Navigating the Dual Copyright System in Commercial Music Licensing

Navigating the Dual Copyright System in Commercial Music Licensing

Siddhant Sharma

Disclaimer: This article is not legal advice. It is expressing opinion and is an attempt to deconstruct the bifurcated music copyright system and offer strategic compliance roadmaps for businesses and technology providers.

Acronyms:

●      Performing Rights Organizations (PROs): ASCAP, BMI, SESAC, GMR

●      National Music Publishers Association (NMPA)

●      Mechanical Licensing Collective (MLC)

I. The Business Owner's Risk: The Fine Print of Public Performance

The commercial utilization of music today is defined by a fundamental flaw: the widespread confusion between a personal streaming license and the necessary Public Performance Right. For business owners, this misconception is not a trivial oversight; it is a critical source of high-figure liability, transforming a standard business practice into a treacherous path of copyright non-compliance.

Imagine the recently opened bar or café that seeks to enhance customer engagement by streaming a popular artist's playlist through a personal account like Spotify or Apple Music. That single, seemingly innocent act of playing music transforms the establishment into a hotbed of copyright infringement. Personal streaming services are licensed strictly for private, non-commercial use only [1]. Using them in a business setting violates both their terms of service and U.S. copyright law, triggering exposure to significant statutory damages.

The illusion of a simple solution quickly gives way to complex liability. A business owner may first acquire a Public Performance License (PPL) and believe they are compliant, only to be fined again. As a matter of public record, ASCAP filed lawsuits against two Chicago-area bars for playing unlicensed music. While a license would have cost each establishment $1,000–$3,000, they were instead subject to fines that soared up to $150,000 per establishment [2].

This scenario raises a critical question for technologists and business strategists: How can a business ensure compliance across a complex, decentralized ecosystem of rights owners? The answer requires a deep dive into the dual nature of musical copyrights and the required licenses.

II. The Dual Architecture of Music IP and the Need for Multiple Licenses

The fundamental challenge in music licensing stems from the existence of two separate and distinct copyrights in every piece of recorded music:

1. The Musical Composition Right (Publishing Right): This covers the underlying creative work—the lyrics and the melody [3]. It is typically owned by the songwriter and administered by a music publisher.
2. The Sound Recording Right (Master Right): This covers the specific recording of the composition—how the song was rendered in the studio [3]. This right is typically owned by the record label.

To use a commercial recording, a business must secure rights from both parties [4]. This dual structure is reflected in the necessary license types:

For a standard business playing background music, or for an event utilizing a DJ, the Public Performance License (PPL) is essential. However, the repertoire of music is divided among competing PROs (ASCAP, BMI, SESAC, GMR). Therefore, a license from one PRO is necessary, but fundamentally insufficient. Achieving legal compliance necessitates a blanket license from each of the major PROs [6].

III. Licensing in the Digital Ecosystem: Challenges for Streaming and Creation

The complexities multiply when music is used in the context of digital services, video, and technology platforms.

The Streaming Service & Fractional Rights Challenge

For streaming applications or media producers, acquiring licenses is a meticulous process:

1. Identifying Rights Holders: PROs help identify the music publishers for the composition, but they are typically not the parties to negotiate with for Sync and Master Use licenses [4].
2. Fractional Licenses: The greatest administrative hurdle lies in the fact that a single song may have multiple co-writers, each represented by a different publisher. This creates a fractional license problem. The Peloton case, in which the company was sued by the NMPA, serves as a prime example. The core issue was the failure to secure all necessary Sync Licenses for songs used in their streaming fitness videos [7]. Peloton acknowledged the administrative challenge of tracking so-called “fractional licenses” noting that only 2% of the works named in the original lawsuit belonged to a single publisher [8]. For instance, obtaining sync rights for a song like Beyoncé’s “Hold Up” would require permission from its eight different publishers [8].
3. The MLC: To address the difficulty of securing mechanical licenses for digital streaming, U.S. law allows services like Spotify to obtain a blanket mechanical license. The U.S. Copyright Office appointed the Mechanical Licensing Collective (MLC) to collect royalties for songwriters and music publishers [9].

The Creator's Landscape

From the artist's perspective, the licensing structure defines their livelihood. When an artist signs a record deal, the rights are typically segregated: the record label controls the profitable Sound Recording Right (Master), while the artist and their publisher retain the Musical Composition Right (Publishing) [3]. Artists are paid for their work through royalties collected by various entities. In the U.K. context, PPL collects for recorded music rightsholders and performers, while PRS for Music collects for songwriters, composers, and publishers [10].

The increasing enforcement actions against third-party DJ mix applications that manipulate YouTube content highlight the growing industry intolerance for unauthorized use, even where the underlying platform may be licensed [11].

IV. Strategic Alternatives and Mitigation for Compliance

Given the high cost and complexity of traditional licensing, businesses and creators should explore strategic alternatives:

●      Commissioned Music: Hiring a composer to create original, bespoke music offers the greatest control. Through a clear contract, the brand can negotiate ownership of the rights or secure a broad, perpetual license, thereby eliminating the risk of infringement claims from established catalogs [12].

●      Royalty-Free Music and Libraries: Utilizing production music libraries offered by platforms like TikTok, SoundCloud, or YouTube carries significantly less risk, though these libraries typically do not extend to ‘trending’ music [12].

●      Best Practices for License Agreements: Whether commissioning or licensing, legal compliance demands rigorous documentation:

○      Get it in Writing: Every agreement should be documented [4].

○      Understand the Scope: The terms must clearly define the permitted use, duration, territory, and limitations [4].

○      Plan for Growth: Securing rights that are broader than current needs is a sound strategy to avoid costly renegotiations when a project’s success increases its reach [4].

Navigating music licensing is less a legal burden than it is a strategic necessity. For businesses and technology providers operating in the digital economy, understanding the distinction between the composition and the master, and ensuring comprehensive coverage from all relevant PROs and rights holders, is the only path to mitigating severe financial and reputational exposure.

References

[1] Personal streaming services are not licensed for commercial or public use.

[2] Spectrio, Businesses Continue to Be Sued for Playing Unlicensed Music.

[3] Conceptual separation of Master (Sound Recording) and Publishing (Musical Composition) rights.

[4] Gordon Firemark, The Podcast Lawyer, Music Licensing Secrets Revealed: How to Score Your Films and Podcasts (Detailed video transcript used for definitions and best practices).

[5] Synchronization rights definition.

[6] Businesses must secure licenses from all major PROs (ASCAP, BMI, and SESAC) to legally use music publicly.

[7] CNN Business, NMPA sued peloton (2019).

[8] Health and Fitness Org, Securing Sync Rights from Multiple Publishers.

[9] Reuters, Spotify defeats US licensing group's lawsuit over royalties (2025).

[10] Collection systems for recorded music (PPL) and compositions (PRS for Music) in the UK.

[11] DJ.Studio Blog, DJ with YouTube.

[12] Reed Smith, Viral and Deadly: When Music Goes Bad on Social, (2024).