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License to rock

For many venues, music performance licenses are just a cost of doing business

By Jim Fester

Fort Wayne Reader

2011-11-17

Many years ago, Cyndi Demaree got a call at the Firefly coffee house — the business she co-owns with her husband Paul — from an out-of-town number she didn’t recognize. “It sounded like a young woman, and she was asking things like ‘do you have live music this weekend?’ and ‘do you have open mic nights?’” Demaree recalls.

Demarre answered that yes, they did have live music this weekend, and they did have open mic nights, and she referred the woman to the Firefly’s website and Facebook page for a schedule.

But it turned out the caller wasn’t a casual music lover. She was actually from one of the three big performing rights organizations in the US, whose purpose is to collect royalties due from public performance of copyrighted material and distribute those royalties to the copyright holders. She was calling to make sure that the Firefly was licensed so that musicians could perform cover songs in the venue.

The Demarees can’t remember which particular PRO the caller was from; as we said above, there are three big ones in the US — ASCAP (American Society of Composers, Authors and Publishers); SESAC (Society of European Stage Authors & Composers); and BMI (Broadcast Music, Inc.). But they said that as soon as one PRO “found” them, the others soon followed. “I think we were paying ASCAP first, and then SESAC and BMI seemed to come calling, and I thought ‘who are you guys?’” says Paul Demaree.

It wouldn’t be quite true to say that the music licenses that businesses need to purchase in order to have music played or performed in their venue are a “secret” in the industry, but they are a cost of doing business that many people are unaware of. “It’s always been around,” says Richard Reprogle, long-time music director at Columbia Street West. “I know Columbia Street has been paying those license fees since the beginning of time.”

But Reprogle adds that he’s been hearing a lot recently about PROs being a little more active in pursuing venues that aren’t covered. “There’s so many new club owners who aren’t aware of that, so you’re getting to hear it quite a bit more. That’s when I started hearing people wondering whether they wanted to offer music or not.”

Corey Rader, co-owner of the Brass Rail, says he was unaware of the practice when he bought the bar four years ago. He explains that he shells out to the Jukebox License Office, BMI, ACAP, and SESAC. The Jukebox License Office gets about $500 a year to cover royalties for the artists played on the jukebox. But Rader says he finds one aspect of the arrangement a little strange. “No one has ever asked me what artists we have in our jukebox or who gets played,” he says. “It always seemed odd to me, but supposedly they pay someone. I like to think some of the smaller and local bands we have in the jukebox get paid, but…”

Radar also pays BMI about $1,000 a year, while around $200 goes to SESAC and $400 to ASCAP annually. “About 90% of all the artists we have through here play original music, but just in case anyone decides to crank out a Bruce Springsteen song or something, we’re covered,” Rader says.

Like Rader and Reprogle, most people consider these licenses a cost of doing business — music is an essential part of what their businesses offer, so paying the annual license fee is just something that has to be done.

But for the Demarees at the Firefly, it proved a little too costly. The PROs offer licenses at various rates, and there are numerous discounts and options that a business might take advantage of, but in general, the price is calculated based on occupancy of the venue and the number of nights they offer music. As a small coffeehouse, the Firefly was at the very, very bottom of the scale, says Paul Deamree. Still… “Between all three, it came out to about $1,200 a year,” he says. “So then, when we’re grinding our way through a recession, it got really difficult.”

Demaree says he’s a musician himself, so he was willing to pay, but it just got too prohibitive for a small venue that doesn’t sell liquor to continue. So the Firefly eventually put an end to its open mic nights a few years ago.

Unfortunately, situations like the Firefly’s are usually when the general public becomes aware of PROs and licenses, and that has lead to a lot of misunderstanding about PROs and what they do, says Ari Surdoval, Director of Corporate Communications and Media Relations at BMI.

BMI has been around since 1939, and they license more than 7.5 million songs by more than 500,000 composers to businesses that use music. “We collect license fees from those businesses that use music in their business, and we distribute the fees we collect as royalties to the members we represent whose works have been publicly performed,” explains Surdoval.

Surdoval says that if you buy a CD and invite a thousand friends over to your house to hear it, that’s fine. “But if you own a business and you use that song to drive profits at your business, then that’s a public performance, and the person who owns that song has a right to be compensated for it. That’s Title XVII of copywrite law in the Constitution.”

He adds that BMI operates as a not-for-profit-making organization. “86 cents out of every dollar BMI collects goes right to the songwriters and music publishers we represent.” A blanket license from BMI allows a business to play any of those 7.5 million songs the company represents, and also protects business from “frivolous or predatory” lawsuits.

Also, Surdoval points out that the vast majority of the artists BMI represents aren’t, say, people like Paul Simon or The Rolling Stones — artists who compose, record, and perform their own music, and make loads of money doing so — but just writers who depend on those payments to make ends meet.

According to Surdoval, BMI licenses over 650,000 establishments nationwide, and that there are many factors that go into calculating the cost of a license for a particular business. “BMI recognizes it’s not a one size fits all thing,” he says. “We go to great lengths to determine the amount of music that a business is using, and the context in which they’re using the music. So if you have a coffee shop that plays music in the background for atmosphere, that’s very different from a 6,000 square foot nightclub that only serves liquor, and where music is integral to the business model.”

He believes that the biggest license he’s seen was about $6,000 a year, and that was for a 10,000 square foot dance club where the cover charge was around $20 per person.

Surdoval says it’s very rare that a business that uses music as an integral part of its business model simply refuses to pay for a license, and that BMI usually is very willing to explore options. Still, Surdoval says they sometimes find themselves dealing with people who came of age in the digital music era, where music is just sort of this free thing that comes out of a speaker. “They don’t seem to understand that this is something that these people who we represent actually make, often out of a passion and love for music, and that they’re already taking an enormous financial risk to make this music.”

To their credit, the business owners we talked to really did understand that — music lovers and/or musicians themselves, they thought a songwriter should be compensated for their work (it’s not just the right thing to do; it’s the legal thing to do). “Yeah, it’s a pain, but it’s the cost of doing business,” Corey Rader says. “This (cost) doesn’t necessarily stand out. I just hope some of that money is getting to the bands we like and support.”

Anyone curious about how the cost of licenses are calculated — or about the practice in general — can find a lot of information on the websites for BMI, SESAC, and ASCAP.