8 Things You Need to Know About Music Licensing

The phases “licensing” and “sync” and even the most specific — “music licensing” — are thrown around a lot in this industry, but even at this point in time, few understand what they really mean. How does a song end up in a movie? Who gets paid when a track is played in a commercial over and over? Can any artist get in on this money, or is it reserved solely for those who already have hit singles on their hands?

Here are 8 things you need to know about music licensing:

• What Is Music Licensing?
• What Is a License?
• The Different Parts of a License
• What Is Being Licensed?
• Who Owns Everything?
• Where Does the Money Come in?
• What Are Royalties?
• Who Makes This All Happen?

It can be confusing for those focused on making music to understand the business side of things. Knowing where to start is daunting. I’ve broken down the basics of music licensing into eight parts, and hopefully, this article can help any musician or Manager understand all they need to know about this field…or at least enough to start looking into getting involved. (Check out our list of film and TV contacts here.)

What Is Music Licensing?

Let’s start at the very, very beginning because for many musicians, knowledge around this topic can be…murky at best. When we say the phrase “music licensing,” we mean one party is granting permission for another to sync music to a moving picture. The word sync is used quite a bit in this world as well, so while they are not technically the same (and things can get very technical very quickly), we will use them somewhat interchangeably in this piece.

Either way, these phrases mean you (or those acting on your behalf) are allowing another to use your musical works in a commercial, TV show, movie, video game, etc.

What Is a License?

The license itself is the actual agreement between the two (or more) parties, and as is the case with all legal contracts, there are many parts to every single one of these. The agreement sees one side giving permission to the other to use their intellectual property. Technically this isn’t limited to music and there are countless examples of other forms of intellectual property being licensed, such as a celebrity’s face being printed on a t-shirt, a famous name being used to sell a product, a character in a movie being slapped on the toy available in a McDonald’s Happy Meal, and so on.

This contract must be clear when it comes to all details…but more on this next.

As you can probably imagine, a lot goes into negotiating a license fee and the contracts surrounding these deals can become rather complicated in no time. At this point, naturally, many musicians are happy to sign away their music to be used in other forms of entertainment and many of these contracts can be standardized at this point, with only some details being worked out. But when it comes to superstars, estates of late acts, and well-known tracks, things do become infinitely more difficult.

Every song has two parts, as far as licensing is concerned and every part is typically owned by a company and sometimes specific artists themselves, so licensing one song can mean getting permission from several, or sometimes dozens of people (depending on the situation).

The Different Parts of a License

As I stated, licensing contracts can be very complicated but at the heart of every deal, there are three main components of a music license upon which all parties must clearly decide and agree.

The Media – This piece is fairly simple. What form of media is the song being licensed for use in? Is it The Simpsons TV show? Maybe it’s the next Mission: Impossible film. Or perhaps there’s a video game coming that requires a specific tune? It could even be a TV commercial for the next Royal Caribbean cruise.

Things get slightly more complicated when one considers how media is spread everywhere these days. For example, said Mission: Impossible film could first be released into theaters and then later played on TV, all with the same song. The Royal Caribbean ad could air on TV, on the internet, perhaps even on the radio. All of these details should be hammered out in any good agreement.

The Term – Simply put, how long does one party grant permission to the other to use the music in whatever forms of media were spelled out in the contract? If it’s a traditional piece of entertainment, such as a movie or TV show, it’s likely several years, or it may be forever, which is something that can be decided upon. For other, more specific situations, one person may license the song or recording to be used only for a very short span of time, like a day or maybe even just one use.

The Territory – Where is this piece of media going to be consumed? Will it be limited to airing on TV in the United States or is a company planning on pushing their new ad campaign all around the globe? The territory piece of a licensing contract can be as simple as agreeing to everywhere at once or as specific as one location.

What Is Being Licensed?

When a piece of music is being licensed for, say, a movie, there are actually two things that must be licensed, and this can sometimes mean several different parties and several different artists need to be involved in this process.

Every song has two parts, as far as licensing is concerned and every part is typically owned by a company and sometimes specific artists themselves, so licensing one song can mean getting permission from several, or sometimes dozens of people (depending on the situation).

A song can be broken down into a master recording and the song itself. The song is the composition and the lyrics, while the master recording is the version of the song being licensed. If this is a bit confusing, here’s a fairly easy example I use to clear things up.

Sinead O’Connor landed a worldwide smash in the ‘90s with her song “Nothing Compares 2 U,” an instantly recognizable heartbreaker. If someone wants to license this track to use in a movie, they first need to have the permission of whoever owns the master recording. It may be O’Connor herself, but since it was a big hit pushed by a major label, chances are it’s actually the company itself.

At the same time, whoever wants to license “Nothing Compares 2 U” will also need to reach out to whoever administers these requests for the estate of the late, great Prince since he wrote the song itself. Permission from both acts, or more likely, the companies hired to work through these agreements, is needed before anything can be displayed publicly with this version of the track.

If Sinead O’Connor’s representatives are asking for too much to use her famous version, it’s possible another cover can be used, or potentially even Prince’s original take, though no matter what, the Songwriter must be consulted and sign on, since their part of the work remains the same.

Who Owns Everything?

Now, here is where it becomes clear a lot of different people need to approve of a licensing contract before it all comes together.

Most of the time, a record label owns the master recordings to hit songs, as the company was the one who paid for the composition to be made (Producer’s fees, studio time, etc.). Smaller, underground acts don’t typically worry about this but larger stars run into this almost all the time.

Many well-known, successful Songwriters have deals with publishing companies, and while this sometimes means they actually own the rights to the song (though that isn’t always the case, and there are many instances of Songwriters holding onto their rights), they work on the artist’s behalf to sort through these deals and collect the money for them.

So, if there are half a dozen Writers on one song and they are all signed to different publishing companies, all those parties must say yes to a licensing contract before it can move forward.

For however long the term in the contract, use of the song racks up royalties, which are collected by a PRO (performance rights organization) such as BMI, SESAC, and ASCAP. It’s very confusing to understand exactly how those royalties are calculated, but those groups collect the money and distribute it to the artists. So, every time something plays on TV, for example, a royalty is generated.

Where Does the Money Come in?

When a licensing deal is agreed upon, two payments happen immediately. Depending on whether it’s a brand new tune from an unknown act or one of the biggest hits from a global superstar, the amount of cash being handed over can vary widely.

The owner of the master recording (typically the record label behind the recording) is paid a master recording sync fee — a fairly straightforward name. The Publisher of the song (the company representing the interests of the Songwriter or Songwriters) earns a publishing sync fee.

These can all go to the same person if it’s an independent musician, but often, these payments are delivered to different parties.

What Are Royalties?

As if that payment wasn’t enough, royalties can end up lining the pockets of those behind the song for years, especially if the media ends up also being a hit. For however long the term in the contract, use of the song racks up royalties, which are collected by a PRO (performance rights organization) such as BMI, SESAC, and ASCAP. It’s very confusing to understand exactly how those royalties are calculated, but those groups collect the money and distribute it to the artists. So, every time something plays on TV, for example, a royalty is generated.

Now, royalties only apply to Songwriters and their Publishers, so it can be very lucrative for a long time as a Songwriter to land a high-profile sync, but the owner of the master recording is only paid the one time.

Who Makes This All Happen?

So, who actually places songs into commercials and movies?

On the creative side, most companies and studios have jobs focused solely on the music, though they can be influenced by others involved in every project. So, a TV show or a film will have a Music Supervisor, and sometimes they have complete say over the musical choices, while at other times, the Director will have an idea of what track they want in what scene, and it’s the job of the Music Supervisor to make that happen.

The same situation can be seen in advertising agencies, as larger ones typically have someone who works on understanding music and the licensing agreements, but agency leads and Creative Directors can also have a say in what makes it into a commercial.

Sometimes these people will reach out wanting a specific song, while at other times, it’s someone at a publishing house or record label who does the pitching. These music companies have Licensing Reps looking to secure deals for the artists they represent and they often need to think ahead, hoping to send the right song to the right person at the right time to make everything click.

It is possible to land a sync on your own as an independent act, but by now, the system is running fairly smoothly for all involved, so it is much, much easier, simpler, and faster to work with a company that has been doing this for some time than to jump into the world of syncs and licenses on your own.