Twice this morning, I was faced with the question of whether a business needs a license to play a radio or TV station on their premises, once in a story in one of the broadcast trade publications (see the article here, in the You Can’t Make This Up column toward the bottom of the article) about a gas station that thought that they got around paying ASCAP, BMI and SESAC fees by using “6 or 7” consumer radios around the station. After I saw that article, I thought that it was worth writing this article, as the difference between 6 and 7 radios could make a real difference as to whether the business needs to pay music royalties.

Broadcasters need to be careful about urging their clients to play their stations at their business locations. There are very specific rules, and if the rules are not followed, liability can result. But, as detailed below, there are some exceptions to the obligation of commercial establishments to pay ASCAP, BMI and SESAC that apply specifically to establishments that play only FCC-licensed radio or TV stations. But the details of the exceptions must be observed or there can be issues. All of the performing rights organizations have contractors who travel the country, checking out retailers, bars, restaurants, and other commercial establishments to make sure that they are following the rules. There are periodically press reports about these rights organizations seeking royalties (sometimes through legal actions) from coffee shops, nightclubs, and even farmers markets that publically perform music without signing license deals. So these commercial establishments need to know the rules about music use to avoid becoming a target. As set forth below, the rules are very specific, and broadcasters can actually benefit from the exceptions as, in the limited circumstances set out in the Copyright Act, businesses can play music from FCC licensed outlets without a license, but music from other sources could present an issue. But be careful, as there are very specific rules – and the difference between 6 and 7 radios could be a real issue.

Under the Copyright Act, any business can be exempt from the royalties if they use one consumer-type audio or video player. But they can have only one such device. Under this exception, the source of the content is not an issue. That’s because it is assumed that the use of this device is to keep the employees entertained. But it allows for the use of only a single radio or TV.

A newer exception adopted in the 1990s goes further. This exception is based on the size of the business and it applies only when the business plays an FCC licensed radio or TV station (or cable or satellite TV programming) where the originator of the programming has paid the appropriate fees. The business that takes advantage of this exception can’t charge an admission fee. And the business must fit in one of these categories:

It has less than 2,000 gross square feet (excluding parking – but the parking area must be just used for parking – so the area around the gas pumps or other actively used outside areas would probably count toward the 2,000 square feet);

Or, if it has more than 2,000 square feet then: If the business only plays the radio, it can have no more than 6 total speakers, no more than 4 of which can be in one room (or adjoining outdoor space) If the business plays TV, it can have no more than 4 TVs, none bigger than 55 inches (diagonal screen size), and no more than one in any room (and there can’t be more than 6 speakers providing the TV audio, with no more than 4 in any one room) For “food service or drinking establishments” (bars and restaurants), there are slightly looser rules, in that the square footage in 1 and 2 above goes up to 3750 gross square feet, but the limits on the number of speakers and size of the TV screen are unchanged.

Note that this exception is not limited to consumer-type radios, but the business can only play FCC licensed radio or TV (cable and satellite TV count as TV too). No CDs, no hooking up to an iTunes library and no streaming services. If a business plays any of these other services, or features live music, then they must get public performance licenses.

A couple of other issues are worth mention. Right now, the payments are made only for the public performance right in the underlying musical composition (otherwise known as the “musical work” – the lyrics and musical notes that make up the song). No royalty is paid by businesses to the copyright holders in the sound recordings under Federal law (but see our concerns about whether certain court rulings may cloud this conclusion when dealing with state laws and pre-1972 sound recordings, and see this article about the Register of the Copyright calling for a more general sound recording performance royalty). However, services that provide music to commercial establishments, and transmit that music through digital means (called “business establishment services”), do have to pay a sound recording royalty, though not for the public performance, but for the “ephemeral copies” that these services make (see our article here).

Also, it is worth noting that broadcasters have some coverage for playing their own signals under their license agreements with ASCAP and BMI. Under those agreements, they can play their music on their own premises without limitation by the number of speakers or size of building set out above, and otherwise play their own signal, as long at the revenue derived from those broadcasts is included in the revenue on which the ASCAP and BMI fees are paid. But stations cannot pass on the coverage under their licenses to their customers, e.g. a station cannot allow a local hotel to play the station in all of its halls and common spaces through some sort of deal with the station. And the license does not cover stations who do live concerts or who play music other than that contained in their signals (e.g. playing CDs while on a remote).

The rules are very specific, and this summary does not cover all of the nuances, so be careful telling your advertisers that they can play your broadcast station in their commercial establishment without carefully parsing out the details of the exception. Call an attorney or someone very familiar with copyright law, as penalties can be steep for copyright violations. That difference between a 6th and a 7th radio could make a real difference!