A lot of legal concepts have big grey areas. This isn’t one of those topics.
When you get yourself a Spotify/Pandora/Tidal/Soundcloud account, whether or not you pay for the service, you’ve agreed by its terms to only use it for personal use. Funnily enough, that actually doesn’t matter much here for the business owner, because Spotify cancelling your account isn’t going to be your biggest concern.
Some background: Music is protected by two Copyrights—one for the underlying musical composition (think the song written on paper), and one for the recorded composition (the version you listen to); each copyright comes with rights attached, and one of the largest is the right to control who can use your music. Most people have generally heard of the term “Royalties,” which is a function of this right.
Royalties are paid out to songwriters, musicians, labels, and publishers, and there are several types of royalties, some of which are negotiated and some of which are set by law. The type of royalty at hand is called a Public Performance Royalty*.
Anytime music is played in a commercial setting, it’s considered a public performance** of a copyrighted work. Imagine a restaurant playing mellow jazz to set the scene for your meal, or a clothing store playing upbeat hits while you shop. The legal theory here is that the business is using the music to make a better experience for customers, which is really done to increase sales, and because of that, the business has to compensate the copyright owners for use of the protected works.
Obviously, if you had to track down, negotiate with, and pay Montell Jordan every time you threw on “This is How We Do It,” you’d be facing a pretty uphill logistical battle. This is where music Performing Rights Organizations (PROs) come in. PROs gather music catalogs from a variety of different songwriters and publishers into one large catalog, which they license out for a fee. Once you’ve paid this fee, you can access anything in their catalog and play it in your business.
If you want to play music in your business the legal way, and make sure that public performance royalties are paid out, you have two options: a) you can either pay each PRO (BMI/ASCAP/SESAC) their separate fees from the example above, and hope that any song you play is covered, or b) you can upgrade to a business level version of the regular streaming services, like Soundtrack Your Brand, Pandora for Business, or Cloud Cover Music (no I don’t get anything for mentioning them, not even a sweet sweet Oreo™), which have all of the important licensing fees included in their monthly fee of $18-$27 a month.
You might be asking, what’s the harm if I decide to save that $8-$17 a month and just keep using my Spotify account? Well, here it is: anytime you play music in a business without paying the public performance royalty, you’re breaking copyright law; if anyone finds out that you’re doing this, they’ll sue you and win. How much? Between $750-$30,000, and up to $150k if the court finds it was willful. That’s not total, that’s per song. And before you ask, yes, there are people out there whose full time job is secret shopping businesses for illegal plays…even farmers markets aren’t safe.
Some of you might still have old school iPods/disc(persons)/tapes with music on them, and might be thinking “well I bought that music, so I’m good right?” Sorry, but that gets a firm “nah bruh.” When you download music or purchase a cd, you’re not buying a copy of a song, but rather a legally-attached license to use it, and that license comes with restrictions—the main one being that it can only be played for personal uses.
How about TV and Radio as an easy way to play music for free? Radio & TV exemptions exist, but get very complicated very quickly. At the base level you can play radio or TV from ONE device in your establishment. That means one “homestyle” radio, not one radio linked to 12 speakers. There is a newer exception linked to the size of the business, and you can use it as long as you don’t charge admission, you’re playing an FCC licensed radio or TV station, and you fall precisely into one of the following categories:
1. Your business has less than 2,000 gross square feet (parking can be excluded if it’s only used for parking and nothing else); food service and drinking establishments get 3,750 gross square feet; or
2. Your business has more than 2,000 gross square feet (3,750 for food and beverage), and
a. If the business plays the radio, it can’t have more than 6 total speakers, and no more than 4 in one room (including any outdoor space adjoining the room); and
b. If the business plays TV, it can’t have more than 4, maximum 1 per room, and none can be bigger than 55”. The speaker limit above applies here too.
That said, I probably wouldn’t use these exceptions because it’s so easy to get tripped up in the nuances, all of which are not listed here.
What’s the TL;DR?
Don’t play your personal music streaming account in your business, just spring a few bucks for a properly licensed service, and write the whole cost off at tax time.
*For the copyright purists out there, public performance royalties are just paid out on the musical composition, not the sound recording…that said, digital streaming services DO need to pay sound recording royalties for the “ephemeral copies” that these services make. Both are conflated here purely for ease of understanding that royalties need to be paid.
**See 17 U.S. Code § 101: To perform or display a work “publicly” means—
(1) to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or
(2) to transmit or otherwise communicate a performance or display of the work to a place specified by clause (1) or to the public, by means of any device or process, whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times.