Vondran Legal® - SESAC Music Licensing for Businesses: A Practical Guide to Commercial Music Licensing

Businesses that play music for customers can encounter an issue they may not have anticipated: public-performance licensing.

Restaurants, bars, nightclubs, hotels, fitness centers, retail stores, entertainment venues, event spaces, and many other businesses may eventually receive a letter, email, telephone call, or other communication from a performing rights organization such as SESAC, ASCAP, or BMI.

The communication may inform the business that music being performed at the establishment requires a license. In some situations, the performing rights organization may request information about the business, its occupancy, and how it uses music. In other cases, the organization may propose a license or contend that copyrighted music has already been publicly performed without authorization.

Understanding what these organizations license—and what their licenses do not cover—can help a business evaluate its options before responding.

What Is SESAC?

SESAC is a performing rights organization, commonly referred to as a PRO.

Songwriters and music publishers own or control certain rights in musical compositions, including the right to publicly perform those compositions. SESAC represents songwriters, composers, and music publishers and licenses certain public performances of musical works within its repertory.

Instead of requiring a business to negotiate separately with potentially hundreds or thousands of songwriters and publishers, a PRO can offer a license covering qualifying public performances of compositions it is authorized to license.

SESAC is not the only performing rights organization operating in the United States. Other organizations include ASCAP, BMI, and Global Music Rights (GMR).

This distinction is important. Obtaining a license from one PRO does not necessarily give a business the right to perform music represented by another.

Why Might SESAC Contact Your Business?

SESAC may contact a business when it believes music from its repertory is being publicly performed at the establishment without an appropriate license.

Commercial music can appear in many forms, including:

• Live bands and musicians;

• DJs;

• Karaoke;

• Background music;

• Recorded playlists;

• Radio;

• Televisions;

• Dance music;

• Special events;

• Music-on-hold systems; and

• Other forms of music played or performed for customers, guests, members, or patrons.

Whether a particular use requires a license depends on the circumstances and applicable copyright law.

One common misconception is that purchasing music or paying for a streaming subscription automatically provides the right to play that music publicly at a commercial establishment. The right to access or possess a recording is different from the copyright owner's public-performance right.

Businesses should therefore examine both the copyright implications of their music use and the contractual terms governing any streaming or music service they use.

What Happens When SESAC Approaches a Business?

The process can vary.

A business may initially receive correspondence explaining SESAC's role and requesting that the establishment obtain a license. The communication may also seek information concerning the nature of the business and how music is being used.

Questions may involve matters such as:

• The establishment's maximum occupancy or capacity;

• Whether recorded music is played;

• Whether DJs perform;

• Whether live bands or musicians perform;

• How frequently live entertainment occurs;

• Whether dancing is permitted or encouraged;

• Whether admission, cover, or similar charges are imposed;

• Whether karaoke is offered;

• Whether televisions or other music sources are used;

• Whether music is used on a business website; and

• Whether other forms of entertainment are offered.

These details can matter because commercial music licensing fees are often based on the type and extent of music use, not simply whether music is played at all.

Before providing information, signing a proposed agreement, or assuming that the proposed licensing category is correct, a business may want to understand exactly what is being requested and why.

What Does a Typical SESAC License Cover?

The precise language of the agreement controls, but a commercial SESAC license generally concerns the nondramatic public performance of musical compositions that SESAC is authorized to license.

Depending upon the particular agreement and categories purchased, licensed activities may include recorded music and live performances at the licensed premises.

The important point is that the license generally concerns musical compositions.

A song and a particular recording of that song are separate copyrighted works. Public-performance licensing of the underlying composition does not necessarily provide every right associated with a particular sound recording.

Businesses should therefore avoid treating a PRO license as an all-purpose music license.

Recorded or "Mechanical" Music

Commercial licensing agreements may distinguish between different types of recorded or device-based music.

Depending upon the applicable SESAC rate schedule and agreement, this may encompass music played through sources such as:

• Recorded music systems;

• Radio;

• Televisions;

• DJs;

• Karaoke systems;

• Digital music devices; or

• Other equipment used to play music at the premises.

Some licensing structures may distinguish between ordinary recorded music and enhanced uses involving factors such as dancing, entertainment, or admission charges.

The terminology and pricing categories can change, so businesses should review the current agreement and rate schedule rather than relying upon an older license or another establishment's pricing.

Live Music

Live music can create a separate licensing consideration.

A restaurant that occasionally hires an acoustic guitarist presents a different licensing profile from a nightclub offering live bands several nights each week.

Commercial licensing arrangements may therefore consider the frequency of live performances when determining the appropriate license category and fee.

Businesses should accurately evaluate how often live music is actually offered and determine whether the proposed licensing category corresponds with their operations.

What Can Affect the Price of a SESAC License?

There is no single SESAC license price applicable to every business.

Depending upon the type of establishment and applicable rate schedule, licensing fees may be affected by factors such as:

• Maximum lawful occupancy or capacity;

• Type of business;

• Recorded music use;

• Live music;

• Frequency of live performances;

• DJs;

• Dancing;

• Cover or admission charges;

• Karaoke;

• Websites or other additional uses;

• Jukeboxes or similar equipment;

• Seasonal operations; and

• Other characteristics of the establishment.

Businesses should carefully review the information being used to calculate the proposed fee.

An incorrect capacity figure, music category, entertainment frequency, or description of the business can potentially affect the amount being requested.

Are There Enhanced or Additional Licensing Categories?

There can be.

Depending upon the agreement and current SESAC licensing program, additional or enhanced licensing categories may apply to particular uses.

For example, the presence of dancing, admission charges, live entertainment, website music, jukeboxes, or other features may affect the applicable rate or require an additional category.

Conversely, a business with limited, seasonal, or infrequent music use may want to determine whether any different licensing category is available.

The key is to match the license to the business's actual operations.

A business should not assume that the broadest licensing package is necessarily required, but it should likewise avoid assuming that a limited license covers music uses falling outside its scope.

What Doesn't a SESAC License Normally Cover?

A SESAC public-performance license should not be confused with complete clearance of every possible music right.

Depending upon the agreement, important limitations may include the following.

Music Outside the SESAC Repertory

A SESAC license generally covers compositions SESAC is authorized to license. It does not automatically license the repertories of ASCAP, BMI, GMR, or other rightsholders.

Sound Recording or Master Rights

A PRO public-performance license for a musical composition does not necessarily provide the right to reproduce, edit, sample, distribute, or otherwise exploit a particular sound recording.

Synchronization Rights

Using a song in a commercial, promotional video, film, social-media video, or other audiovisual production can implicate synchronization and other rights that are separate from ordinary on-premises public-performance licensing.

Reproduction and Distribution Rights

A public-performance license ordinarily should not be treated as authorization to reproduce or distribute copyrighted music.

Dramatic or "Grand" Rights

Certain dramatic performances of musical works—such as theatrical or dramatic presentations—can involve rights beyond an ordinary nondramatic public-performance license.

Other Locations

A license issued for a particular establishment may not automatically extend to affiliated companies, additional locations, outside events, websites, or other properties.

Businesses with multiple locations should pay particular attention to exactly which entities and premises are covered.

Do You Need SESAC, ASCAP, and BMI Licenses?

Potentially.

This is one of the most confusing aspects of commercial music licensing.

SESAC, ASCAP, and BMI do not necessarily represent the same musical compositions. A business playing a broad selection of popular music may encounter works represented by several different PROs.

Therefore, paying one organization does not necessarily satisfy every public-performance licensing obligation.

For businesses using DJs, live cover bands, karaoke, customer requests, or large commercial playlists, repertory overlap and licensing coverage can become particularly important.

The analysis should focus on what music is actually being performed, who controls the relevant rights, and what each existing license actually covers.

"But the Band or DJ Is Responsible for the Music"

This is another recurring issue.

A venue may assume that a DJ, band, promoter, event organizer, or renter is responsible for obtaining all necessary music permissions.

That assumption can create problems.

The parties should determine contractually who is responsible for obtaining music licenses and complying with copyright requirements. Businesses should also understand that contractual allocation of responsibility between private parties does not necessarily determine who a copyright owner or licensing organization may pursue.

Contracts with DJs, performers, promoters, and event renters should therefore be reviewed carefully.

Common Issues in SESAC Licensing Disputes

Several recurring issues can arise when a business is approached about commercial music licensing.

1. Incorrect Capacity Information

Licensing fees may depend in part upon maximum lawful capacity rather than the number of customers typically present on a particular evening.

Businesses should verify the capacity figure being used and retain documentation supporting the correct number.

2. Incorrect Description of Music Use

A business may be categorized as offering live music, dancing, DJs, or other entertainment more frequently than actually occurs.

The factual assumptions behind the proposed license should be checked.

3. Changes in Operations

A venue may discontinue live music, stop using DJs, eliminate dancing, reduce entertainment, close seasonally, or otherwise materially change its operations.

Businesses should determine whether their agreement requires changes to be reported and whether those changes affect future licensing fees.

4. Multiple PRO Demands

A business may obtain an ASCAP license and later receive communications from BMI or SESAC.

This does not necessarily mean the business is being charged twice for identical rights. Each organization may represent a different repertory.

Nevertheless, the business should evaluate what each organization claims to represent and whether the music actually being performed falls within that repertory.

5. Questions About Whether a Particular Song Is Covered

Do not assume that every song associated with a particular recording artist belongs to one PRO.

Songs can have multiple writers and publishers, and rights can change over time. A performer may also record a composition written by someone else.

When a particular composition matters to a dispute, repertory information should be examined at the song level.

6. Consumer Streaming Services

Businesses sometimes believe Spotify, Apple Music, YouTube, or another consumer service solves the licensing problem.

A subscription permitting an individual to listen to music does not necessarily grant the business the public-performance rights necessary for commercial use. The platform's own terms of service may also restrict business or commercial use.

7. Automatic Renewal and Termination Provisions

Commercial music licenses may contain renewal, notice, reporting, and termination provisions.

A business considering cancellation or modification should review the agreement well before the renewal date. Waiting until an invoice arrives may substantially limit available contractual options.

8. Reporting and Audit Provisions

Some commercial music licenses require the business to maintain information supporting the factors used to calculate its fees and may contain provisions allowing the licensing organization to verify reported information.

Businesses should understand their reporting and record-retention obligations before signing.

9. Unlicensed Performances and Infringement Claims

The stakes can increase when a dispute moves beyond negotiations over a prospective license.

If a PRO or copyright owner contends that specific copyrighted compositions were publicly performed without authorization, the matter may potentially develop into a copyright infringement dispute.

At that point, issues can include whether the compositions were performed, whether the plaintiff owns or controls enforceable rights, whether the performances were licensed or exempt, the relevant time period, potential damages, and possible resolution of the dispute.

Businesses facing an infringement demand or lawsuit should consider obtaining legal advice promptly.

What Should You Do If SESAC Contacts Your Business?

Receiving a licensing communication should not automatically cause panic, but it should not simply be ignored.

A business can consider taking several steps:

1. Preserve the correspondence and any proposed agreement.

2. Identify exactly what SESAC says requires licensing.

3. Inventory how music is actually used at the establishment.

4. Confirm the business's lawful occupancy or capacity.

5. Determine how frequently live music, DJs, karaoke, dancing, or other entertainment occurs.

6. Identify any existing ASCAP, BMI, SESAC, GMR, commercial music service, or other music licenses.

7. Review the proposed license categories and pricing assumptions.

8. Determine whether specific compositions identified by SESAC appear in the relevant repertory.

9. Review renewal, reporting, escalation, audit, and termination provisions before signing.

10. If infringement allegations have already been made, consider having counsel evaluate the demand before providing substantive admissions or responses.

Can a Business Avoid PRO Licensing by Using a Commercial Music Service?

Sometimes a commercial background-music provider can simplify licensing, but the scope of the service must be examined carefully.

A service may cover certain background-music uses while excluding live bands, DJs, karaoke, dancing, special events, customer requests, or other entertainment.

Businesses should obtain written confirmation of exactly what rights the service provides rather than assuming that paying a commercial music provider eliminates every possible PRO obligation.

Why Commercial Music Licensing Gets Complicated

The difficulty is that a business owner often thinks in terms of music, while copyright law separates music into different works, rights, owners, licenses, and uses.

One establishment might simultaneously have:

• Background music;

• Televisions;

• A DJ on Friday night;

• A live band on Saturday;

• Karaoke on Wednesday;

• Music in promotional social-media videos; and

• A playlist used during private events.

Those activities may not all involve the same rights.

A PRO license may solve an important part of the public-performance problem without solving every copyright issue associated with the business's use of music.

Vondran Legal® Commercial Music Licensing Services

Vondran Legal assists businesses with commercial music licensing issues involving organizations such as ASCAP, BMI, and SESAC.

Depending upon the circumstances, our services may include:

• Reviewing ASCAP, BMI, and SESAC licensing demands;

• Reviewing proposed commercial music licenses;

• Evaluating the scope of existing licenses;

• Analyzing the business's actual music and entertainment practices;

• Reviewing capacity and other information used to calculate licensing fees;

• Evaluating live-music, DJ, karaoke, dancing, and recorded-music classifications;

• Reviewing renewal and termination provisions;

• Evaluating repertory issues involving particular compositions;

• Responding to licensing correspondence;

• Assisting with negotiations and potential resolution;

• Evaluating infringement allegations;

• Reviewing demands concerning allegedly unauthorized public performances; and

• Defending commercial music copyright infringement disputes when appropriate.

A commercial establishment does not necessarily need to accept every factual assumption, classification, or licensing position presented to it without review.

At the same time, ignoring legitimate music licensing obligations can potentially turn a manageable licensing matter into a substantially more expensive copyright dispute.

The goal should be to determine what rights the business actually needs, what rights it already has, what each PRO is offering, and whether the proposed license accurately reflects the establishment's operations.

Frequently Asked Questions About SESAC Licensing

Is SESAC the same as ASCAP or BMI?

No. SESAC, ASCAP, and BMI are separate performing rights organizations. Their repertories and licensing arrangements are not identical.

If I have an ASCAP license, do I still need SESAC?

Possibly. An ASCAP license does not automatically grant rights to compositions represented by SESAC. The answer depends upon the music being publicly performed and the scope of the licenses involved.

If I have BMI, do I still need SESAC?

Again, possibly. BMI and SESAC represent different repertories. Businesses should analyze the music they use rather than assuming one PRO license covers all commercial music.

Does SESAC license live music?

Commercial SESAC licenses may include live music depending upon the agreement and applicable licensing category. The frequency of live performances can potentially affect the applicable fee.

Does SESAC cover DJs?

DJ performances can implicate public-performance rights. Businesses should review whether their applicable license covers the relevant recorded-music or entertainment use.

Does a SESAC license cover Spotify?

These are different issues. A PRO license concerns public-performance rights in musical compositions within the organization's licensed repertory. A Spotify or other streaming subscription provides access to a service subject to that service's contractual terms. One should not be assumed to substitute automatically for the other.

Can SESAC sue a business?

Copyright owners and parties with appropriate enforcement rights may pursue infringement claims when copyrighted compositions are allegedly performed publicly without authorization. Whether a particular claim is valid depends upon the facts, rights involved, applicable licenses, and law.

Should I ignore SESAC letters?

Generally, ignoring repeated licensing or infringement communications can increase risk. A business can instead evaluate the asserted licensing obligation, the music actually being performed, its existing licenses, and the terms being proposed.

Can an attorney negotiate with SESAC, ASCAP, or BMI?

Counsel can assist a business in reviewing the factual and contractual basis of a licensing request, communicating with the licensing organization, analyzing potential infringement exposure, and attempting to resolve disputes where appropriate.

Practical Commercial Music Licensing Checklist

Businesses using music commercially should periodically ask:

• What music are we actually playing?

• Are we using background music, DJs, bands, karaoke, or all of them?

• Which PROs represent the compositions we regularly perform?

• What licenses do we currently have?

• What does each license actually cover?

• Are our occupancy and entertainment classifications accurate?

• Have our operations changed since the license was issued?

• Are we approaching an automatic renewal or notice deadline?

• Are we using consumer streaming accounts commercially?

• Are third-party promoters, DJs, or performers bringing music onto the premises?

• Are we creating videos or advertising containing copyrighted music?

• Do our contracts clearly allocate music licensing responsibilities?

• Have we received licensing or infringement correspondence that requires a response?

Conclusion

SESAC licensing is one part of the broader commercial music licensing landscape.

A typical license can provide valuable public-performance rights for compositions within SESAC's repertory, but businesses should understand its boundaries. A SESAC license does not necessarily cover ASCAP or BMI compositions, sound-recording rights, synchronization rights, every digital use, every location, or every type of entertainment.

When approached by SESAC—or ASCAP or BMI—the first question should not simply be "How much do we have to pay?"

The better questions are:

What music are we using? What rights are implicated? Which organization controls those rights? What does the proposed license actually cover? Are the assumptions used to calculate the license accurate? And what obligations will the agreement create going forward?

Answering those questions can help a business make a more informed licensing decision and reduce the risk that an ordinary commercial music issue develops into a copyright infringement dispute.

Vondran Legal® assists businesses with ASCAP, BMI, and SESAC commercial music licensing matters, including license review, licensing disputes, negotiations, infringement demands, and copyright litigation.