It's not the same everywhere in the EU, but here in Poland as an establishment owner you have to pay this fee to an agency that purports to represent the musicians. As you describe eg. Spotify in background.

This agency pays out proportionately to registered licensed musicians, but the proportions are calculated in some ridiculous way that doesn't really factor in who's music is played. It means that the only folks who get reasonable payouts from this agency are, like, stars and old hits authors. The ones who's music gets played a lot in radio and other places. Winners take all.

The reality is that a lot of that cash is really for some chums who's job it is to be controllers.

AFAIK the entire scheme is a result of that one and only legacy industry that needs to protect it's interests: football and sports in venues, and maybe music clubs. In practice it means you rarely see TVs in bars the way you do in the US.

Idk it's a shitty concept imho.