Illustration by Emma Roulette.

Small businesses dole out big fees for an atmosphere

Maybe you frequent your favorite bar for its signature cocktails or killer happy hour. Maybe it’s the quirky art and moody lighting you’re into. Maybe you love that you can kick back with a cold beer and an Otis Redding song floating around the room. Whatever it may be, you dig the vibe. But that “vibe” comes at a steep price for some businesses.

Part of the vibe of a place lies in the establishment’s musical ambiance. And legally speaking, music means money; businesses are required to pay for the license to play DJ.

Not all comply, though. And it’s tempting not to. Let’s say you paid $9.99 for the new War on Drugs album on iTunes; you go into work the next day and want to crank it on the speakers. So, you do. And you don’t give it a second thought because you’re busy serving up the next round, and all the barflies and boozers are having a great time.

Many business owners do this and, for the most part, can get away with it–for a time.

When Mars Pub of downtown Gainesville reopened in January 2013, it played music from private iPods or its vinyl collection. Like many businesses, Mars wasn’t initially concerned with dishing out the cash to Performance Rights Organizations, or PROs, like the American Society of Composers, Authors and Publishers (ASCAP). After about three months, owner-manager Allison Basker recalled, ASCAP had already sent Mars “numerous harassing letters.”

ASCAP, Broadcast Music, Inc. (BMI), and the Society of European Stage Authors and Composers (SESAC) currently dominate the PRO sphere in the U.S.

The idea of a “performance right” was legally set in stone by a United States Supreme Court case in 1917, Herbert v. Shanley Co. The ruling codified the idea that the public use of someone else’s music in a place of business, even if incidental, is justification enough for royalty payments. Public use would include live performance, karaoke or broadcast of a previously recorded song.

The ruling gave PROs the ability to issue “blanket” licenses. These licenses allow businesses to use PRO-represented music for an annual fee, part of which is distributed to songwriters.

For some businesses, however, the fee is too much.

ASCAP initially asked Mars, a 3,000-square-foot bar outfitted with a full sound system, for a yearly fee of $1,500.

“The larger your capacity, the more you owe,” Pat Lavery, marketing and booking director at the High Dive, explained. “The PROs assume that you are ‘sold out’ or close to capacity every night when they calculate how much you owe them.”

For Mars, ASCAP overestimated. By explaining their actual capacity versus ASCAP’s assumption, Basker was able to negotiate the fee down by two-thirds. As of June 2013, Mars pays ASCAP $500 a year for music rights.

“Fees have been escalating for years and enforcement of collections has become stricter due to the lack of record sales revenue generated by artists,” Lavery said.

When PROs slap a business with a contract, the business has a few options: pay in full, negotiate or utilize an exempted form of broadcast, such as FM radio. Another option is to simply do nothing.

Businesses who choose to do nothing, declining the contract, may escape the fee for a time, but this comes at a greater risk. Continual violators face fines of $750 to $150,000 per song.

The soliciting PRO will continue to keep track of the business, which is why businesses have become increasingly more fearful of speaking about their relationships with PROs. Increased publicity could result in a higher profile on the PROs’ radar, thus increasing the risk of litigation.

Advertising on the internet, for example, exposes a business to the watchful eye of PRO administrators scouring information on potential collections in the area.

“Venues that have official websites with comprehensive info on shows tend to get hit the hardest,” Lavery said.

And when organizations like ASCAP and BMI sue a business, the outcome tends to be inevitable. As of 2010, BMI had not lost a single suit it brought to court.

The most cost-effective protection may be to play by the rules and dust off the FM radio. But by surrendering control over its music, businesses lose an integral part of their atmosphere.

For Mars, preserving its vibe was worth the fight. But even after negotiating her pub’s fees down significantly, Basker still feels the pinch.

“We are paying them painfully slowly.”