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Paul Zimmerman
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FACING THE MUSIC: Hoteliers Run the Risk of Copyright Infringement

Article originally appeared in Hotel Association of Los Angeles (HALA) Newsletter.

In the digital age, music is omnipresent and access is immediate. Hotel operators, eager to improve the guest experience and elevate their brands, are assessing and enhancing the presentation of music at their properties. But along with the rise of online streaming, satellite radio and curated playlists comes the risk of copyright infringement – and the hospitality industry is an easy target for such claims.

A hospitality establishment generally must have a license in order to legally play music to the public, regardless of the method of play (which may include hosting a live band in an onsite club or bar, streaming a playlist from an Internet music service, or even playing music that you purchased and stored on your own iPod).

This license requirement is both administered and enforced by performing rights organizations (“PROs”). There are three such organizations in the United States:  BMI, ASCAP, and SESAC. The PROs act as licensing intermediaries for songwriters; in exchange for a fee, they issue blanket licenses that grant licensees permission to use the entire catalogue of music that each PRO represents. On the enforcement side, BMI and ASCAP are the two largest PROs, and these two alone file approximately 400 to 500 lawsuits every year for violations of the Copyright Act by hotels, restaurants, bars and other venues open to the public. The PROs employ professional musicologists who visit public establishments, and make note of any unlicensed songs that are played. The PROs then typically issue a license and royalty demand directly to the establishment, insisting that some amount of past royalties be paid to avoid a lawsuit, and that a license be obtained for any future use. Sometimes managers who receive such demands mistake these requests for scams, and simply disregard them – but hoteliers ignore such demands at their peril.

Obtaining a license to play music can cost a few hundred to a few thousand dollars per year, depending on multiple factors, including the size of the establishment. On the other hand, playing music without first obtaining the requisite license can quickly become extremely costly. The penalties for violation of the Copyright Act are up to $30,000 per work infringed, and if the infringement is willful (e.g., if the establishment has been notified of its failure to license the music and nonetheless continues to play it), the penalty is increased and can range up to $150,000 for each infringed work. Thus, playing just four unlicensed songs could result in a $120,000 penalty (or up to $600,000 if the infringement was willful), plus the infringer may be required to pay the opposing side’s legal fees and costs.

The Living Room Steak House in New York learned this lesson the hard way. In February 2016, judgment was granted in favor of BMI, which had brought a lawsuit alleging that the restaurant played a total of five songs without license. The court awarded $16,000 in statutory damages, noting that the judgment was “approximately four times the amount Defendants would have paid in licensing fees.” Broad. Music, Inc. v. The Living Room Steak House, Inc., No. 14-CV-6298, 2016 WL 756567, at *6 (E.D.N.Y. Feb. 26, 2016).  The Court also ordered the defendant to pay the entirety of BMI’s attorney’s fees and court costs. Clearly, no five songs are worth such a consequence; businesses attempting to dodge the music licensing requirements are taking a substantial and unwarranted risk.

Although it would certainly be cheaper to just stop playing music altogether, music has long been a tool for guest engagement. There is also brand value in developing and sharing custom playlists with guests, especially given the increase of millennials who grew up with abundant, customized music at their fingertips. So what are hoteliers to do?

One option available to hotels is to partner with a paid, third-party music service that caters to the hospitality industry, several of which will handle both the licenses necessary to play music to the public, as well as curate the content of such playlists. Although paying for such a service is more expensive than obtaining the licenses directly from the PROs, these full-service providers are one way to take the licensing responsibility off hoteliers’ shoulders.

Additionally, there are some limited exemptions to the music licensing requirement, which generally apply to small establishments that play music transmitted only by radio or television, do not charge to hear the music, and have a limited number of speakers or televisions. However, the application of these rules can be complex. If you are not sure if you qualify for the Copyright Act’s licensure exemption, you should consult an attorney with knowledge of music licensing.

Before investing a great deal of time and attention into developing branded musical experiences for guests, it is important to consider the following:

  1. Determine what you are trying to accomplish by playing music in your business. A hotel must consider its primary goals: Atmosphere? Background noise? Guest engagement? Brand visibility?
  2. Talk to an intellectual property attorney. Consider speaking with legal counsel who understands copyright law, and in particular, knows how music licensing in a public establishment works, especially in light of new streaming technologies. Your business may qualify for the Copyright Act’s licensure exemption, depending on the method of play and the physical characteristics of the establishment (including its size, and the placement  and number of speakers), in which case you may not need to incur the cost of a license. Even if you are not exempt, counsel can help you determine the most cost-effective way to acquire the license(s) you need for your business.
  3. Negotiate license fees. The amount you pay for a music license is negotiable, just like any other license. Ask the PROs to consider the type of business you're in, the square footage of your property, how often music is played, and the amount of consumer traffic you receive. Remember, PROs will be more willing to work with you if you're proactive in securing a license, as opposed to negotiating to prevent a lawsuit after you’ve been caught without one.

Do not let your eagerness to entertain and engage your guests cloud your better judgement. If you intend to play music at your hotel, it is important not to cut corners. In the era of custom playlists and streaming radio, access to music may be immediate, but it still comes at a price.

This article is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.