14 Important Music Licensing Terms and Agreement Clauses

Our discussion of music licensing has covered a number of different topics. However, as you may already know, music licensing cannot be discussed without also touching on topics like music copyright, contracts and agreements. 

As an aspiring musician, it is important to fully understand the different licensing terms and clauses that may or may not be included in your deals and agreements. This will allow you to make better decisions and provide you with the knowledge to fight for better deals. 

Whether you’re the person who created the original composition or you’re looking to use someone else’s work, below is a list of terms and clauses you should know about when entering into any type of licensing agreement.

Exclusive vs. Non-Exclusive

There are two different types of music licenses when it comes to exclusivity. A non-exclusive agreement means that you are giving someone else the right to provide your music to third-parties. 

This would grant them specific usage rights to your song for a variety of different purposes such as television, sampling, movies, etc. The person licensing the music would usually pay you a fee and potentially a portion of the revenue obtained from their usage. 

However, since the agreement is non-exclusive, you still retain the right to license the music for other non-exclusive agreements with different parties.

***Exclusive illustration***

There are a number of different advantages when it comes to using a non-exclusive license agreement. For one you’re not limiting yourself, as you have the ability to maximize your reach and income potential with this type of agreement. This is because you can still shop around for other opportunities with that specific work.

An exclusive license agreement on the other hand takes place when you grant permission to a single party only. With this type of agreement, you don’t have the ability to license your work with any other entity. 

This may not be the case forever and the duration of the exclusivity can usually be negotiated depending on the project. If someone is requesting the exclusive rights to your work, then it is important to consider what you might be giving up from the inability to  license the work elsewhere. Subsequently you need to ensure that you are fairly compensated based on exclusive rights being requested.

***Non-Exclusive illustration***

Suggested Reading:

6 Benefits of Music Licensing Explained

3 Important Factors to Help You License Your Music and Land More Placements

6 Most Common Music Licensing Myths and Misconceptions

Traditional vs Micro Licensing

Sync music licenses can be a very lucrative source of income for musicians. If you hear a piece of music in a movie, commercial, TV show or advertisement, it’s likely that money is being made by the original composer. 

A traditional sync license would be used for this purpose and an agreement would be established between the musician and the person who wants to use the work. The terms generally include an upfront payment that can be anything from a couple thousand to millions of dollars for more popular artists. These deals are larger in scale and a lot more complicated as they have more moving parts and interested parties looking for their cut.

Micro-licensing on the other hand is still similar to traditional sync licenses, however the deals are much smaller in terms of money and the scope of the project. Where traditional sync licensing is concerned, think blockbuster movies and when micro-licenses are mentioned think small scale indie films or Youtube videos. Both however are still considered sync licensing agreements at the end of the day. 

YouTube for example, is a very popular internet platform in which music is often used for intros and background noise in videos. It’s almost impossible for an artist, label or publisher to keep track of license requests for this purpose. Especially since a lot of these videos aren’t generating much traffic. 

YouTube has technology in place to monitor and detect the use of music on their platform to ensure the rightful owners are being compensated. Typically micro licensing situations will generate either mechanical or performance royalties depending on the medium using your music. An artist will usually collect these royalties through a publishing administrator but some of these royalties can also be obtained through the use of your music distributor like TuneCore as well.

Understanding Fees

The fees that are associated with music licensing will vary from situation to situation. The fees really have a lot to do with the popularity of the music being used and the size of the project it’s being used for. 

Someone can spend upwards of $25,000 on a single song if it’s being used for a very large project. You could also potentially pay $25 for a non-commercial project of some sort. 

You can expect different amounts based on whether you’re dealing with an independent musician or someone that is more established and mainstream. The highest levels of fees come from things like high-end television campaigns, whereas music for lease and feature films are typically lower, but not always. 

Once you have the overall fee accounted for, you have to think about who is going to be taking a cut of the pie. If a music label is part of the equation, they may be entitled to a substantial cut of the money, and the song writer will also get a cut which is great if this happens to be you.

 

There is also a cut that goes to the performers if they are different from the writer. Again this should all be stipulated in your agreements and there is no blanket way of organizing these deals. Each scenario will be unique but the more power you have and maintain, the better off you will be, especially if you do your research and are a savvy negotiator.

Overall Budget

The original artist or copyright owner can set forth any monetary requirements that they wish, however they will need to be realistic depending on the circumstances and the overall budget of the parties trying to license their work. 

It’s important to be practical and fair with those you are dealing with. After all, you want this to be a long lasting relationship with room for more placements rather than a horrible experience that sees a door close on you in the future.

For example, a major motion picture is willing to spend tons of money on a track especially if they know it’s going to be popular and positively impact their project. This is something that can generate a very lucrative income for all parties involved and if this is the opportunity you find yourself faced with then obviously you may be able to get away with more extravagant requests.

An independent film however isn’t going to have the same budget and capabilities as a major, meaning you will have to be smart and respectful throughout your negotiations. That’s not to say that respect goes out the window in bigger deals but do your research so that you avoid stepping on toes. 

***example of major deal vs indie deal & all the players involved (more hands in your pocket w/ big deal) ***

It is also important to note that smaller deals don’t exactly mean less money so don’t down play these opportunities. Keep in mind that with bigger deals, there are usually more hands grabbing at the revenue pile whereas a smaller artist will likely see a bigger take home percentage.

At the end of the day, a good opportunity comes in many different shapes and sizes but it never hurts to get your music out into the world especially if you’re just starting out and trying to make a name for yourself. 

Before you present anyone with your requirements, do some research, know who you are dealing with and the scope of their project. It’s one thing to ask for too much but you don’t want to get caught asking for too little either.

Terms and Duration of a Music License

A typical music license agreement will vary in its duration depending on the type of project and a number of other variables relevant to the situation. 

Some licenses may last a lifetime while others may only be for a year. There can be an expiration date or a period of time where the terms are adjusted or renegotiated. The possibilities are endless here as every situation will be different. 

This also relates to our topic of exclusive and non-exclusive agreements as you may grant someone exclusivity for a specified period but you may write in a clause that allows for new deals to be signed after that period is up. 

Whether you are licensing your music to someone or looking to acquire the permission to use someone’s music, the term and duration is very important to establish because without it, it can cause headaches for everyone involved.

***reasons for different terms illustration***

Scope of Use

It is always important to have an understanding of someone’s intended use for your work.The scope of use being requested by someone can be very narrow and specific or quite broad depending on the project. 

When working towards establishing the appropriate license for the situation, it is crucial that both parties are clear on what the work will be used for. This means that the details of the project should be outlined within the music licensing terms and agreements. 

It should be stated if the music will be used for a film, advertisement, sampled within another song, commercial, etc. Once the license is agreed upon and administered, the scope of use dictated is what must be adhered to in order to comply with the license. Anything outside of the scope of use can negate the license or be cause for a lawsuit.

Territory of a Music License

A music license will typically refer to different territories in which the relevant music can be used. These territories can reference a certain market or set of countries and the agreement must abide by these geographical restrictions. 

Typically this means that if the project plans to utilize your work, it cannot be used outside of the listed territories and regions. In most scenarios, a worldwide use scenario will be agreed too. 

However there are situations where restrictions to certain territories would make sense. For example if a movie is released in multiple countries where different cultures and languages are customary, they may only licence your music for North America and seek other works, more suitable for audiences of the other regions.

Also, a project or song might be very popular in one market but It might not see that much success in another market.These are all important considerations when it comes to outlining the terms of your licensing agreements.

An amendment or new music license agreement would have to be established in order to allow for other territories to be considered for the project. 

The more markets that are involved in a project, the more you should potentially be requesting in compensation. As the party who is trying to license the music It may be difficult to predict all the territories you may need later on, but it’s important to think about this ahead of time. 

Most Favored Nations

Lawyers will use this terminology to have their agreements default to the best possible terms for their clients based on the other parties involved. Essentially, If there is another party involved in the license like another copyright owner for example, everyone will receive the same terms and benefits. 

When a music supervisor is seeking music for a, deals must be made with both the owner of the sound recording and the owner of the composition. If the supervisor strikes a deal with the sound recording owner for $5000 and then negotiates a deal with the composition owner for $8000, a most favored nations clause would mean that you have to go back to the sound recording copyright owner and pay them an extra $3000.

This tactic is used to protect an individual that doesn’t have the same bargaining power that someone else may have. You might not be able to see what everyone’s agreement includes but this ensures that you are on par with the other copyright owners rather than ending up with much less. 

***illustration based on example***

Value

It’s important that an artist is compensated in some way but this doesn’t always need to be in the form of money. Compensation can come in the form of exposure, future collaborations, gigs, etc. 

When money is involved, the final payout won’t always be a life changing amount, but at the end of the day, your music has value and you should be compensated accordingly. When you license your music out for a project, they most likely won’t include your name and the title of your song in the middle of the project for everyone to see. 

People might be able to catch something in the credits, but most people don’t sit through these things. Regardless the music plays a big role in the final product, and even though it may not take centre stage it still holds value. 

It might be hard to put a price on the value you bring to the table but do your best to gauge this as accurately as you can to ensure that all parties are fairly compensated. What both parties are exchanging should all be clearly outlined in your licensing agreements.

Payments

Surprisingly, many agreements fail to address critical payment information, but a licensor should not only acknowledge the amount to be paid but also the details of how, when and where payments will be made. 

Different projects will trigger different royalties and the party obtaining the license is responsible for making payments to the correct people and places. F

or example money may need to go to the artists performing rights organization, record label, publisher or simply to the artists bank account. It’s also important to establish when these payments will be made. 

Will there be an upfront payment, payment upon completion or an ongoing royalty paid out quarterly? Make sure this is clearly stated so that you eliminate any guesswork on both sides.

Third Parties

It is very common to have a track that is owned by a number of different parties. People that tend to be involved include a record label, songwriter and the performer. However, anyone can technically own a copyright and often rights are bought and sold, meaning that there could be other random parties involved as well. 

When it comes to permission and licensing agreements, all copyright owners must be in the know of what is going on with their work. Everybody needs to be contacted and be in agreement with everything being requested in order for things to proceed. 

An artist may be asked to provide information to a music supervisor for example, but this doesn’t protect the supervisor and his team from being liable to everyone else involved, especially if the artist isn’t the sole copyright owner. 

Everyone needs to participate in order for this situation to work. In the end, it’s about making sure everybody is in the loop, comfortable with the terms and gets what is owed to them in an ethical and fair manner.

Gratis (or Free/No Fee) Licensing

When you are trying to get your name out there as a musician in order to generate some consistent exposure, it may be strategic for you to do things in good faith. Essentially artists will sometimes participate in free/no fee opportunities in hopes that this will further their careers. This can present problems depending on the situation but in a lot of circumstances it can be pretty beneficial for the artist. 

There are a lot of online platforms offering opportunities for artists to upload their work to be used by third parties. Typically the people grabbing the music from these platforms aren’t required to pay anything although some platforms will potentially charge a subscription fee. This could be anyone from a business looking for music to be used in their commercial campaigns, music supervisors working on a film, the owner of a YouTube channel, etc.

***Illustratte example***

Using these services gives a third party access to a ton of free music that they can leverage as they see fit. While this isn’t a horrible thing it just takes away a lot of your control as an artist when you leave something up for grabs like this. 

At the end of the day, if something were to blow up, you don’t exactly have the authority to demand any compensation in the majority of cases. This is because your agreement is with the platform and you have agreed to allow usage for no compensation.

Be careful with “free” whether you are the one giving something away or taking something to enhance your own work. You still have to be careful in these scenarios to ensure that you avoid any future headaches and that the service you are dealing with is reputable.

***illustration of not entirely owning sometthing and giving it away (producer complex)***

Dispute Resolution

Unfortunately, shit happens and to just assume that it won’t is not a solid practice. Regardless of who you’re dealing with and how well you know the person, it is important to include contract verbiage related to how things will be handled if things go south.

Things like what jurisdiction of law will be resorted to if an issue arises, if grace periods will be permitted to rectify any breaches of contract, limits to the different types of monetary damages that can be pursued, and so on.

Don’t get caught without a plan for handling the messy scenarios. The bigger the deal, the more emphasis you will see put on this area however this doesn’t mean that smaller deals should disregard these areas altogether.

Name and Likeness

Just because you have secured a license this does not mean you have the explicit right to now use and promote that artist’s brand or name as you please. Yes, they may be associated with your project now, but you will still need to negotiate for the right to use and advertise their name in a way that is deemed acceptable to them.

While a music license refers to the benefits that come with having a legal agreement in place between a musician and another party, there are a lot of details to take into consideration. It’s important to have a properly drafted license in place to ensure that all parties involved are being treated fairly.

Rates can vary and will depend on things like the popularity of the artist and a number of other variables. In the end, music licensing is a really great way to establish more streams of income, increase exposure and reach more people.

We want to turn it over to you now, what has your experience been like with licensing agreements? are there any other important terms or clauses that you’ve come across?