What Commercial Businesses and Venues Need to Know About Music Licensing

Hey, everybody. Welcome back to Pro AV today. I'm your host, Ben Thomas. One of the questions that I hear all the time from our integration and end user community is, you know, Once I put a system up, an audio system, maybe a display system, what do I do from there? Can I stream my own Spotify? Can I just put DIRECTV up on the screens? And the answer nine times out of ten is absolutely not. That's very illegal, and it's not something that you could do in a commercial space. But for today's conversation, we're gonna focus a little bit more on the audio and commercial use side, not only from, the streaming and in places like food and beverage, restaurants and places like that, but also just a little bit on the performance side and some of the things, that the integration and technology installation side of the world needs to know as well. To have that conversation, I brought on the best guess, really, that I could even think of, and that's somebody who helped found beats music, which is now Apple Music and currently the CEO, of a company called Sound Track, your brand, and that's Ola SARS. Ola, thanks so much for coming on today. Thanks for having me, Ben. Pleasure. Awesome. Well, Ola, before we really dig in super deep into the topic here, we'd love to give you a chance to talk a little bit about your experience. Obviously, you you have, a wealth of knowledge in the streaming world, but talk a little bit about that commercial side and how the soundtrack your brand opportunity became, what it is now? Sure. So as as you said, I came from the consumer side of music streaming. I've been active in the music. Digital music space for more than fifteen years. And, I've been part of, the whole transition from you know, the analog models and distribution to what we have today, which is obviously streaming and and access models that we're using all around the world right now. So, the short story of me is that I I kind of was pioneering on the consumer side. I realized when working out of out of the US that there's this whole opportunity outside of consumers' headphones in the public domain. So in your local coffee shop all the way to your conference center, hotels, everywhere music was playing, actually, in ninety six percent of US businesses, kind of, consumer interfacing businesses. There's music being played in the background. And I realized there's a there's a huge market here, what is referred to as background music And I also realized that background music had not been digitized to Aetna and gone through the same transition as the consumer markets. And, so I set up a company based on solving that problem for business owners around the world, giving them, you know, the tools to play the right music at the right place at the right time in order to enhance the customer experience. And I set that company up with Spotify as my co founder, Now we're live in seventy five markets. And but it's it's very early. I would say it's like ten years behind the cycle of what's going on in the consumer industry. So this topic is new for everyone. Well, Ola, I think our audience typically is familiar with a lot of the distribution technology, whether it's the speakers, whether it's cabling, whether it's the infrastructure, and even the idea of of creating, you know, immersive experiences, whether it's using, music to create ambiance, to create conversation, things like that. I I think we have a pretty good grip on that, but a lot of times the question that we get is why is it important for us to make sure that we license this music. Why is it important in general for for companies to pay a fee or to license these, to broadcast them in their place of business? There's a couple of whys, right, and dependent on kind of what type of person you are, but my my driving force is trying to kind of do the right thing here and help music creators at the end of the day, the songwriters or the artists around the world to actually make a living just like the coffee shop owners making a living of selling coffee. So should the songwriter in in Austin be able to make money make her, you know, pay her bills So when we use music in any type of context, it's important that the that we're actually doing that in terms of you know, fair trade and and fair distribution of of royalties for for the usage of that. So that's my that's why I get up in the morning, to try to fix this this actually somewhat dysfunctional market, of of B2B. And then the other one is obviously very practical as if there's legislation placed worldwide that that space, you know, using Spotify as an example or Apple Music in your business is the equivalent of opening a cinema with a Netflix account. So, obviously, you're not gonna do that if you're if you're running a professional business. So it's the same it's the same prerequisite. You you need to pay a commercial license when you're using music to to, you know, expand or augment your customer experience. And and that's something that I have invented that's been around since the twenties. The the need to actually pay pay for commercial licensing when you're using music in a commercial space. And it comes with a pretty juicy, liability should you not choose to follow guiding principle. So there's this kind of a carrot and a stick in the equation, right, helping the artist do the right thing, you know, responsible sourcing, and then the other one is Well, if you're helping a client and you're not, you know, you're setting up all this, you know, exclusive, cool, hardware in place. And then you kinda miss the whole thing by using the wrong source, and your client gets sued. Oh, thanks for for providing that that level of understanding, and I think that that, you know, especially understanding that that you want to serve really both the artist side and the creative side, right, and protect Both of those communities is so important. You know, I I think one of the questions naturally that comes up after that is what sort of licensing do I have to get? And how do I go about getting that? Right? Maybe I'm a venue right now or maybe I'm a coffee shop that's in non compliance. How do I go about getting those certifications and licenses? Well, it depends a little bit on what type where you are in the world, but let's stick to the US for the context of this discussion. Right? And, and I'm gonna try to keep this on a on a basic level. There's a there's a very long response, and I'll try to do the short response. So when you're playing music in the public domain or, you know, in in in a physical environment, you need to cover mainly two dimensions of music licensing. One is the performance rights. Enablement of actually playing music and performing music in the the physical domain, music coming out of the speakers to simplify it. And then the second part that you need to cover is actually the source of the music. What are you playing music from? What is referred to in Muskin is just reproduction or map. So the service. So Spotify could be, the service. But you can't use that in the commercial domain. You can use it in headphones. In the commercial domain, there are services that you can use. Like, for example, my company's soundtrack to brand, but there are other alternatives like Pandora for Business, SiriusXM for Business. And like I you can use CDs, you can play FM radio, but obviously business owners and installers obviously wanna use the power of streaming as well, because we've been trained as consumers. So there there's a couple of options. But soundtrack basically has the same catalog as Spotify as, but licensed for commercial use. And then for the performing rights, it depends on what type of business you're in. If you're a fitness provider or or if you're kind of a hotel or something, but in in general terms, you can either source that through the service provider, where soundtrack actually does cover performing rights from the four PROs in the US that are ascap, B, my c second GMR that represent the performing rights of of of the songwriters, or you can go directly to any of those four PROs and get kind of the performing right licenses, which is which is also an option. But if you if you wanna really simplify it, you're running, let's say, a hotel, you could get one of these services. Soundtrack, as an example, and it will con contain both the right licensing on the service level and the performing rights, and then you should be fully covered. You know, what's interesting that you you talk about that performance side. You know, a lot of these places, whether it be coffee shops or whether it be, even large scale venues. Right? You know, a lot of them will do will stream both music, and then they will have live performances separately. Is there a separate license that folks have to have to to cover that live performance and over churches, for example, house to worship, you know, there's a license called a CCL lie license that that helps cover a lot of those reproductions in my life, live performances. Is it the same on the commercial licensing world as well? Unfortunately not. This and this is where I'm really trying to keep it short and to the point here, but there's this is very complex reality of playing music. It's actually way too complex and it has to be in my humble opinion. So my job is trying to simplify for the business owner or for the church or everyone wants to do the right thing, wants to play music, but Unfortunately, no. You have to kind of check, depending on what type of business or what type of service that you're providing to your community. And then you gotta check what type of licenses you have to have in place. But, usually, it's easy you could just go online and you can go to CSAC or ascap and be mine. You can kind of read up on it depending on what you're doing, but I can give you a general response. If you're doing any any, type of business within retail, any type of business within the broader sense, hospitality, meaning hotels, restaurants, strong, bars, cafes, those licenses would will be included in, soundtrack to brand subscription both, for the service and for the performing rights. When you start moving into fitness, as an example, gyms and work classes, it becomes a bit more complex. And when you start moving into houses of worship and other types of use cases, then there's some additional complexity, unfortunately. But, it's pretty easy to figure out if you take ten, fifteen minutes and kinda Google around. Well, and then you obviously, you have the whole world of of live broadcast and streaming as well. We won't dig in too deep to that because we wanna focus more on the venue side of things today. But that's that's its own, conversation altogether, but You know, one of the one of the things that that, you know, kind of come up as I hear, about these You know, you have nonprofit businesses and small businesses, maybe that thing. Hey, I'm I'm kind of exempt from this. You know, I'm not doing tons and tons of business. Are there scales to to certification and legal broadcasting of of these, of these tunes or or does it, you know, is it kind of a blanket thing where, hey, look, if you're operating a small little coffee shop on the corner, you've gotta abide by all these two. Is there a scale to it, or is it really kind of just a blanket? No. Fortunately, it's it's as complex for the small business owner with a cat bay as it is for Starwood hotels. So that's that's the that's the tough part about it, which I'm trying to help these on entrepreneurs that are trying to make a living as well on their business and simplifying it. But I think we have come a come somewhat down the line of actually being providing one service, you can buy it online. And when you buy SoundTrack your brand, then you get all the music, hundred and twenty million tracks, all the licensing for the master side of it. I mean, the reproduction, the actual access to the music files. Through streaming as well as the performing rights, all in one for, you know, thirty five or fifty dollars depending on per month depending on what type of service that you're buying from us. So that covers you, but should you try to choose another way and kind of do direct deals with the the PROs, then you have to do one with all four of them in order to cover it. And you have to also have a service that's licensed for commercial use or playing a CD or radio, for example, which which, by the way, the interesting part is that when we looked at the US market, we realized that two thirds of small businesses in the US, and there's actually three point eight million small business in the US, within kind of the broader segments that we're looking at. Two thirds are using consumer services, without even knowing that. It's illicit. And I totally understand because, of course, you wanna have all the music in the world at your fingertips. Of course, you wanna be able to playlists and kind of changed the mood and and access all this beautiful art, but there just hasn't been a service that was licensed to it, but now there is. So So the easy answer is if you go get one of these legit services where soundtrack is included, you're all covered. Otherwise, you gotta kinda go step by step by yourself and try to figure it out. Well, you bring up a great point and that is that the end user at the end of the day is the person that's liable for a lot this and the business owner. But one of the the folks really who's in that typical line of of installing the technology or or providing advice is the integrator community, especially in the AV world, where you've got someone where you're gonna you're they're your dealer distributor installer most times, So the integration community, the in the technology community has to be up to date on these as well. And, you know, talk a little bit about the importance of community, especially when it comes to advising, the end user business owner on, on best practices, not only for things like music streaming and music performance, but also, you know, being able to broadcast TV, performance as he shows, and don't even we won't even get to the Super Bowl. That's its own world together, but how important is that integration and technology community to help advise the the business owners? I would say they're completely critical for for having, you know, a functioning industry. Because they're professionals They're doing this, you know, five days a week or six, seven days a week in reality. The cafe owner, she's not. She has no idea what music life She's trying to make a living, you know, from her business. So I think, being a professional partner and helping your clients, understand both kind of the whole hardware setup and and and the audio visual setup. That that you would be looking to provide in combination with the IP side, meaning the rights in order to to provide different types of content services, music, video, whatnot that you're looking to do is is part of the the service solution or being a professional provider here. Right? So I think the the installer market is is needing to become more and more sophisticated and becoming more and more kind of a professional partner here, helping the businesses to you know, get the right hardware in combination with the right kind of services in order to drive their business at the end of the day because that's what the entrepreneur is looking to do. Sell more coffee, sell more t shirts, or, you know, book more conferences. So, it provides an opportunity as well in my opinion not just increased complexity. It provides an opportunity for the for the installation market to become, you know, more of a sophisticated service provider and obviously charge more for services when you're also consulting in terms of serving different types of complexities of service layers. So if I was in in that industry. We're working with a lot of installer companies and kind of distributors that are viewing this as a huge opportunity leaning in learning and adding services to their to their kind of portfolio of products, which provides them not only with kind of the one off hardware sale. It also provides them with an opportunity to sell subscriptions and kind of recurring revenue, which opens up both new avenue for these these service providers in terms of revenue stream. Well, and and sticking on that point. I I love that you even mentioned, you know, the integration dealer distributor community bringing in bringing it into their portfolio as a as a service offering. Right? Because it does it does a couple of things for them. It it means that they don't have to be always up to date. Right? They they are allowing you guys to make sure that the certifications are always correct and compliant with the most recent laws. But you you mentioned recurring revenue. Right? It's a great way for that dealer distributor installer to, continue to serve, the end user and the the business owner community in the long term. What are some of the ways that you're seeing you know, the installer and and integrator community leverage a technology like soundtrack your brand right now. If you have this customer relationship and it's an existing customer. It's a new customer that you're bringing on. Obviously, you wanna kind of solve the whole problem for the customer. Right? Like, providing both the installation and then what's coming through the hardware in order to provide the experience. So, it provides an opportunity to become an adviser in terms of selection of services. It provides an opportunity to not only sell kind of like service packages, but also maybe curation of music over time. You we see a lot of our service service partners take the curation job and kind of become the curator as well as the the the service provider of the hardware platform for their customers. Which provides another kind of incremental revenue opportunity, right, as well as just, you know, being able to redistribute in our case, soundtrack, in making an affiliate fee or actually a reseller fee from us when selling through the right music service. And by they're doing their customers a favor as well, seeing to it that they're they're correctly licensed and and preventing them for any type of, like, legal matters moving forward. Right? So it it makes all the sense in the world for them to lean in and learn about this and become or, you know, a distributor of these types of services and make more money in the relationship with their customers. Well, that's helpful inside. I know not only for the the installer and dealer distributor community, but really even the hardware manufacturers, right, making technology that's easily integrated within services Right? It's something that we've seen, across all sorts of different manufacturing, technologies, not just the corporate IV community. But something that we've seen across all sorts of different verticals. Last question, you know, when you maybe you had a crystal ball in front of you and and you wanted to see, hey, maybe in five ten years. This is what the industry would look like. Do do you think it's gonna continue to get more complex, or is it something that you think eventually will really settle out and we'll kinda get our c legs when it comes to, to rights management. I I think we're in kind of a a pivotal moment right now. We're just seems a bit more complex than it actually is. So I think it's gonna get better. That's my response. I think we're gonna learn that customers, and we are already seeing it. They want streaming. They want the the the empowerment of all the music in the world at your fingertips, maybe even letting you know, AI drive, the selection of music, depending on who's in the store and what's going on and what's trending in Austin right now, stuff like that. But in order to do so, you need to kind of solve the baseline of, okay, getting a proper license service in place first. That provides the enablement of the music and and kind of synergy, and connection to the hardware that's being installed. And when that's done, all the fun starts. Right? Then you're like, okay, I'm licensed. I got a great setup. Let's now do what we actually set up using music to drive my business. Because, like, what we really wanna get to is the point where we see bar owners, you know, selling more beer. Because the music is great or restaurant entrepreneurs having people stay for for for, you know, drinks in their bar rather than going to the baro the street. That's what we wanna give them the the benefit of music as as a tactical tool to drive their business. The actual setup in the complexity with a good installer with a great partner that will be done in a couple of days, and then they can start on on kind of the fun stuff. Right? So I wouldn't over exaggerate the complexity even though it being complex, but it's with a good partner and just getting it in place and kind of asking the right questions, you're gonna be at the point of using music as you want to to drive your business rather than thinking about all this complex heater about around rights management. Well, we appreciate your insight, especially coming from, somebody who lives in that technology world you know, I appreciate really you giving that those thoughts and, I really breaking down some of the complexities for us on on rights management and, and playback at some of those, commercial space. Thanks so much for coming on. Thank you for having me. Always a pleasure. And thank you all for tuning in. Be sure to like it subscribe. Watch us again next time on ProAV today.