The answer is simple, but very few seem to know about it. It’s called an ASCAP license.
The American Society of Composers, Authors, and Publishers
http://www.ascap.com/licensing/about.html
I learned about ASCAP the hard way. No I wasn’t fined or anything like that. While playing one night at a local wine bar/club, I was propositioned by the manger of a downtown hookah lounge to start another weekly gig at his place. When your city starts a smoking ban, it’s so easy to get your foot into a lot of clubs dieing for something to entertain their cigarette-less patrons into staying.
So on the first night I played at my new gig, turnout was great, and we all danced till bar time on a Wednesday night. Then the owner (not the manger who gave me the gig) asked me if I was playing Michael Jackson. I was, and it was then that he informed me that I couldn’t do that because they didn’t own an ASCAP license. He informed me I was only allowed to play foreign music and world beat. The Mediterranean owner was kind enough to share a big chunk of his music collection with me, and some of it was pretty good. However: 1) I didn’t know the songs. 2) My audience didn’t know them, and they liked the dance party hits that is my general format. The gig didn’t last long, as people didn’t want to wait till midnight for the owner to leave and for me to start playing what they liked.
So this is how I learned about ASCAP. In America, clubs and other public places that play music have to buy an ASCAP license. I believe they come in all different sizes, for even having a jukebox requires a license with them. That annual fee covers the club to legally play pretty much anything they want. ASCAP then distributes a certain percentage of that fee back to the record companies and other fat cats (don’t ask me how they decide who gets what). Really though, it’s a pretty easy way to legally cover your club, and pay rights without having to keep track of every song played.
From my understanding, if you go to a club with an ASCAP license (pretty much any club that host DJ’s on a fairly regular basis) and your entire Mp3 collection is illegal, it is not illegal to play those songs at the club. HOWEVER, You would still personally posses illegal music and you hold that risk. The club itself is protected, and the playing of those songs would be legal.
If you are concerned, check with the club to see if they are properly licensed with ASCAP for DJ performances. If they are not, it’s the club’s liability (in America anyways) and responsibility. Are the ASCAP police going to raid the place in the middle of your gig? No.
So, if anyone tries to tell you that playing your Mp3’s in the club is illegal, set them straight. Now you possessing them without proper purchase, that’s a whole different legal matter.