Background Music to Stop Being Free: the “Right of Public Performance and Communication of Recordings” under the Copyright Act

2.1 Imbalances in remuneration for performers and others involved in sound recordings

Levying copyright fees from music users itself is not new. Copyright holders, such as lyricists and composers, already possess performance rights (Ensōken)※2 as well as public communication rights (Dentatsuken)※3 in sound recordings. When commercially available audio recordings are used as BGM in stores and other similar venues, permission must be obtained from these copyright holders and usage fees are often levied unless the usage falls within an exception under the Copyright Act. The infrastructure and methods for collecting fees for such copyright usage are also well established. Copyright management organizations have performed the role of collecting and distributing usage fees to copyright holders for many years.

In contrast, no right existed in relation to the activity covered by the BGM Right. Consequently, prior to the New Amendments, performers and record producers were unable to receive remuneration when sound recordings they had produced were used as BGM or for similar purposes.※4

In other words, there was an imbalance in the use of BGM in stores and other commercial spaces: although copyright holders of musical works could receive royalties, the performers and record producers of the relevant sound recordings received no remuneration whatsoever.

2.2 Inconsistencies between Japanese and overseas intellectual property laws

As of the date of this article, a BGM Right or similar has been introduced in 142 countries and regions worldwide. Among OECD member countries, it has already been introduced in 36 countries, excluding Japan (prior to the New Amendments) and the United States.※5

Recently, Japanese cartoons (or anime) and video game music, city pop, rock, and soundtracks have become widely listened to outside Japan. Initiatives aimed at expanding the Japanese music industry internationally are gaining momentum, as evidenced by the establishment of the international music awards “MUSIC AWARDS JAPAN” by five different music organizations.※6 However, even as the overseas expansion of Japanese music has progressed, it has been challenging for Japanese Sound Producers to receive remuneration because no BGM Right existed in Japan. Under the principle of reciprocity,※7 Japanese Sound Producers could not receive remuneration when their commercial recordings were used in other countries, even if the other country had a BGM Right or similar.※8

2.3 Expansion of commercial sound recording use in Japan

When Japanese copyright and similar laws were originally enacted, the use of commercial sound recordings in the food and beverage industry, such as coffee shops, was limited.※9 Today, however, the use of commercial sound recordings in Japanese business establishments is widespread. Sound recordings are used in approximately 30% of all business sectors and the level is even higher in key individual sectors, for example, 50% in the accommodation and food service industries, and 40% in the lifestyle-related services and entertainment industries.※10 Further, BGM users in these business sectors not only use CDs and records but also widely utilize commercial BGM streaming services. For example, within the accommodation and food service industries, almost 50% of BGM is sourced through streaming. The Japanese market is now an environment where a wide variety of BGM is readily available and heavily used.※11 Given this expansion in the use of commercial sound recordings in Japan, the need to provide remuneration to Sound Producers has become much greater than before.

3.1 New Amendments establishing the BGM Right

Under the New Amendments, (i) any person who publicly reproduces a performance recorded on a commercial phonogram,※14 or (ii) any person who publicly communicates, using a receiving device, a performance recorded on a commercial phonogram that is publicly transmitted,※15 is required to pay secondary use fees to the artist(s) who performed the sound recording.※16

Similarly, with respect to recording producers, any person who publicly reproduces the sounds contained in a commercial recording, or who publicly communicates via a receiving device the sounds from a commercial recording that are publicly transmitted, is required to pay a secondary use fee to the recording producer.※17

A key feature of the BGM Right is that it is structured not as a right to grant licenses, but as a right to claim secondary use fees. Since the use of commercial sound recordings typically involves the granting of a license from the copyright holder, creating the same right for Sound Producers would complicate the exercise of these different sets of rights and could actually hinder the communication of sound recordings to the public. Further, the Rome Convention,※18 the World Performances and Phonograms Treaty (“WPPT”),※19 and the legal systems of major countries all treat the BGM Right as a right to only claim remuneration. In light of these factors, the BGM Right has also been established only as a right to receive secondary use fees.※20

The New Amendments also contain some express exceptions to the BGM Right. For example, secondary use fees cannot be claimed by Sound Producers in the following cases.

1. With regard to public performances, where the performance is not for profit and no fees are charged to the audience or viewers.※21・22
2. With regard to public communications, where the activity is not for profit and no fees are charged to the audience or viewers,※23 where ordinary household reception equipment is used.※24・25

3.2 New Amendments establishing procedures to administer BGM Right

The New Amendments use a mixture of existing and newly created procedures to administer BGM Right.

1. Use of existing procedures

   Given the practical difficulties in terms of costs and other factors for each Sound Producer to exercise their rights against each BGM user, and for each BGM user to verify the specific Sound Producers to whom payment is due on a case-by-case basis and to make payments accordingly,※26 the New Amendments empower the Commissioner of the Agency for Cultural Affairs to designate organizations to facilitate the administration of BGM Right. When an organization is so designated by the Commissioner of the Agency for Cultural Affairs, only the designated organization(s) may exercise the BGM Right on behalf of Sound Producers. This is essentially the same procedure as the existing method used to charge, collect and distribute secondary use fees in the broadcasting sector.

   More specifically, in the broadcasting sector, the Japan Council of Performers Rights & Performing Arts Organizations (“Geidankyo”) is designated as the managing organization for the exercise of rights and the collection and distribution of secondary use fees regarding commercial use of sound recordings pertaining to performers, while the Recording Industry Association of Japan (“RIAJ”) is designated as the managing organization for the same pertaining to producers of sound recordings. It is anticipated that these same organizations will also be designated as the managing organizations for the exercise of rights pertaining to the BGM Right.

2. Creation of new procedures

   The New Amendments also provide for the passing of new regulations regarding the drafting and giving of public notices, as well as the consultation and adjudication of secondary use fee disputes. The subject matter of these new procedures and regulations is outlined in (i) through (vi) below.

   1. Designated organizations must establish regulations on secondary use fees that specify the amounts of secondary use fees for each category of use, as determined in accordance with standards set by the Commissioner of the Agency for Cultural Affairs, as well as the effective date of the fee amounts and other prescribed matters.※27
   2. When a designated organization intends to establish or amend secondary use fee regulations, it must endeavor to solicit opinions from users and other related parties and must publicly announce the draft regulations.※28
   3. Upon such public notice being given, user representatives may, within one month from the date of the public notice, request the designated organization to enter into consultations regarding amendments to the draft secondary use fee regulations, and the designated organization must comply with such a request.※29
   4. If no agreement is reached regarding the subject matter of the consultation within six months from the date of the public notice, the parties may apply to the Commissioner of the Agency for Cultural Affairs for a ruling on the draft secondary use fee regulations.※30
   5. If no request for consultation is made by user representatives, or if an agreement is reached or a decision is made regarding the subject matter of the public notice, the designated organization must notify the Commissioner of the Agency for Cultural Affairs of the secondary use fee regulations and make them public by the date of their implementation; the notified secondary use fee regulations shall take effect on the date specified as the implementation date in said regulations.※31
   6. Designated organizations may not charge an amount exceeding that specified in the notified secondary use fee regulations.※32

3.3 Delayed Effective Date

Although already passed as law,※33 the New Amendments will not take effect until a date to be determined by Cabinet Order that must be within 3 years from the date of the New Amendments being passed (i.e., within three years from 17 June 2026).※34

4.1 Methods for Collecting Secondary Usage Fees

As mentioned above, the collection of secondary use fees from users is planned to be conducted by designated organizations, however, the actual method of collection has not been established and remains under consideration. However, it seems likely that one of the two existing methods for collecting copyright royalties already utilized in Japan will be adopted.

The first of these methods is the “At-the-Tap Collection Method” under which a designated organization (in Japan this is the Japan Society for Rights of Authors, Composers and Publishers (“JASRAC”)) collects royalties directly from users of copyrighted material under annual contracts, monthly contracts, per-song contracts, and other agreements entered into directly between the designated organization with individual users of copyrighted material. The second method is the “Main Valve Collection Method” under which the designated organization (i.e., JASRAC) collects copyright royalties by commissioning paid music channels and commercial BGM service providers (in Japan, this is often USEN Corporation which is the main BGM service provider to stores in Japan), to collect the royalties on behalf of the designated organization from BGM users of copyrighted materials, and by requiring such commercial BGM service providers to pay an amount calculated by applying a fixed rate to the price of the services they provide to the BGM users.

According to RIAJ and Geidankyo, for the collection of secondary use fees under the BGM Right, in addition to the Main Valve Collection Method, the following proposals have been made for the collection of secondary use fees for the use of audio sources via CDs and records: (A) implementation of an easy-to-use electronic payment method for BGM users to directly pay secondary use fees to the fee-collecting designated organization, and (B) method of collecting fees from the user organization as a whole instead of charging each user individually.※35 However, each of (A) and (B) have intrinsic problems that will need to be overcome if they are to be utilized.

Under method (A), there is the issue of whether the designated organizations can secure sufficient human and administrative resources to manage individual payments of secondary use fees from BGM users. Although method (A) has been proposed to simplify collection under the At-the-Tap Collection Method, it still requires managing individual contracts with a large number of users. If secondary use fee collection is not uniformly enforced due to a lack of human or administrative resources, a sense of unfairness regarding the burden of secondary use fees may arise among BGM users, potentially leading to a vicious cycle in which fee collection becomes increasingly difficult.

As for method (B), given that the designated organization (i.e., JASRAC) enters into individual contracts with each BGM user for the collection of copyright royalties fees, there is a risk of discrepancies in the scope of collection, in that the scope of royalties collected for distribution to copyright holders may not coincide with the scope of royalties collected for distribution to Sound Producers. Additionally, if method (B) is used, BGM users would likely be required to enter into contracts with multiple designated organizations (one contract for the collection of copyright royalties and another contract for the collection of BGM Right secondary use fees), thereby increasing their procedural burdens.※36

Given these deficiencies with methods (A) and (B) and to be sure of establishing a fee collection scheme that is effective, efficient, and convenient for BGM users, the better approach would seem to be to implement the Main Valve Collection Method. This is because the Main Valve Collection Method allows fees to be collected in a lump sum from users of BGM services, thereby easing the procedural burden on users, reducing administrative costs for the designated organization and helping to prevent collection leakage. If the At-the-Tap Collection Method is adopted, it would be advisable to align the collection methods for copyright royalties and BGM Right secondary use fees, unify the procedures for handling copyright and BGM Right, and for the designated organizations handling BGM Right to work closely with copyright management organizations, including JASRAC.

Further, to better facilitate legal use of BGM, open, full and pro-active disclosure the terms of service of music streaming services should be encouraged. According to a 2023 market survey on the BGM Right, 23.1% of the responding businesses used music streaming services such as Spotify, Apple Music, and YouTube※37 to play BGM on their premises even though the terms of service of these consumer-oriented music streaming platforms generally prohibit commercial use of their platforms.

Demand for platforms of music streaming service is expected to grow even more in the future. It is therefore entirely foreseeable that existing providers of music streaming service will revise their terms of service, new providers will enter the market, and those providers will view commercial use as a business opportunity and expand into this sector. If that happens, actively pursuing the collection using the Main Valve Collection Method from such platforms of music streaming service from the beginning, has the added advantage of being a more effective way of achieving maximum BGM secondary use fee collection.※38

4.2 Methods of calculating the amount of secondary use fees to be distributed

Assuming the BGM secondary use fees are collected by a designated organization as is planned, they will also need to be distributed by the designated organization to the applicable Sound Producers. The secondary use fees collected by the designated organizations, including those collected under the Main Valve Collection Method, are not linked at the collection stage to Sound Producers of the respective musical works. When distributing the collected secondary-use fees to Sound Producers, it is necessary to allocate the amounts to the Sound Producers of each respective musical work. Discussions by the relevant organizations and government agencies on the most suitable method to determine the correct amounts of secondary use fees for BGM Right to be distributed are underway※39 and the approach most likely to be adopted is to base the calculation on track usage data (which mirrors the current practice for distributing commercial recording secondary use fees in the broadcasting sector).※40

Since March 2026, Geidankyo has been reviewing its distribution amount calculation method for secondary use fees regarding commercial use of sound recordings pertaining to performers in the broadcasting sector. Specifically, Geidankyo has revised its distribution amount calculation method to calculate the distribution amounts for each song individually for featured artists (meaning the artist(s) whose name is listed alongside the song title; “FA”) and non-featured artists (meaning artist(s) who participated in the recording but are not listed alongside the song title; “NFA”). This is a change from its previous method of dividing the total distribution funds according to a fixed ratio between FA and NFA before calculating the distribution amounts. As a result, the actual participation of FA and NFA in each song will be more readily reflected in the distribution amounts.※41

However, with the introduction of the BGM Right, the number of songs included in track usage data, which serves as the basis for distributions, is expected to increase significantly. Therefore, assuming Geidankyo becomes the designated organization for performers of sound recordings, whether its existing human and administrative resources will be sufficient to adequately manage and process the expected increase in the volume of track usage data to ensure accurate calculation of distribution amounts is considered to be a key practical challenge moving forward. The same challenges are also expected for the designated organization (anticipated to be RIAJ) which will administer producers of sound recordings.

4.3 Coordination with BGM users

With the establishment of the BGM Right, users of BGM will be required to pay not only royalties to copyright holders in BGM but also secondary use fees to Sound Producers of BGM, which is expected to increase the financial burden of BGM users. Consequently, there are concerns that this may actually hinder the use of commercial recordings and stifle the development and consumption of music and related activities.※42 Further, BGM user organizations have called for a phased implementation that takes small and medium-sized businesses into account, as well as the consideration of implementation of support measures. They have also requested exemptions or low flat-rate caps for usage below a certain threshold to accommodate small-scale and for educational use.※43 There is a need to strike an appropriate balance between the rights of Sound Producers and the business activities of BGM users.

Currently, JASRAC exempts the payment of copyright royalties for the following uses of copyright recordings that are not subject to Article 38, Paragraph 1 of the Copyright Act※44 : (i) use at welfare, medical, or educational institutions; (ii) use at offices, factories, or similar facilities primarily intended for employees only; or (iii) brief and minor use at street stalls or similar locations.※45 Arguably, introducing similar exemptions for the collection of secondary use fees based on the BGM Right should be considered.