Introduction to Music License Agreements
Music license agreements are contracts that govern the terms under which music creators (like musicians, songwriters, composers, producers, and record labels) allow other parties to use their music in various ways, usually for a fee or some other compensation. These agreements lay out, in detail, what rights are being transferred and/or licensed to another party (often referred to as the licensee), and how those rights are to be used. A simple, nonexclusive, three- or four-word phrase on a website describing the use of an artist’s song is not sufficient to constitute a music license agreement. A music license agreement should be detailed, written with a specific purpose, and should be crafted carefully. Otherwise, they can open the door to misunderstandings and disputes about the authorized use of the artist’s music, which could lead to harm to the music creator .
For example, it is not unusual for a company to approach an artist with a request to license a song for use in an advertising campaign. At some point, the advertiser will want a licensing agreement prior to commencing use of the music. The most commonly used music license agreement requires the licensee to pay the artist a flat licensing fee. Such flat rate fees are often based on the anticipated use of the music. For example, a company that needs a song for a long running national advertising campaign likely will need to pay a higher licensing fee than just a single regional use. Also, if the licensee wants audio-only use, that usually comes at a lower price than licensing the song for video images, as well as audio.
Importantly, if the license agreement is clear regarding the scope of the rights granted to the licensee, there should be no confusion, and, therefore, neither artist nor licensee should have a reason to complain about the other’s conduct relevant to the terms of the agreement.
Various Types of Music License Agreements
Mechanical License Agreement
Mechanical licenses are for recordings when the song is to be used in a CD, vinyl, or DVD project. It is important to clarify that a mechanical license only covers the composition rights and not the sound recording rights. A mutual agreement and negotiation with the copyright owner on royalties is necessary to execute a mechanical license agreement.
Synchronization License (Sync License)
A synchronization license grants the right to "synchronize" audio and video. For example, if a company wants to use your song for a television show or commercial, they would need to enter into a sync license agreement. Much like a mechanical license, this agreement requires a royalty negotiation with the copyright owner. Sync rights holders are generally the same as the master rights holder, but may not always be.
Public Performance License
A public performance license is necessary when there will be an entity using or performing the song in a public setting, such as a live concert, restaurant, school play, or coffee shop. In most cases, the venue, not the musician, is responsible for obtaining the license. Public performance licenses are typically issued and regulated by the performance rights organizations, including Broadcast Music Inc. (BMI), American Society of Composers, Authors, and Publishers (ASCAP), and The Society of European Stage Authors and Composers (SESAC).
Master License
A master license agreement refers to an agreement in which the rights holder of the sound recording grants another party the right to use that sound recording for a specific purpose. The underlying composition is not generally granted by the master recording rights holder.
Essential Components of a Music License Agreement
The key elements of a written music license agreement often include a grant of rights. The grant of rights section should include the right to copy, modify, distribute, and otherwise use the licensed material and articulate any rights that are not included. The grant of rights section should also include a definition of the territory within which the licensor may use the licensed material as well as the duration of this right. For example, the grant of rights section may provide that the license is valid only in the United States and that the right will expire on a specific date (i.e. "This license shall expire one year from the effective date.").
Compensation terms should also be included in a music license agreement. Compensation can take many forms. For example, a licensee can compensate a licensor by paying a one-time license fee, by paying periodic royalties, or through some other type of compensation.
Restrictions are another key point that can be addressed in a music license agreement. A licensor may limit its licensee’s right to use the licensed material to a specific purpose. Additionally, the licensee’s use of the licensed material may be contingent upon the payment of compensation.
How to Create a Music License Agreement
A music license agreement is a remarkably personal agreement. The licensee wants to hear the creative voice of the artist, while the artist wishes for the licensee to have an exclusive use of a particular piece of music. Therefore, in each music license agreement, both parties should establish, as specifically and as equally as possible, the time and manner in which the other authorizes and expects the usage of the work or works.
When drafting a music license agreement, you should take the following steps: When drafting, you should consider what song or songs are being reviewed. For each song, the authorizing party should be sure to note whether the licensee has exclusive rights to the song or whether the licensee also allows the artist to commercially exploit the song. Likewise, a popular band that has reached millions, such as Katy Perry or Lady Gaga, has developed a distinct voice that has crossed genres. It is important for the artist to determine if they will license their hardcore rock album to a free-spirited pop-punk label. The art of negotiating a license agreement is to make sure that the style and uses of the music are compatible.
An essential part of a music license agreement is defining the term of the agreement. The term is the period of time during which the licensee will have the right and privilege to use the music in question. Commonly, the licensee will have a choice of either paying a flat fee for the term or paying on a periodic basis for the duration of the relationship. Both parties must decide how often and when the fee should be paid. A sample licensing fee schedule may include a flat fee of $300 for 30 days and the parties may agree to a 1¥ per cent increase for each additional day. The parties may also elect to tie the fee to the performance of the music itself. For example, the fee could be stated as follows: The parties agree that the licensee will pay a flat fee of $150 for every 2,000 downloads, $200 for each band performance, and $300 for each television broadcast.
The agreement should include a detailed statement of the manner in which the licensee will pay out the fee. The parties can negotiate that the licensee must pay the fee (a flat sum or on an incremental basis) before any of the music is used. On the other hand, the parties can contractually stipulate that the licensee can obtain the music and then later pay the fee. The latter is more common with free music, where a user must pay on a "per play" basis, as opposed to licensing rights to a set period of time.
A music license agreement is a nuanced contract, and as such, has the vertical scope to be tailored according to each unique work and relationship. The agreement must broadly consider the scope of the relationship, the manner in which the music will be used, and the agreed upon fees.
Free Music License Agreement Templates
Using templates for music license agreements can be an efficient way to cover a wide range of licensing arrangements when speed is of the essence. It allows you to avoid the time and cost associated with creating a music license agreement from scratch. However, templates have their limitations. You’ll need to customize them for your particular situation, and agencies and composers may need to consult legal counsel to ensure all the necessary requirements and obligations for each party are being met.
Music license agreement templates are not one-size-fits-all solutions. Parties should still consider their unique situations when using templates, and work with experienced legal counsel to ensure both parties’ needs are being met.
When assessing a template, it’s important to look for the following:
How Does the Template Handle Deliverables? A music license agreement should always specify what the deliverables are, including how and when they will be provided. When working from a template, ensure that you’re satisfying this requirement.
Are Both Parties Subject to the Same Performance Obligations? Some templates contain blank sections where each party’s obligations may be entered . Make sure that everyone is subject to the same obligations, and that the specified obligations are clear and realistic.
Is Exclusivity Clearly Specified? Are the exclusivity rights being granted enough to satisfy your specific need? For example, if the music is being used in an ad, is it exclusive for that ad, or for all uses? Look for widely-accepted definitions of exclusivity, and make sure the definition is clear.
How are Third Parties Given Rights? In many cases, music license agreements may also grant third parties certain rights. Consider all third parties when reviewing a template to ensure everyone is protected.
Are Other Important Clauses Present? Licensing deals may require additional legal clauses to protect both parties. For example, it may be important to specify the types of technologies that the license covers. Some licenses may only apply to broadcasts, while revenue-generating on-demand plays may need to be considered separately. Licenses may also specify states and territories for which the agreement is valid. Other clauses may be important, such as the right to audit.
Legal Aspects of Music Licensing
Music licensing is an integral part of the music industry, allowing music creators to monetize their work while providing businesses and individuals with access to a wide range of creative content. The legal implications of music licensing agreements are vast and complex, encompassing the rights and obligations of both licensors and licensees, as well as the requirements for complying with copyright law in various jurisdictions.
In most cases, music is protected by copyright as soon as it is created and fixed in a tangible medium, such as a downloadable or streaming digital file. This means that the creator of a musical work (known as the "copyright owner") has the exclusive right to authorize others to use, reproduce, distribute, and perform their music. These rights are automatically acquired upon creation, although registration with copyright authorities may offer additional legal protections and benefits, including the ability to pursue statutory damages and attorney’s fees in the event of infringement.
A music license is essentially an agreement between a copyright owner (licensor) and a third party (licensee), where the licensee obtains permission to use the copyrighted music in a specific manner for a set period of time in exchange for payment. In addition to outlining the specific scope of the licensed use (e.g., in a film, video game, commercial, public performance, etc.), most music licenses include clauses related to the following:
Given the complexity and importance of these issues, music creators and licensees should seek the assistance of legal counsel before executing a license agreement. A well-drafted music license protects the interests of both parties and provides both a clear understanding of their respective obligations and a framework for addressing any potential disputes.
Frequent Errors with Music Licensing Agreements
Some of the most common mistakes made in music licensing agreements involve the usage and protections of intellectual property. Frustratingly often, not allocating enough time to work on contracts or purely failing to read the details before signing can lead to the most significant issues later on. In the case of public performances, even if a music artist is only presenting songs not written by them, they still have to be mindful of licensing requirements. This is particularly common for those presenting both recorded and live material. For example, an event promoter failing to obtain licenses through Performing Rights Organizations (PRO) for public performances can be reversed and lead to substantial legal fees. Failing to pay royalties for a song’s use and public performance can lead to cancellation of the contract and the artist losing out on their money. Consulting with a skilled attorney before signing any agreement is always recommended as there are often agreements designed for specific needs of the parties the agreement will affect. Having these documents in place can not only save you money, but also ensure that the requested arrangement is clearly spelled out and protects each of the interested parties.
The Next Generation of Music Licensing Agreements
Emerging trends and developments related to the music industry—including technological shift, increased focus on collections, and greater emphasis on legal protections—will shape and redefine the future of music licensing. The rapid changes in how music is shared and consumed are forcing music licensing practices to adapt, with new approaches necessitated by the increased role of technology. At the same time, increased focus on revenue streams is spurring platforms to seek new ways to capture and maximize collections from performing rights organizations. As the industry shifts away from an emphasis on record sales, many are relying more heavily on planned performances and touring as a primary sources of income . This raises potential licensing issues under the terms of music licensing agreements, as different arrangements may be required for venues and other providers of musical content and experiences. Moreover, the anticipated decrease in recording artist revenues due to the prevalence of digital music offerings could result in problems with licensing revenues that are not in line with industry expectations. In the face of these challenges, a successful approach to music licensing will require diligence in navigating complex issues and recognizing nascent opportunities. The complexities of the music industry landscape require a comprehensive understanding of licensing, bookkeeping, and distribution. Additionally, an eye to the future is necessary to ensure that contracted licensing arrangements remain viable in a rapidly evolving marketplace where changes are the norm rather than the exception.
Leave a Reply