Sync Licensing 101

COMPOSITIONS

A composition is any music as it exists as a piece of intellectual property.  Basically the melody, progression, lyrics, rhythmic pattern, or any combination of thereof would be considered a composition.  All songs are compositions but not all compositions are songs. Compositions without lyrics are often referred to as a “Piece”.  In almost all cases the owner to the copyright of a composition is the original author(s) unless there is a written agreement between the author(s) and another person or entity (AKA a publishing company).

MASTERS

A master is a recording of a performance of a composition.  The actual, tangible, recording. If you compose a piece of music for piano and five different pianists separately make recordings of that composition, you now have five different masters of one composition.  Traditionally (though not as common these days), music labels would own their artists’ masters. Often, a label would give the artist money upfront (aka an advance) to pay for them to record songs for an album. If everything went well, the label would collect any money made off of the masters (via sales, sync, etc) until they recouped the money they advanced the artist.  After that, both the artist and the label would share in the profits from the masters (hopefully).

PUBLISHING ADMINISTRATION

In music, a publishing administrator is a person or entity that is empowered to look after the best interests of a composition, or catalog of compositions.  Sort of like power of attorney. The Publishing Administrator (or Pub Amin) doesn’t own any of the compositions it represents, but often takes a percentage of the revenue as a commission.  Therefore its in the best interest of the pub admin to find as many revenue sources as possible for the catalog it represents. If the writers make money, the pub admin does too. Everyone’s happy.

COVERS

Covers are fun.  And now, since we are yellow belts, we know that covers are basically new masters of existing compositions.

In 1997, Limp Bizkit won the hearts and souls of the TRL youth with their hit cover of George Michael’s “Faith”.  Anytime that song got played, sold, or synched both Limp Bizkit and George Michael made some cash. So when the Limp Bizkit’s version of “Faith” appeared in the 1998 dark comedy Very Bad Things, the music supervisor on the film had to clear the composition through George Michael’s publisher and the master through Limp Bizkit’s label.

Another fun little anecdote is the case of Guitar Hero, that video game where you hit buttons on a guitar-shaped controller in synchrony with classic rock songs.  If you played the game, you may have noticed that a lot of the songs sounded a little…different. This was because the game makers decided to re-record the songs. This way, they didn’t have to pay the licensing fee on the master side.  They only had to pay the publishers for the rights to use the composition in the game. As you may imagine, this cause a bit of a stink among the labels.

SAMPLES

A sample is the use of a portion of an existing sound recording (aka a master) in the creation of a new sound recording (new master).  An artist could sample one small section of a recording and loop it, or sample many different recordings in order to create a new master.  Sampling is most common in hip-hop music production, but can be found in almost all genres. If you want to use a sample in your next composition BE SURE you clear the rights before you try to monetize it.

Because the sample itself is a piece of a recording of a composition, you will need to clear rights with both the master and publisher. If you haven’t gotten (and most likely paid for) the rights to use your new master with the sample’s original copyright owners, you are going to have a very hard time getting any kind of sync opportunities.  Music supervisors are sticklers for rights and always play it safe when it comes to samples.

Synch Fee

Any time a song is synched to picture, it will command a sync fee.  The fee is determined by a number of factors, but the three biggest are:

Scope of Use – The media on which the sync will occur and live (TV, Web, Video Game, Ad)

Term – How long the sync will run for (1 week, 1 year, in perpetuity, etc)

Territory – Where the sync will air (Local stations, Nationally, Worldwide)

Another factor is the negotiating leverage that the song or artist has. For example, if you are a Dad Band from Trenton, NJ with 67 views on YouTube, you probably wont be able to negotiate fees as high as Steve Winwood.

These aren’t ALL of the points that factor in to how sync fees are priced, but they certainly are the most important.

Royalties

For music, there are two main types of royalties to be earned: Mechanicals and Performance.

Mechanical Royalties are simply royalties based on physical or digital copies of a song.  These are paid out by the rights owner to the recording (master) which is usually a label.  In the US the mechanical royalty rate is 9.1 cents per sale of a physical recording or digital download.  If you hit 100,000 iTunes downloads of your hit song “Twerkin’ in the Rain” the label owes you $9,100.

Performance Royalties are paid to the songwriter and publisher anytime the composition is performed in public.  If your music is played on TV, the Radio, or performed live in a venue by a cover band, you are owed public performance royalties. Performing Rights Organizations such as ASCAP or BMI monitor and collect these royalties on your behalf.

Speaking of…

PROs

A Performing Rights Organization (PRO) is basically an agency that collects royalties on behalf of the rights owners (songwriters & publishers).  For the most part, any time a song is played in public (TV shows, Radio, The Olive Garden) the venue, network, or channel has to pay out the rights holders.  PROs collect these payments and distribute them amongst their rights holders.

There are different PROs depending on what country you are in.  In the USA its ASCAP, BMI and SESAC (which is invite only).

The way its all divvied up can be quite complicated as you probably can imagine.  For example, BMI has over 150 different license types. But here is a very simplified breakdown…

Venues pay for annual blanket licenses so the musicians can play whatever they want during performances.  The fee is based on a number of different factors, but mainly capacity, free vs ticketed events, and frequency of live performances.

• Retail (Clothing stores, Barber Shops, Car Dealerships) – Are priced based mainly (but not solely) on square footage.

• Hospitality (restaurants and hotels) – Priced based many factors including square footage of area where music is payed, capacity, TV vs background music speakers.

• TV – Networks submit cue sheets of all of the music used in their programming to the PROs.  These cue sheets list the timings of the usages. The fee rates are different depending on the network and the time of day the show airs.  If your song is played on NBC during prime time it will earn a higher royalty rate than if it was played on BET Jazz at 2am.

• Radio – Pay is based on reach and the usages are reported by the stations directly to the PROs

As you can see, it’s really complex.  This is why songwriters need PROs: to make sure that if your music is being played in public, you are getting paid. It could be pennies per play, but multiply that by potentially hundreds of thousands of plays and you could be getting some nice mailbox money.

Pre-clear

Okay – We may be getting a little inside baseball here. ‘Pre-cleared’ is a term used by music supervisors. It is music where all of the rights holders agree to pre-determined rates for the use of the music for a project, usually in bulk.  For example, lets say a clothing brand wants to showcase their new designs on Instagram. Over the next six months they will produce two new video posts per week and have $1,000 per post budgeted for music.

The brand creatives will reach out to rights holders with a creative brief and ask for “all of your best fashion music that is pre-cleared at $1,000 all-in”. The rights holders will then send them a package of music that has been cleared at that rate in advance.

This way, the clothing brand can simply dive into the pool of pre-cleared tracks and plug them in as they like, without worrying if they will be able to afford the sync fee. Once the songs are locked in, they send a note to the rights holders who reply with an agreement and invoice.

One-stop

One stop simply means all of the rights (100% of master an 100% of publishing) are represented by one entity.  This makes the licensing process very easy for both parties (licensor and licensee) as they can clear the whole of a song through one person. They do not have to track down and clear rights with multiple different rights holders. One-stop also allows for more flexibility on pricing and deal terms.

Sub Publishers

Often songwriters or publishing entities will have “Sub Publishers” who represent the catalog in other territories of the world.  This can be advantageous to the original rights holders as they have representation in markets where they normally wouldn’t. Sub Publishers take a commission on royalties and sync fees earned in their respective territories.

MFN

MFN stands for Most Favored Nations.  It means that all of the involved rights holders (master and publishing) will get the same fee for a sync.  Basically, all parties will get the same terms and fee, which is the most favorable. It’s sort of like “setting the bar”.

Example: Let’s say you are an artist that produces hip hop beats and you have 50% writers share on a 2 Chainz song called “Vape Nation”.  Pepsi wants to use this track in their next ad. They reach out to all of the rights holders (label & publishers) to get quotes for the use.  If the label quotes $100,000 for the use and the publishers quote lower, but cites MFN. Unless Pepsi pushes back on the label to get the quote lower, the label has now just “set the bar” for what the spot is worth, monetarily.

TL,DR: Always quote with a MFN clause.

Publishing Administration Exclusivity

This is a big one, and polarizing at times.  But here is the low down.

Exclusivity is crucial if you want to be taken seriously in the sync world.  There are tow big reasons why…

1. Lets say you have a non exclusive pub admin deal with Company A.  You can then legally enter into a pub admin deal with Company B (and company C, D, etc).  So now you have several people with rights to clear your music for sync opportunities. Lots of boots on the ground. Sounds great right? NO!!! its a mess.  Whats going to happen when Dunder Mifflin wants to use your song “Paper People Polka” in their new campaign. They look the song up at the PROs and reach out to all of the companies for a quote.

Company A quotes $20,000

Company B quotes $10,000

Company C has no idea what they are doing and quotes $750.

Who do you think they are going to clear the rights with?

Know. Your. Worth.

2. If you land a nice juicy TV commercial (these are big $$), they are guaranteed to ask for “market exclusivity” at the very least.  What this means is that you can not legally enter into another sync agreement with a direct competitor in the marketplace for the duration of the term of the sync.  Example: If your song “Drive Me Home, Kevin” lands in a Toyota commercial, you cannot legally clear a sync for a Ford commercial until the term of the Toyota spot expires. Makes sense right?

Now, if your publishing administration deal is non-exclusive, Admin A could clear the Toyota spot while Admin B clears the Ford spot a week later.  There is no for either admins to guarantee market exclusivity for either spot. Ad agencies don’t like this.