well an all music ,unrecorded show (or at least not made for a available for distribution) is a grey area. it is what i do, and i pull a huge amount from what the record labels upload to youtube. there are large amounts of music streams (KMEAT is one) that are not licensed with SESAC, but are allowed to continue broadcasting on the internet.
this is not a defense of heather, moreso of myself and SNT.
It is not a grey area at all.
By broadcasting a stream is available for distribution, a stream distributes what is being sent to it.
The YouTube videos are monetized by the artists, playing them is taking that monetization away from them.
Non-licensed music streams are not allowed to continue, they continue because they have not been discovered and shut down yet.
Soon every stream provider will need to have the same song recognition system that YouTube has or they will not be allowed to sell their services.
Being pay or free doesn't matter either - both mean the rights holders are not being paid.
Playing some songs for a few friends is not a big deal but it is illegal by letter and spirit of the law.