that most original bands also include at least one or two covers in their sets – Also what music do you play while the band is offstage?

      1. Dennis

        We do have a jukebox box but the licensing for it is taken out of the money that is collected from playing the jukebox. The bands that play here do not play covers, just original songs and we play an Ipod or jukebox between bands.

        1. Oscar Michelen

          So the jukebox is OK since its licensing fees are covered, but the iPod would not be.

  7. Don

    Really hurts small rural bars. Some may net $30000 or less annually. To pay 10% to unknown entities seems strong arm. What prevents a 4 th,5th, etc agency from jumpin on the gravy train. Do you have to pay them all off? Extortion?

    1. Oscar Michelen

      Usually the letters will come on behalf of all the rights agencies not just one or two. But the amount you pay can often be reduced down based on your earnings and average attendance numbers.

  8. A Client

    Terra Travail: You should look into how your company samples for payment rates. You’ll realize that this system represents the interests of the most wealthy copyright holders, and and doesn’t represent the interests of any artist who has less exposure.

    If ASCAP or BMI actually represented artists interests of all levels they would show more discretion in enforcement and payment. As it stands, your policies significantly limit the venues for artists such as myself to monetize on the music I write.

    Now, your statement that venues can hire unlicensed bands is not what venue owners are told by agents of ASCAP. They are told, that they can’t prove that the all songs will not be licensed material, and will be sued if they continue to have live music.

    You probably know these things to be true, and if so, please keep your dishonesty in mind the next time a child in your family looks up to you. Being an honest person is one thing no one can take from you, and it’s unfortunate that you’ve sold your integrity for whatever salary you get. But, it’s never too late to start doing the right thing in life. I hope you take this advice to heart.

  9. Phil

    WELL STATED!!!

  10. Dave Clark

    Great article Oscar. It’d be interesting to hear how the independent artist gets paid. Say I’m a local musician with registered works thru BMI. Either I or other artists are playing my songs in public venues. How am I getting paid? Am I getting paid at all? Or does the majority of PRO revenue go to the top artists in each genre? Is it contingent on the location reporting song usage? What do you think sir? Appreciate your time

    1. Oscar Michelen

      The Performing Rights Organizations always favor the top artists Dave so they get the lion’s share of pooled royalty fees (which these bar fees would fall into).Royalty payments are paid out of a royalty pool. However, not all performances or songs are paid equally. For example, in radio, the majority of royalties go to artists who have hit songs played on commercial radio, where the negotiated license fees are higher. And we know who gets regular airplay on commercial radio – The major recording artists with the money it takes to make a radio “hit”.The PROs do not consider it cost-effective to survey every potential public performance venue where live shows may take place. However, they all have systems in place where you can self-report your music being played. And guess what – even when you perform it yourself you can get paid from the PRo for those performances – If you are with BMI ask about BMI Live which could end up paying you for playing yoru own music

  11. Valerie

    How did this case distinguish from Twentieth Century Music Corp. v. Aiken, 422 U.S. 151 (1975)

    1. Oscar Michelen

      Its different in a number of ways. In Aiken the store just had a radio on that was playing music. The Supreme Court said that this was not a “performance” of the song under copyright since it was just a re-transmission of an already licensed use. Here, the bars have acts that are performing the songs and some are charging covers at the door to hear the music. Secondly, in Aiken, the radio station had already paid the licensing fees for broadcasting the music – here the bars have not paid ASCAP or BMI or SESAC. Many radio stations now announce at least once during the day that any re-broadcast or re-transmission of their shows are prohibited.

  12. Martin

    As a small rural bar owner I am dealing with harassment of ASCAP. We have a jukebox and DIRECTV which are covered buy their licenses and business contracts. No radios. We don’t have bands since the bar is too small in floor space to even support it if we wanted it. We do have karaoke, which is provided by a licensed contractor DJ who does pay the royalties for the music he owns and uses. We do have a written contract and he does his own promotions. We charge no cover charge. And in my humble opinion I do not believe we benefit financially due to financial obligation to provide the karaoke contract service. I’m sure that could be up for debate as he does a have a small following but he reputable and does a good job of making be people sound good. Some do not even indulge with spirits but all is good. Why does ASCAP still pursue us?

    1. Oscar Michelen

      Without seeing the ASCAP letter sent to you its hard to say. Sometimes they send out robo-letters without specific claims other times the letters tell the bar owner when an ASCAP rep was in the bar and did not see any indication of a license display. Perhaps ASCAP is unaware of your written arrangement with your karaoke DJ. It sounds like you properly protected yourself so maybe you should hire a lawyer to contact ASCAP and explain the situation.

  13. BW

    BMI and ASCAP are destroying live music. I own a 1k square foot bar (23 seats, 54 fire capacity), the previous owners sold the business to me when BMI was suing them for a considerable sum. Not a huge amount, just more than the business could bare. I pulled live music completely due to ASCAP chasing me down. It’s simply not worth the cost in a business this size. I have musicians regularly asking to play for free (tips only) and I refuse due to ASCAP.

    The BMI/ASCAP companies smell like the creation of lawyers, knowing how to capitalize on court rulings. Anyone with a business that has been sued for ADA issues knows what I am talking about. I had a mis-labeled bathroom and it cost me $10k. You can fight in court but you will lose, the attorneys love that and form businesses around that.

    By the way, the majority of live musicians that are signed by ASCAP and BMI are getting screwed. When they play at a venue, the ASCAP/BMI fees are deducted from their pay (it will be itemized on their pay schedule), and unless they are a mega-star, they will not get that back ever. And that is almost all of them. Let me restate that….. IF YOU ARE A MUSICIAN PLAYING YOUR OWN MUSIC IN ANY CONSIDERABLE SIZE VENUE, AND YOU OWN THE RIGHTS TO YOUR OWN MUSIC, YOU WILL PAY AN ASCAP/BMI FEE AT YOUR PERFORMANCE, AND NEVER GET IT BACK, EVEN IF YOU HAVE AN AGREEMENT WITH ASCAP AND OR BMI.

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