How To Make Money From Music Licensing – Guest Blog

How To Make Money From Music Licensing

Music licensing is a major area of growth in music 2.0. If you hope to bring in income as a DIY musician then licensing is definitely an avenue you should be pursuing. Thankfully, SoundTempest has assembled a thorough and complete guide detailing the ins and outs of music licensing.

via SoundTempest:

Perhaps one of the biggest misconceptions about being an artist in the music industry is that all of your money comes from selling CDs and possibly touring. It is an understandable belief – for example, if a band sells 500,000 CDs at $14.98, it’s easy to do the math in your head and assume that of the nearly $7.5 million generated through those sales, a good chunk of that would go to the band.

However, the truth is, the industry is not like that, by and large. It is not only possible, but probable that a major label artist selling 500,000 units might only end up with less than $100,000 in actual profit from the label. But then factor in taxes and money being split among different band members, as well as costs of living, transport, and a host of other associated bills, and each individual band member might have been better off working at a retail job. Factor in slumping CD sales, and digital sales that aren’t accounting for the loss and the picture becomes even more grim.

What about live performances? Adjusted for inflation, performing artists earn less than they ever have before, probably because there are far more performers now than ever. Not to mention all the associated costs and stresses that accompany it; transportation of the band and gear, insurance, lodging, food, etc. While this is not an issue for superstars like Madonna or The Rolling Stones, for the average band simply trying to earn more money to convert a hobby into a part-time or full-time career, touring is not efficient.

Despite all this, there is another revenue stream that any artists, producers, and composers can benefit from, which many independent musicians are unaware of: music licensing. This is an area where even independent, unsigned artists can make a respectable income, potentially into the five figures with no sort of record label or agent support whatsoever. Sound appealing? In this guide, we’ll explore what licensing is (and isn’t), how to do it, and how it can benefit you.

As you read, feel free to comment with questions, suggestions, clarifications, or any other thoughts!

I. What is Licensing?

Licensing involves the transfer of copyrights, in whole or in part, exclusively or non-exclusively, from one entity to another, in exchange for some sort of benefit; usually money. Licensing is not a concept exclusive to music; it is very common in any industry where intellectual property is involved. For the purposes of this guide, however, I’ll be using the term “licensing” exclusively to refer to licensing of music – songs and sound recordings. Let’s break down the definition, as it applies to musical works.

Transfer of copyright. Under U.S. law, any musical work is copyrighted as soon as it is fixed into a tangible medium of expression. “Tangible” does not mean cassette tape or CD – it can mean any number of digital formats as well. Copyright is a form of intellectual property, and like any property, it can be transferred from one person to another. Here’s where it gets interesting:

In whole or in part. Copyright is actually comprised of a number of rights, most of which are exclusive, with a few exceptions. As a copyright owner, you can divvy them up in any way you choose; you could give three people your right to distribute a song (eg. put it on a CD and sell it), four people the right to synchronize (eg. use it in a film or video), and keep all the rest of the rights yourself. Alternatively, you could give all of those rights to just one person or entity.

Exclusively or non-exclusively. You’ve probably picked up on the meaning of this phrase already, and it’s extremely important to the concept of licensing. Unlike normal property, intellectual property, like the copyright to a song, can be “duplicated” and in the possession of an unlimited number of entities. Practically speaking, this means that if you non-exclusively license a song to someone, and you get $400 for that license, you’ve earned money without actually losing anything! You can non-exclusively license the same song to somebody else without doing any additional (musical) work.

In exchange for a benefit, usually money. The final component of our definition is simple enough. In many cases, a licensing deal results in cold, hard cash, but this is not always the case. You may simply gain the benefit of opportunity to earn money down the line, or the promise of backend royalties. Whether or not the compensation offered is worthwhile is highly dependent on the other terms of the deal.

Of course, while this is a fairly simplified definition, sometimes it just makes more sense to see examples. Here are a number of situations that would all constitute licensing.

  • A local car dealership paying a rock band $1,000 for the privilege of using one of the band’s songs in a commercial.
  • The Discovery Channel buying a premade CD of background music from a “music library” (more on this later) for use in one of its shows.
  • group of artists allowing a video game company to use their songs in a new racing game, in exchange for prominent credit in-game.
  • A cover band paying REM to record their own version of “It’s the End of the World as We Know It” and sell it on a CD.

Not every situation where copyright is transferred constitutes licensing in the context we’re using it here. For example, a composer being paid $20,000 to compose a movie score which then becomes the property of the film company would be better known as a “work-for-hire”. Work-for-hire (or WFH) is used to describe a relationship when an individual is paid an up-front fee or salary and in return, their artistic creations become the property of an employer – no copyright is retained by the creator. Practically speaking, licensing typically deals with existing works that were not composed exclusively for some sort of contract.

The last important concept regarding licensing is that of a “license”. Assuming the copyright is not actually transferred entirely from one person to another, the person who wishes to use the music (the “licensee”) needs to sign a contract with the copyright holder (the “licensor”.) The contract, which spells out what rights the licensee is being granted, limitations on those rights (usually something related to time), and various other terms and conditions, is called a license. There are a handful of widely-used licenses, which makes it easy for professionals in the industry to communicate quickly about the content of a contract and its intended purpose. They include:

  • Synchronization (sync / synch) license: This grants the licensee the right to take a SONG and combine it with a video work of some kind, such as a film or TV show.
  • Mechanical license: This allows the licensee to record and distribute a song via “phonorecord”, which includes anything from tapes to CDs and MP3s. There are actually two subtypes…
  • Compulsory mechanical license: If a song has been made available to the public (intentionally), U.S. law allows anyone to record their own version of that song and sell it by acquiring this kind of license. They do not have to ask permission or negotiate with the copyright holder, but they do have to pay a standardized royalty rate based on number of physical sales and downloads.
  • Negotiated mechanical license: The opposite of a compulsory mech. license (CML.) An NML means that the licensee is not acquiring mechanical rights via statutory law, but is deciding on terms with the licensor. The Harry Fox Agency is an organization that makes the process of obtaining NMLs as easy as obtaining CMLs, though they do not represent all songs or all writers.
  • Master use license: This allows the licensee to edit and synchronize an existing sound recording. This must be acquired in addition to a sync license if the licensee wants to use an existing recording!
  • You’ll note I’ve differentiated between “song” and “sound recording” – this is because U.S. law distinguishes between the two. A song is a collection of notes, rhythms, and lyrics. A sound recording is simply a means of fixing that song into a tangible medium. The distinction is important because you can control rights to a song but not a sound recording, and vice versa. Even in typical, artist-unfriendly major label contracts, the writer of a song retains control of that copyright, while the label only takes control of the sound recording.

    II. Who Needs Licensed Music?

    There are a great many entities that license music all around the world from thousands or perhaps tens of thousands of bands, composers, and producers. The most prevalent class of licensee, when it comes to sync and master use, may be media producers – anyone that creates content for film, TV, radio, advertising, or home entertainment in general. Next time you’re watching your typical TV network or film, for example, pay attention for an hour to all the music being used. Chances are, a massive chunk of that was not written specifically for any given production, but was licensed – this is very common in everything from network TV shows, like Grey’s Anatomy, to cable TV (Discovery, TNT, USA, MTV), to big-budget movies like Rush Hour 3, to home fitness videos, radio commercials, hotel or spa lobbies, video games, and so on and so forth.

    Though media producers do make up a big chunk of licensees, many times there are companies that serve as intermediaries, licensing musical content from composers, then licensing it toothers companies or individuals. These are referred to as “production music libraries”, though often this is shortened to simply “music libraries” or “libraries”. Libraries often double as actual music houses, with some sort of in-house music staff that can create custom audio for any given project. We’ll delve into libraries a bit more later.

    Performing artists represent the rest of the primary target market for licensing. As mentioned earlier, mechanical licenses, be they negotiated or compulsory, generate royalties for every sale of a recording using the licensed song. The purpose of music publishers is to attempt to gather a vast, high-quality catalog of music from a number of songwriters and make it available to recording artists. Many performers, including highly successful major label acts, do not write their own songs, so there is a constant need for excellent songs to be recorded on a yearly basis.

    For the purposes of this guide, however, we will not go into the realm of publishing and songwriting with the intent of being ‘cut’ by as big an artist as possible. This is a different beast than licensing for film/TV or libraries – it is significantly harder to break into, and it is a troubled market given how CD sales have been gradually slipping. On the other hand, other forms of media have been exploding, be they video games, animated movies, new cable TV channels, etc.

    III. Production Music Libraries and You

    Libraries have a huge presence in the world of licensing. Many content producers have a massive need for new music that is only growing. Think of all the hundreds of cable TV channels that have 24 hours of programming that must be filled daily. Even if you discount ads (which also need music, of course!) there’s still an unbelievable amount of media being shown to the general public on TV alone. Most of that is going to require some sort of underscore, but it would not be feasible for networks and production companies to hire composers to write custom scores for each and every show. Money isn’t the only prohibitive factor – considering how much music is needed, it would be unrealistic to expect even a top-notch team of composers to consistently generate hours upon hours of music every day.

    The same situation can be found outside of TV as well. Think about all the thousands of radio stations and their countless local and national advertisers. Many of these broadcasts will require music, but like with TV, it would be very hard to find composers fast and cheap enough to create the required output. Then, you have the market for any sort of home DVD or video product; makers of, say, workout tapes would likely not have the budget for a custom soundtrack, but might still want some adrenaline-pumping music nonetheless. Or what about any sort of company which needs to put on trade show presentations or sales videos? Aesthetic is very importantin these scenarios, and music is part of that. But it’s unlikely a company not working in the entertainment business would have a music supervisor or composer on their staff.

    Situations like these are where production music libraries come in. Some libraries are highly specialized, offering a small catalog of high-quality music in a handful of genres, while others showcase literally thousands or tens of thousands of CDs worth of music. Libraries make the process of finding music easy, even for non-musicians, usually by having an excellent sales and support staff, as well as advanced search engines allowing users to browse by mood or intended use. Some libraries do not even bother to sell their wares, but rather provide major content producers with new music regularly, and wait for money to accumulate only after music is used, thanks to backend royalties.

    There are two common business models that most libraries will select between:

    Needle-drop / per-use – The library charges buyers up front for a license to any given song, and the cost of the license varies heavily depending on the intended usage. A single use in an internet Flash video on a website getting moderate traffic will cost far less than even a single usage on prime time network TV.

    “Royalty-free” – This term is slightly misleading. The library offers collections of music, usually in CD format, to buyers for a single upfront fee. Once the buyer purchases a CD, they can use it repeatedly in almost any context without owing the library further money in most cases. However, if the music is used on TV, the buyer will usually have to pay royalties to a performing rights organization (PRO) such as ASCAP, which in turn will give some of those royalties back to the library and original writer.

    The “giveaway” model, wherein libraries literally give out music for free and simply expect profit on the backend, is not as common as either of the above.

    Not all music libraries are created equal when it comes to the quality of their catalog; some have more prestigious and high-paying clientèle than others, and thus have higher-quality music. The top-tier libraries consistently employ very skilled musicians, full orchestras (as opposed to sampled orchestras), sharp production values, and creative composition. To get an idea of the wide spectrum out there, simply do a Google search for “music production libraries” and you will find quite a list!

    As for how different libraries actually acquire their content, this too varies. Some specialized libraries use select or in-house composers, and do not solicit music elsewhere. They may be affiliated with a particular major label catalog or publisher instead, which makes it even harderfor any outsiders to get in. Others are mostly closed to the average composer, but may periodically search for new music to fill in gaps. A great many libraries will accept music from any source, provided it is high-quality enough and they are not overstocked with that particular musical style, but may not actively solicit. Lastly, some libraries allow anyone to add music to their database at any time, but do little to nothing to promote this music, and do not pay composers up front; only when deals are made.

    IV. How Can I License My Own Music?

    This is the part you have all been waiting for, no doubt. So you understand what music licensing is and who needs it, but how can it benefit you? Let’s go through the main methods of how to license tunes you’ve written, and what sort of compensation you can expect.

    a. Direct Licensing
    This is the most simple form of music licensing. It involves the end-user of the licensed music, such as a filmmaker or video game developer, communicating directly with the artist or composer. There is no middleman, and all terms of the deal are defined by the artist and the end-user alone. For any musician who is already somewhat visible (and gaining visibility), this is almost inevitably going to come up at some point. A fan wants to use a song for a YouTube video; a local surf shop needs a theme song for their new commercial, etc.

    There are a number of benefits to direct licensing, the primary one being that you (the licensor)keep all fees. Even the most favorable library deals are usually only a 50/50 split, meaning that all other things equal, you’ll earn twice as much money for the same songs as you would elsewhere. Being able to present your catalog exactly how you want and control every detail is another perk. The downside to this method is that your potential market of licensees is limited by your own visibility. If you are a relatively unknown artist, it is highly unlikely that Fox will approach you to license one of your songs.

    Additionally, you have to deal with all the legal and business stuff yourself. If you’re completely inexperienced, you’re at a disadvantage for writing up (or understanding) a licensing contract. If someone doesn’t pay you on time, you need to spend your own resources going after them. For applicable situations, you need to follow up on people who use your works on TV and get them to fill out cue sheets. Then there’s the issue of presentation – do you have an easy-to-navigate page with your licensable works? If a music supervisor is in a rush, he or she might not spend time trying to figure out your site design or the genre of your pieces, and may simply move on.

    Luckily, there are tools available to help those interested in direct licensing. One such tool is theMusic Licensing Calculator, an embeddable object that can be placed on your site. The calculator allows potential licensees to very easily get a quote based on their type of usage and email it to you, or inquire further about the price (negotiation.) Of course, you’ll also want to make an aesthetically pleasing site with an easily navigable layout and clear categories for your licensable music.

    If you choose to direct license, the fee you get will be highly variable. The Music Licensing Calculator will help you get a sense for the different kinds of fees you might expect, on average, for different types of usage. I recommend checking out one of the sample calculators to see for yourself.

    b. Buyout Library Deal
    Another fairly straightforward form of licensing, the buyout deal basically involves you giving exclusive rights to a song or collection of songs to a music library. In return, you are paid alump sum up front. You can expect 50% of any backend public performance royalties, which again are generated from television usage of your music. These royalties can be tiny – less than $10 per use, if it’s an obscure program on cable – or well into the hundreds or thousands of dollars per use for primetime network TV. While backend royalties, over time, can accumulate to a respectable amount, you need to have a lot of music out there, as well as a lot of patience, to reap the rewards; it can take nearly a year for a usage of your song to result in a check in your hands.

    Buyout fees range from $150 to $1000, though common fees reside in the $300-500 range per track. As the composer/producer, you are generally expected to make sure your track is fully mastered and ready to go. You will most likely be asked to make edited versions of the song, such as a version without a lead instrument, and 60/30/15 second versions. If the library has to do work editing the track for you, it may result in a reduced fee. $300-500 might not sound like a lot for a song that took months to write and produce, but consider that production music does not necessarily have to be your magnum opus. Mood is often more important than intricate part-writing, so if you’ve had works in progress lying around where you had a great groove or chord progression but no lyrics or prominent melody, you might consider converting those pieces into library tracks.

    Buyout deals are ideal if you can pitch a collection of similar songs. Examples include a CD of adrenaline-filled metal music, a CD of chillout/lounge music, a CD of meditative new age tunes, a CD of tense orchestral underscores, and so on. Again, to get an idea for what’s out there and what people are buying, just Google for “music production libraries” (or “production music libraries”) and listen to lots of demos in various categories. Chances are, you can write something at leastas good as many of the songs you will find.

    If you’re looking for a deal like this, you can try a few different approaches. One is to go through a service like Taxi, which provides listings on behalf of music libraries (among other companies.) You pay Taxi and submit songs to them – they forward your best material, giving you a better shot at a deal than someone who simply sent an unsolicited envelope with music in it. Many people have achieved success through Taxi, so it’s worth looking into if you have a little extra money to invest ($300/yr and $5/submission, to be exact) and prefer to let other people do the opportunity searching for you.

    My own preferred method is to simply contact libraries yourself. Compile a list – very easy with Google – then look for FAQs or submission information on each library’s website. Some may have a simple process for submitting music for consideration, or state that you can send demos to a certain address. If no such info is available, give them an email or a call. Briefly explain who you are and what kind of music you write. Tell them what you have available, and ask if they are looking to license any new music. With any luck, if your music is good enough, you’ll get some interested buyers. Remember: the more songs you have, the better, and the more collections of similar songs, the stronger your pitch will be. Pre-edited music (60, 30 second edits) is also a good idea.

    c. Non-Exclusive Library Deal
    This type of deal offers little to no front-end compensation, but can nonetheless be potentially profitable, and is a preferred option to buyout if you think you’ve written a truly desirable song. In this situation, you can provide the same song to as many non-exclusive libraries as you want, and increase the chances that it will get some kind of exposure. Some non-exclusive libraries are selective and will only take high-quality tracks; however, they do more work for the tracks that they do accept, which is better for you.

    Other libraries simply make a catalog available to the public, as described earlier, and do nothing to really promote any individual music. They’ll accept anything, but you have to rely on their traffic and do some legwork yourself to earn any money. The most popular library of this type isAudioSparx, which allows people to upload music and sound effects and fill out page after page of search terms to help lead potential buyers towards ideal material. While such a site might not sound appealing compared to the instant reward of several hundred dollars through a buyout library, if you can accumulate a good amount of desirable material, it can be a reliable source of income that requires little time investment.

    d. Licensing via Agent
    Some artists have no desire to deal with the hassles that can accompany any form of licensing, and so having someone operating on your behalf is the best way of obtaining benefit without spending your own time. The downside, of course, is that finding a reliable agent of some kind who actually wants to see you succeed, and isn’t simply interested in taking your money, is very difficult. I’ll reiterate that Taxi is a wholly legitimate organization that really does achieve success for its members, assuming their music is up to snuff. However, there are many companies imitating Taxi that are actually scams; I strongly recommend reading my guide to avoiding such scams unless you want to risk wasting money.

    Any well-connected music industry figure may be able to find opportunities for you, but there isno one way of finding such a person. You must be willing to do some level of networking in order to meet people who can do things for you, and you should try to think about what you can do for them, too. Despite the caricature of the music industry as being corrupt and heartless, if you demonstrate kindness and well-meaning to others, they will be more inclined to help youin return if they have the opportunity.

    Anybody can potentially be a valuable contact, not just experienced music attorneys, managers, talent agents, and music supervisors. Your roommate who is majoring in marketing could end up in charge of a $15 million advertising budget for a big company three years from now. The local indie filmmaker with the clever 5 minute animated short could end up directing Pixar’s next hit before you know it.

    Treat your friends and acquaintances well and don’t abuse any connection, no matter how unimportant it seems. This seems like very obvious advice, but nearly every day I encounter some kind of rudeness among fellow musicians. The next time one of my music library contacts says they’re looking for a style of music I don’t do, and I’m trying to decide who to forward the gig to, I’ll pass up the rude ones every time.

    Note: Licensing is one of the most common topics I discuss with other musicians, which is one of the primary reasons I’ve written this guide – to answer many of the questions I receive on a regular basis in a more thorough manner than I can possibly do on an email-by-email basis. However, while I have a good amount of personal experience in licensing, I am not a lawyer! Please do not take anything written here as legal advice.

    via SoundTempest

    Re-posted by Dexter Bryant Jr. [d.BRYJ]
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    1. Alan · August 14, 2011

      Thank you for the insight. The only question I am left with is how to license other people’s music if one were to start a production music library. Does one have to own the full copyright in order to do this or just a synch?


    2. Yadgyu · December 31, 2011

      Music licensing is a waste of time.
      Most libraries will never license a song for you. The ones that do will usually pay no money upfront because they provide a blanket license. You end up getting paid backend royalties. These royalties are pathetically low for cable TV placements (cents on the dollar).
      I would advice anyone serious about making a living from licensing music to throw in the towel. The competition is huge and you do not stand a chance if you are over 40 years old. It may hurt to hear such advice, but it is true. Young composers make current sounding music and will work for free just for the excitement of hearing their music in the background of “Keeping Up With The Kardashians”.
      Anyone who has licensed music for more than 10 years can tell you that their earnings from royalties are going down and the upfront payments are all but non-existent. If you have a few thousand songs sitting on your hard drive, you stand half a chance of making a few thousand dollars a year. Anything less will net you enough money for a few items off of the McDonalds dollar menu every three months.

      • Black Tarzan · March 28, 2012

        Competition is thick but I still believe that people young and old can make a career licensing music, it just takes a helluva lotta work. Having hundreds, even thousands of songs is an excellent start. The other part is connecting with people who are in a position to license your music and pay you for it. The odds of being selected for random opportunities is low but if you’re close friends with the guy who supervises music for Entourage or any other great show with great music, if that person respects your music and your work ethic and really likes you, you’re right in line for huge opportunities to make money with your music.

        • yadgyu · April 3, 2012

          Too much work for too little money. Janitors at Walmart make mor ethan most people trying to license music. Of course there are some people that do well from licensing music. But those people are in the minority. Most other musicians are wasting time.

          Music libraries do not pay fees to acquire music. They do not pay sync/license fees. All that most composers can hope for is PRO royalties. Those royalties are very low. Musicians cannot make a living from a $100 check every three months. The game is over.

        • Black Tarzan · April 5, 2012

          Most people, yeah, but not everyone. Some people make good money licensing. Its all about connections. Getting in with the right people makes a helluva difference. I once made $500 for licensing 8 seconds of music to an IKEA Christmas commercial in Australia. If you divide that by the time spent making that music (3-5hrs to compose the full-length version), I made really good money for the time I invested. The challenge is getting your music licensed regularly enough to make a living with it.

          You can see the commercial here:

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