Under the Copyright Act of 1976, the owner of the copyright in a song is granted the exclusive right to "perform" the song "publicly" [17 U.S.C. 106(4)]. A song is "publicly performed" if it is played at a place open to the public or any place where a substantial number of persons outside of the normal circle of family and social acquaintances is gathered, which means virtually any business. Therefore, in general, if a business wishes to play music, it must obtain a "public performance” license from the copyright owner. While a business can technically obtain this license directly from the copyright owner for each song played, this is obviously impractical. More practical is for a business to instead obtain annual "blanket" licenses from performing rights organizations ("PROs") to which music copyright owners belong and which act as the agents for the copyright owners for purposes of collecting public performance license fees.
There are three PROs in the U.S.: American Society of Composers, Authors, and Publishers (ASCAP), Broadcast Music Inc. (BMI) and SESAC, originally the Society of European Stage Authors & Composers. A blanket license allows a business to unlimited play of any and all songs written by the members of that PRO. Since it is typically difficult or impossible for a business to limit the songs it plays to those controlled by a single PRO, to be safe a business must obtain licenses from all three. Alternatively, a business may subscribe to a background music service, which has its own blanket licenses with the PROs. In effect, a background music service collects the public performance license fees on behalf of the PROs as part of its monthly music service charge. Background music services pay a lower license fee per business than the business would pay directly, so using a service is typically a more economical path, not to mention less paperwork.
1998 changes to copyright law carved out an exemption allowing businesses, under certain circumstances, to avoid the need to obtain public performance licenses.
Click here to determine if your business is exempt.