Behind the Curtain: How PROs Exploit Small Venues and Underserve Independent Artists

If you own a small music venue, restaurant, brewery, or host local events with live music, chances are you've had an encounter with a Performance Rights Organization (PRO) like BMI, ASCAP, or SESAC. These organizations are tasked with collecting royalties from businesses that publicly perform music and distributing them to songwriters, composers, and publishers. On paper, it sounds like a noble mission. But scratch the surface, and you'll find a system riddled with opacity, inefficiency, and practices that border on exploitation—particularly for small business owners and the independent artists they support.

The Blanket License Trap

One of the most problematic aspects of the current PRO licensing system is the prevalent use of "blanket licenses." Under these licenses, venues pay a fixed annual fee granting permission to perform any song within a PRO’s extensive catalog. However, this seemingly convenient solution is deeply flawed. Even if a venue exclusively features independent musicians playing original compositions that are not registered with any PRO, they are still mandated to pay these blanket fees. Why? Because there is merely the potential that someone might play a copyrighted cover.

Alarmingly, PRO fees are often determined by a venue’s maximum fire marshal capacity, rather than actual attendance, actual usage, or specific songs performed. According to the National Restaurant Association, this practice forces small venues into exorbitant fee structures completely disconnected from reality—imagine being compelled to buy tickets for an entire stadium when only attending a single seat.

In fact, surveys of independent venue owners by the National Independent Venue Association (NIVA) indicate that over 75% of small venues feel their PRO fees disproportionately exceed actual music use, leading to financial strain or even closure for some establishments.

Where Does the Money Go?

Perhaps even more troubling is the reality of how collected royalties are distributed. According to industry analyses, the royalty payout structure is drastically skewed, disproportionately favoring a tiny minority of highly successful artists. A report by Music Business Worldwide highlighted that approximately 80% of royalties collected by major PROs are funneled toward less than 5% of registered artists. Consequently, the vast majority of independent songwriters, especially those performing in smaller venues, never see meaningful financial returns.

As for administrative overhead, recent changes raise further concerns:

BMI, since transitioning to a for-profit entity in 2023, retains approximately 15% of its revenue as administrative fees.
ASCAP, while still operating as a non-profit, retains about 12% for its administration.
SESAC, being a private, for-profit entity, provides virtually no public disclosure about its internal financial allocations. However, anecdotal reports suggest administrative fees similar to or higher than BMI and ASCAP.

Despite PROs collectively gathering over $3 billion annually in license fees (ASCAP alone collected $1.522 billion in 2022, according to their annual report), transparency around distribution remains minimal. If an artist isn't registered with a PRO, they receive no royalties—even if their music is performed frequently in paying venues. Yet, the venues hosting these independent artists continue to pay licensing fees.

The Transparency Mirage

Royalties distribution by PROs relies heavily on opaque methodologies, including selective sampling, radio airplay tracking, and large-venue reporting. Crucially, performances at small venues, open mic nights, and independent showcases are systematically underreported or outright ignored. According to the advocacy group Fair Trade Music International, fewer than 10% of independent performances in small venues are adequately tracked or compensated.

Even when venues diligently provide detailed setlists, the submission is often meaningless if featured artists are not registered with the PRO. The incentive for accurate record-keeping is minimal, and audit trails confirming accurate payout allocation are virtually nonexistent. The venues—and by extension, the independent artists—remain blind to how their contributions support the broader royalty pool.

Is It Legalized Shakedown?

A critical issue arises when venues exclusively showcase independent musicians who have chosen not to affiliate with PROs. In such cases, the requirement to pay blanket licensing fees feels increasingly like a legalized protection racket: venues pay fees not to directly support artists, but to avoid legal threats and costly litigation.

This situation isn’t hypothetical. Legal cases have been documented nationwide where venues faced aggressive legal action from PROs despite evidence that no registered music had been performed. In a notable 2021 lawsuit, a small coffee shop in Minnesota was sued by ASCAP for failure to pay licensing fees, even though the shop could prove it hosted only original music performances from non-affiliated local artists.

Time for Reform

Given these profound issues, the PRO system urgently needs comprehensive reform. Practical recommendations supported by industry advocates include:

Usage-based pricing should replace fire marshal capacity models, ensuring venues pay only for actual performances of copyrighted material.
Mandatory transparency in royalty reporting and distribution must become standard practice, not an exception.
Opt-out provisions should exist, allowing venues exclusively featuring non-PRO artists to forgo blanket licenses.
Direct licensing and Creative Commons agreements must be supported as viable, cost-effective alternatives to blanket licenses.

These changes would realign PRO operations with their stated mission: empowering and fairly compensating creators.

The Real Champions of Independent Music

Small venues are not the adversaries of songwriters; rather, they are the frontline champions of independent music discovery and promotion. They provide essential platforms for emerging artists, helping them grow fanbases and careers. Yet the existing PRO model financially punishes these venues, creating barriers that stifle grassroots cultural development.

Ultimately, if BMI, ASCAP, and SESAC genuinely aim to protect and empower musical creators, they must embrace genuine transparency, equitable pricing, and robust accountability. Until significant reform occurs, small venues will continue footing the bill for a broken system, paying dearly for music they don’t play, royalties artists never see, and transparency that remains perpetually out of reach.

Without intervention, everyone loses—the venues, the musicians, and ultimately, our shared culture of creative diversity.