Cafés are swapping licensed music for AI playlists to skip royalty fees

Cafés have started replacing licensed background music with AI-generated playlists, and the arithmetic behind it is blunt. The NZ Herald reported on August 8, 2026 how one New Zealand café owner weighed the annual cost of a music licence plus a streaming subscription against the margins on coffee, and switched the speakers to AI.

The pressure behind the switch is survival. Hospitality liquidations in New Zealand jumped 49% in the year to March 2026. Against margins like these, an app converting the prompt “early morning cafe jazz” into an endless playlist for a small subscription wins on price every time. The Herald puts the global AI music market at a projected $2.8 billion by 2030, and functional audio for businesses is one of its quietest, steadiest segments. Tools built for exactly this already exist, TuneTaxi pitched itself as background music for venues back in 2024.

Why an AI playlist means no performance licence

Playing music in a commercial space is a public performance, and venues pay a licence for it. In New Zealand it comes through OneMusic, the joint venture between APRA AMCOS and Recorded Music NZ. The licence covers the repertoire those societies control on behalf of songwriters and labels.

AI-generated tracks with no registered rightsholders sit outside the repertoire. Nothing to represent, nothing to license, nothing to pay. Royalty-free production music worked the same way for decades. The difference now is cost and volume: generation costs a venue near zero and the supply never runs out. On the upload side the flood is already documented, with AI tracks passing 50% of Deezer’s daily uploads this summer.

What venue royalties mean for a songwriter’s income

Background music money is invisible to most listeners and real to every PRO. Licences from shops, cafés, gyms and restaurants feed the public performance pool distributed to songwriters each year. It’s the passive slice of a writer’s income, the part earned while a barista steams milk under your song.

Every venue flipping to AI removes a recurring payer from the pool. A single café is pocket change. A measurable share of a country’s hospitality sector is a royalty stream drying up, and the writers who feel it first are the working ones whose income depends on volume across thousands of small rooms, never on hits.