Attention Shoppers: The Background Music You Hear May Not Be Licensed
October 15 2018 - 9:29AM
Dow Jones News
By Anne Steele
LOS ANGELES -- Luis Ulloa keeps his Spotify account blasting at
his Blackbird Pizza Shop, which he opened late last year in a
former punk-rock clothing store on Melrose Ave.
The neighborhood native pays the standard $9.99 a month for his
account, which he and his employees use to play punk tunes
throughout the workday. He's never heard that businesses are
supposed to pay licensing fees to play music -- or that Spotify's
terms of service specify that the music is for noncommercial
use.
"Everybody does it like this," says Mr. Ulloa, who has worked in
the restaurant business for 25 years.
Services like Spotify and Apple Music have returned the music
business to growth by getting consumers to pay again after years of
rampant piracy. But those same services are being used in violation
of usage policies in commercial settings like coffee shops and
small retail stores at an estimated cost of $2.65 billion each year
to artists, labels and publishers, according to a new report from
Nielsen Music. The report was commissioned by Soundtrack Your
Brand, a former subsidiary of Spotify Technology SA previously
known as Spotify Business that sells a music streaming service for
businesses.
The findings highlight a complication of the rapid rise of
streaming as more people choose to pay for access to vast catalogs
of music instead of owning it. They also may point toward a growth
opportunity for the music industry -- if the market for music in
these businesses can be properly captured.
While large retail chains with big budgets use in-store music
providers like Mood Media Corp. (formerly known as Muzak), there
are around 21 million smaller businesses globally that use consumer
services without authorization, according to the report. It
surveyed small and medium businesses across the U.S. and six
countries in Europe.
Pandora Media Inc., Sirius XM Holdings Inc. and Soundtrack Your
Brand, in which Spotify is still a key investor, offer
music-streaming service options for businesses in the U.S. costing
around $25 to $35 a month. Still, many businesses are using
$9.99-a-month subscriptions to Spotify or Apple Inc.'s Apple Music,
whose terms of service offer only personal, noncommercial uses.
As the music industry rebounds from an era of piracy among
consumers, the commercial market represents a largely untapped site
of future growth, according to Stockholm-based Soundtrack Your
Brand, which has been discussing the report's findings with record
labels and other rights-holders.
Playing music in businesses or other public settings requires
permission from some of those rights-holders, but technology has
sometimes gotten ahead of existing licensing mechanisms.
To play music from CDs, radio or live, most businesses in the
U.S. are supposed to obtain a license from a performance-rights
organization representing songwriters, who are entitled to
compensation when music they have composed is played in a public
setting. The two biggest such organizations in the U.S., Ascap and
BMI, offer "blanket" licenses that pay songwriters and music
publishers based on estimates of how often their work gets played
in public.
To stream music, a business is supposed to pay for a
subscription that includes the right to play it in a public
setting; subscription services like Mood Media and Soundtrack Your
Brand typically cover such rights. The terms of service on Apple's
iTunes Store, for instance, don't permit commercial uses of songs
downloaded from the site.
According to the report, which surveyed business owners who
operate fewer than 10 physical store locations, around 83% of
businesses across the countries surveyed pay for and use a personal
music service in their stores. In the U.S., 71% incorrectly believe
that is allowed under the services' terms. (Another 10% use
Alphabet Inc.'s YouTube to play music in their stores, which is
free but is also not authorized for commercial settings.)
A YouTube spokeswoman said this usage "clearly violates" the
company's terms of service and it reserves the right to discontinue
use of the service when notified.
Though 88% of all small and medium stores play music either
daily or almost every day, less than half say they know there is
even a difference between playing music for personal consumption
and playing background music at a business.
Businesses included in the report ranged from nightclubs to
fitness studios to hotels.
Based on the Nielsen study, Soundtrack Your Brand estimates
there is some 7% to 8% of global music industry revenue that isn't
being captured because of improper use of personal streaming
services. With 29.4 million small and medium businesses globally,
the total available market could be as much as $12.3 billion, the
study suggests.
"This multibillion-dollar opportunity is immense but we're still
a long way away from realizing it," says Willard Ahdritz, chief
executive of independent music publisher Kobalt Music Group, which
Soundtrack Your Brand estimates loses out on $169 million in
revenue annually. "We, as an industry, need to do a better job
informing these businesses what licenses they need to have and how
to obtain them."
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
October 15, 2018 09:14 ET (13:14 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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