The Many Worlds of Composer and Songwriter Music Licensing Deals (SCL Score Magazine)
Last Updated on Tuesday, 20 July 2010 17:42 Written by Todd and Jeff Brabec Tuesday, 15 June 2010 17:09
“He’s A Pirate” Birthday Greeting Card (Pirates Of The Caribbean)
“Peter Gunn” Theme Chase Bank TV Commercial (Peter Gunn TV Series)
“Halloween” Theme Ringtone (Halloween)
“Everything I Do, I Do It For You” American Idol Movie Song Segment (Robin Hood: Prince Of Thieves)
“Circle of Life” Broadway Show (Lion King)
“Over The Rainbow” Use in the Motion Picture Australia (The Wizard Of Oz)
Score a film or television episode, write a new song or theme or have a pre-existing work synched into an audio visual production… Normally a onetime creative or synch fee and then you wait for the ASCAP, BMI or SESAC performance royalties and that’s it, right? Wrong!
In today’s world, the opportunity for additional earnings from such diverse sources as videogames, interactive dolls and toys, ringtones and ringbacks, the internet, Broadway, downloads and streaming, advertising commercials, samples, mashups, greeting cards, slot machines, karaoke, music box sets, etc., is there for anyone who has the right composition, the knowledge of the types and structure of deals in each area as well as the range of possible fees that can be realistically negotiated.
New types of products using music and new types of music uses and payment models are appearing daily with the primary beneficiary being the composer and the songwriter as well as the music publisher who is many times the movie studio or production entity.
Video Games
This is an area which can be extremely important for well known and unknown songs alike, both in terms of exposure and money. In many cases, both the composition and the master recording are licensed on a one-time fee buy-out basis, without regard to the number of games that are actually sold; many of which sell millions of units. Buy-outs range from $2,500 to over $20,000, with some negotiations resulting in smaller and higher amounts depending upon bargaining power, how the song is used, and the music budget for the game. Short term licenses are many times the norm (5 to 7 years instead of life of copyright which is the norm for a feature film).
In many videogames based on successful movies or television series, the original score is not used with new score composed and normally paid on a fixed dollar amount per finished minute of music. For compositions though which are so integral or identified with the original project, fees can be substantial depending, of course, on what the original score or song contract clauses said about “subsequent uses” in other productions as well as its “work for hire” status.
Music based video games (i.e., Guitar Hero, Rock Band, Karaoke, etc.), on the other hand, many times provide for additional payments based on per unit royalties or the reaching of sales plateau numbers as well as additional royalty income for songs downloaded into the game. For example, $5,000 to include the song in the game, $5,000 at 300,000 units sold, $5,000 at 500,000 units sold and $4,000 for every 200,000 units sold thereafter or .02 per unit with an advance against a certain number of units. Compositions downloaded into a game are paid on a percentage of the price to the consumer or a penny rate.
Television Series
When a producer wants to use an existing song in a television program, weekly series, special, miniseries, or made-for-TV movie, permission must, with few exceptions, be secured from the music publisher of the song. In this regard, the producer of the show will decide on how the song is to be used (background vocal or instrumental, sung by a character on camera, over the opening or ending credits) and the medium over which the program will be broadcast (free television, pay television, basic cable, pay per view, Internet, mobile phones, airlines, all media, etc.).
The producer or its “music clearance” representative will then contact the publisher of the composition, describe how the song will be used, ask for a specified period of time to use the song in the program, negotiate a fee, and then sign what is known as a “synchronization license.”
Since home video has become an important ancillary market for television programming, negotiations will usually take place for that medium as well. Considering that some television programs are also released in movie theatres in foreign countries, the producer may also request such rights and negotiate additional fees for such non-television uses. And since many television programs are eventually broadcast in media other than that on which they were initially aired (e.g., a pay television program being broadcast on free over-the-air stations, on airplanes, on the Internet, or on cell phones), a producer may also request prices for a wide range of additional options.
For example, the typical current standard license for one of television’s most successful shows describes how the composition is to be used (background or visual vocal), the rights (free, basic and satellite television and in context trailers), the fees for the original as well as subsequent episodes, the duration required, the term (one year) and option quotes for additional years, home video buyouts, downloads, trailers, websites, audiovisual streaming, foreign countries as well as ringtones and ringbacks.
Synchronization fees for known compositions for a worldwide five-year free television license for a major network show range from $1,750 to more than $3,500, with fees varying for pay and cable television use and for other media such as home video and foreign theatrical. All television life of copyright licenses range from $6,000 to over $12,000. All media excluding theatrical life of copyright licenses range from $17,500 to over $25,000. As to newer compositions or less known compositions where the publisher or writer does not have bargaining power, the fees can be lower. For example, fees can be 50% or less in these instances. Having an ad card at the end of an episode announcing the song or artist can also reduce the fee. Individual program music budgets also have an effect on fees that are able to be negotiated.
Motion Pictures
When a motion picture producer wants to use an existing song in a theatrically released film, the producer must negotiate with the music publisher for use of the composition. Once an agreement is reached, the producer will sign a synchronization license, which will give the producer the right to distribute the film to movie theaters, sell it to television, distribute to home video with no additional royalty payments, and use the song in “in context” television or Internet promos and theatrical previews.
The amount of the motion picture synchronization fee depends on a number of factors, including how the song is used, the overall budget for the film and the music budget, the stature of song being used, the actual timing of the song as used in the film, whether there are multiple uses, whether the uses are thematic or over the opening or closing credits, the term of the license, the territory of the license, and whether there is a guarantee that the song will be used on a soundtrack album or released as a single.
The synchronization fees charged by music publishers for known compositions for a major film are usually between $15,000 and $60,000. In addition, record companies normally charge between $15,000 and $60,000 for the use of master recordings (i.e., the original hit recording) in a motion picture, but, depending on the stature of the artist, the licensing policy of the record company and the nature of the recording being used, these fees can be greater or less than the range referred to above. Higher fees can be negotiated for multiple, thematic or opening or closing credit uses. For lesser known compositions, fees will usually be lower. The same is true for all compositions if a film is an indie vs. a major.
“Step deals” are also very common with many lower budget indie films. Under these type of deals, the original license might be for film festival use (for a small or gratis fee) with additional payments if certain agreed upon “steps” occur (e.g., picking up national or foreign distribution, a sale to a major, achievement of certain box office receipts plateaus, etc.).
Advertising Commercials
An extremely valuable source of income is the use of compositions in radio and television commercials for consumer products. The fees paid by advertising agencies and their clients for commercials can be substantial (e.g., from $75,000 to over $1,000,000 per year for successful songs), depending on, among other things, whether it is a radio, television or internet commercial (or combination thereof), a national or limited-territory campaign, whether there are options for other media and delivery systems as well as other countries of the world, if the original lyrics are being changed or new lyrics added, and whether all advertising rather than only product category exclusivity is being requested by the agency.
Certain major advertisers may request total exclusivity from a publisher, but the fees for this type of grant are substantial for a recent hit song or well-known standard (from $250,000 to over $1,000,000), because the song is effectively being taken out of the marketplace.
Most commercial licensing agreements provide for restrictions only on licensing for competing or similar products. For example, a beer-commercial agreement may restrict the writer or publisher from licensing the same song for another alcoholic beverage commercial, but it will allow licensing for use in a food or automobile advertising campaign
Television Ad and Theatrical Previews for Motion Pictures
If a song is used in a motion picture, the right of a motion picture producer to use clips from the film in television advertisements and theatrical previews is almost always granted by the music publisher in its synchronization license. In the event that a song is used out of context in the commercial (such as a song used in a scene in a film being used over a number of scenes in a trailer), an additional fee is normally negotiated. Many times, a producer will use a song that is not contained in the film as part of its television advertising, preview teaser, or trailer campaign for the motion picture.
In such a case, the producer will contact the music publisher and negotiate a fee for television commercial, Internet and/or theatrical trailer/teaser use only (usually from $12,000 to over $100,000 for known compositions).
Download, CD and Record Sales (Mechanical Royalties)
Though “mechanical” sales have been seriously declining in recent years due to illegal file sharing, piracy, etc., soundtrack album and single physical and download sales should not be discounted as a source of income. Aficionados and fans of movie music will continue to purchase movie songs and scores that have meaning to them with hit songs from movies generating good mechanical income.
The minimum statutory mechanical royalty payable to writers and music publishers is 9.1¢ per composition for the period 2009 through 2012. There is also a durational formula based on 1.75¢ per minute of playing time for compositions 5 minutes or longer.
Under this statutory mechanical rate, a single selling 100,000 physical or download units would be worth a total of $9,100 in combined royalties to the publisher and writer. As for album, CD and download sales, the above royalties, unless agreed to the contrary, would be multiplied by the number of songs on the album. For example, if 10 songs were included on an album and each received a 9.1¢ royalty, a total of 91¢ in mechanical royalties would be generated from the sale of each album. It should be mentioned that the per-song statutory mechanical royalty can be reduced under certain circumstances (for example, if the writer is the recording artist or if the record is sold as a developing artist, midline, record club, television-only, compilation, or budget album) so that the royalty figures can be less than those mentioned above. Such “reduced rates” are voluntary, however, and occur only if the publisher agrees or if the songwriter is a recording artist and has no choice but to accept lower royalties.
For limited downloads and interactive streams, a settlement provides rates based on a percentage of the online music services revenue (10.5%) with minimums established and reduced by whatever fees are being paid by the service to ASCAP, BMI and SESAC.
Broadway Musicals
Movies to Broadway is many times a secret to success in a field where financial rewards can be the greatest and million dollar losses common. Successful movies provide a built in audience for a theatrical production, an important factor considering the multi-million dollar costs of putting a show on, and if the movie has well known songs, the odds for a successful Broadway run are even greater.
Combined composer and lyricist royalties for the Broadway run and first-class national touring productions under the Dramatists Guild Approved Production Contract usually range between a 3% pre-recoupment and 4% post-recoupment pro-rata share of the box office receipts if a percentage royalty is negotiated (which can mean from $200,000 to more than $10,000,000 per year for all songs in a hit show), or a fixed dollar amount per week (from $250 to more than $1,000, regardless of the success of the play) if the parties have agreed to a non-percentage royalty.
“Royalty Pools” are very common these days where all royalty participants (composer, lyricist, librettist, choreographer, etc.) share in an agreed upon percentage of a show’s weekly operating profits. Operating profits are arrived at by subtracting from the gross weekly box office all weekly costs of production. An agreed upon percentage of the resulting figure (e.g., 35%) is the royalty pool to be shared by all participating parties.
ASCAP/BMI/SESAC
One of the largest sources of royalty income for songwriters, composers and music publishers and one that has held up the best during difficult economic times is the performance right payments from ASCAP, BMI, and SESAC, as well as from affiliated collection societies in foreign countries (i.e., PRS in the U.K., SOCAN in Canada, SACEM in France, APRA in Australia and New Zealand, IMRO in Ireland etc.). ASCAP (The American Society of Composers, Authors and Publishers), BMI (Broadcast Music, Inc.) and SESAC negotiate license fee agreements with the users of music—radio and television stations, cable stations, Websites, concert halls, wired music services, airlines, restaurants, colleges and universities, etc., collect the license fees from each licensed area and distribute the money back to songwriters, composers and music publishers based on surveys of performances in each of the licensed areas.
The license agreements give the user (i.e., a television station, a website, etc.) the right to perform the music and lyrics of any member of these organizations without threat of an infringement action for unauthorized performance of compositions. The license fees collected by ASCAP, BMI and SESAC are close to $2 billion a year with ASCAP and BMI both collecting in excess of 900 million dollars each.
These freely negotiated licenses are either “blanket”, allowing unlimited use of each organization’s repertory for a negotiated fee, or “per program”, whereby the fee is dependent on the advertising revenues of a specific program which uses music not otherwise licensed directly or at the source. Music users can also go directly to the copyright owner and negotiate “source” or “direct” licenses.
It is important to bear in mind that these three organizations have entirely different writer and publisher contracts, license fee agreements and payment policies, rules and practices resulting in different payments for every type of use. For works used in the audio visual area (free TV, cable, satellite, pay per view, etc.), payments are based on, among other factors, the type of use (theme, score, feature, promo, logo, ad, public domain work, etc.), the media of performance, the license fee of the station, network or service, viewership and ratings, time of day, duration of the use, and past history of performances, among other factors.
Based upon the separate reciprocal licensing agreements between ASCAP, BMI and SESAC and performing rights societies in all of the primary countries of the world, U.S. songwriters, composers and music publishers are covered for performances of their works in foreign countries with the foreign country society forwarding to a writer’s U.S. performing rights organization any monies collected in that territory. Foreign country writers and publishers are covered similarly via these agreements. Many U.S. publishers collect their monies directly through sub-publishers in the local territory.
For film and television composers and songwriters, the countries providing the most income are the U.K. (PRS), Germany (GEMA), Canada (SOCAN), Japan (JASRAC), France (SACEM), Spain (SGAE), Australia / New Zealand (APRA), Italy (SIAE) and the Netherlands (BUMA).
Foreign Theatrical Royalties (Movie Theatre Performances)
In most countries outside the United States, motion picture theatres are licensed by the local performing right society for music used in theatrically distributed films. Some of the formulas negotiated with movie theater owners and distributors include a % of net ticket sales, sums based on the number of occupied seats, a % of gross ticket sales and whether the theater is in a rural versus urban location, among others. An average rate would probably be in the area of 1% of the box office total with that figure reduced by foreign society administrative charges including social and cultural deductions in certain countries.
These fees are collected by the local performance right society in each country (i.e., PRS for Music in the United Kingdom, SACEM in France, SOCAN in Canada, APRA in Australia / New Zealand, etc.), which in turn remits the writer’s share of such monies directly to ASCAP, BMI or SESAC in the United States, which then pays the royalties to the writer. The music publisher normally allows its sub-publisher representative in each foreign territory to collect its share of such monies directly.
Because of the worldwide appeal of many U.S.-produced motion pictures, it is not unusual for a successful film to generate between $50,000 and $300,000 in total foreign theatre performance royalties for the United States composers, songwriters and music publishers who have music in a particular film as reflected on the cue sheet. These monies go to any film, big or small, as long as the movie is shown in movie theaters.
In the United States though, movie theaters are not licensed by ASCAP, BMI or SESAC due to the 1948 Alden Rochelle court decision against ASCAP. Though the “practices” cited in that case were long ago corrected, the Consent Decrees governing the United States performing rights organizations specifically enjoin and restrain them from “granting to, enforcing against, collecting any monies from or negotiating with any motion picture theater distributor concerning the right of public performance for any music synchronized with motion pictures.” In short, no United States movie theater pays composers, lyricists, songwriters or music publishers for the music in films being shown in United States movie theaters.
Dolls and Toys
Many dolls and other toys use music or tapes or microchips. Formulas in this area are sometimes based on the statutory mechanical per-song royalty rate (9.1¢), or higher negotiated rates because of the merchandising aspects of the license.
Home Video/DVDs
The home video market represents a major source of studio revenue and can be a source of revenue for the music publisher and songwriter. Home video licensing is normally handled in a number of ways, including:
- A one-time buy-out: Many video distributors demand that publishers accept a one-time buy-out fee for all video rights, regardless of how many videos might be sold—a fact of life in today’s market that must be faced and negotiated accordingly since the only negotiation is the actual amount of the one-time fee being paid.
- A per video royalty based on sales of the DVD or other audio visual product.
Remixes
Remixes are an important part of music as they enable recordings and songs to reach different markets and different audiences from the ones for which they were initially designed. For example, an initial recording whose primary purpose was designed for a film may need to be remixed to reach additional markets that may not be interested in a “movie” song. One of the more important markets for remixes is the dance, electronic or club market but there are many more. Obviously, there are recordings that are initially made just for this market but, because of the skills of remixers, songs and recordings that would not be appropriate for these markets become hits and are accepted by music fans who may have never listened to the original.
When it comes to songwriter or composer credit, copyright ownership, and songwriter and music publishing royalties from the remixed version of a composition, however, the remixer does not participate because there is no change in the songwriter-publisher ownership and royalties, unless the original writers and publishers agree in the case of substantial new material.
Sheet Music and Folios
Famous Movie Songs, The Best Television Themes Ever—these are but a few of the many folios released each year. Though not as valuable as it once was, this area can provide a steady stream of good income for some compositions and, for others, a substantial infusion of royalties. For example, successful songs may be distributed in a multitude of arrangements for piano solo, piano duet, guitar, concert band, jazz ensemble, vocal solo, choral arrangement, electronic piano, organ solo, and as part of a “best of” or “songs from a motion picture” series. In addition, sheet music may also be printed in non-music-oriented books such as Merv Griffin’s “Jeopardy Theme,” which appears in Alex Trebek and Peter Barsocchini’s The Jeopardy! Book. “How To Play” and instructional audio visual DVDs and download / availability have also increased income in this area, since there are not only print but mechanical and/or synchronization rights encompassed as well.
Ringtones
The use of the melodies of motion picture and television theme songs and scores as ringtones for cell phones is a major source of revenue with license formulas in the United States ranging from 10% to 16.15% of the actual retail selling price to the consumer for the completed transmission, download, upload, or other delivery of the recording (or revenue earned) with either a guarantee that the consumer price on which the royalty percentage is based will not be lower than a certain amount (e.g., 99¢), that the ringtone will sell within a certain price range (e.g., between $1.00 and $3.00) or that a minimum royalty (e.g., 10¢, 12.5¢, 15¢) will be paid to the writer and publisher regardless of the percentage formula calculation. A one-time per song upload fee of from $25 to $50 may be paid. The contract will usually provide that the ringtone use will not exceed 30 to 45 seconds. The territory will be for the United States or the United States and Canada, unless the parties agree to include additional countries.
In 2006, the Register of Copyrights issued an opinion that the compulsory licensing provisions of the U.S. Copyright Law apply to most ringtones and mastertones, and that record companies or other firms are allowed to use statutory mechanical licensing procedures and rates to license musical compositions for use in these areas. In 2009, the Copyright Royalty Board established a total 24¢ writer/publisher statutory royalty rate for mastertone ringtones which rate has been appealed.
Musical Greeting Cards
Film or television compositions used in greeting cards take the form of either music only, music and lyrics performed together via the original master or a re-record or a reprint of a portion of the lyrics.
These deals are usually for the United States and Canada with a 3-5 year term with a right to make an arrangement of the composition but not to change the fundamental character of the music or change the lyrics. A specified maximum duration use will be given (e.g., 30 seconds) with royalties based on either a percentage of the wholesale price (usually with a minimum floor) or a per unit royalty. For reprinting lyrics only, some companies prefer a one-time payment for a specified number of cards. Writer, publisher and copyright ownership information will always be on the back of the card.
Sampling
Sampling occurs when a creator or producer takes a portion of an existing song or composition, an existing recording, or both and puts them into a new work. If the use is authorized and done with permission of the copyright owner (the publisher usually), the final deal could be a negotiation involving co-copyright ownership or participation in all earnings of the new work. If the sample was done without permission (unauthorized), all of the earnings of the new work could end up going to the creators of the old work.
Among the considerations taken into account are the duration and nature of the sample and the bargaining power of the parties.
Conclusion
As you can see, there is an unlimited world of opportunities for exploitation of copyrights beyond their initial use. Awareness of these opportunities, knowledge of each of the fields and the ability to license quickly and appropriately are the keys to succes