What Is Music Licensing?

two guys playing guitar
by The Bopper Team

Advertisers and film producers want to drive a strong emotional response in their audience, and music is perhaps the most effective and readily-available way to make this happen. Movies, television shows, and ads would be reduced to dry dialogues and slideshows without music. The mood at political rallies, conferences, and sporting events is massively boosted with the right song pumping over the loudspeakers. And while that calm, quiet feeling you get when you sip a latte at your favorite coffee shop might come from the caffeine at first, it’s the music that makes it easy to stay for a second (or third) cup.

But as with most things in life, music is not free. Especially if you want to use music in a commercial setting, you’re going to need to secure a license in order to use a song without running into legal headaches. Often, it can be a tall order to secure the rights to use that perfect song. Understanding the ins-and-outs of music licensing is key to joining the party, regardless of whether you are paying for music or getting paid.

A Brief Overview of Music Licensing Terms

There are different types of music licenses for different uses. To use a song in a commercial setting, every single one of these rights must be cleared and approved by the relevant stakeholders. When you layer on the different parties involved, mediums of use and the daisy-chain of percentages and agreement, things get complex, fast. We’ll provide a brief overview of some of the most important terms below.

Publishing RightsWhen someone writes a song (melody, words, composition) they have the right to benefit from any recording or performance of that song. While every person who contributes to a song gets a piece of the publishing rights, the recording of the song itself is handled separately.

Master RightsWhen a piece of music is actually recorded, the specific and original recording is referred to as the ‘master.’ Typically, whoever pays for the music to be recorded owns the master rights – often a record label will cover the cost of producing a track, then pay an advance to their artists in exchange for a portion (or all) of the master rights. Independent artists who record their own music often hold their own master rights. Whoever owns these rights is able to grant licenses to other parties.

Synchronization LicenseCommonly referred to as a ‘sync license’, this refers to music that is synced with visuals in other mediums. Whenever you hear a song in a movie, ad or TV show, it’s safe to assume that a sync license has been granted, otherwise someone is going to get sued. In general, the rights holders (e.g. music label or indie artist) will get paid a flat fee for the use of the recording in the production.

It is common in sync licensing to hear the term ‘one-stop’, which refers to a song that is controlled by one entity. This can mean working with an artist who owns 100% of both master and publishing rights. Many companies and platforms offer one-stop given the agreements they have with artists, labels and related entities.

Public Performance LicenseThis covers music that is broadcast in public places including stores, bars and coffee shops, but it also extends to radio and concerts. When you hear a song at your favorite coffee shop, a performance license is involved. Quite often these are handled in bulk by streaming platforms which offer specific services to businesses.

Mechanical LicenseThis is required to create physical reproductions of music. To print CDs or cassette tapes, you need a mechanical license – although this license existed before either. When player pianos became popular in the late 1800s, ‘live’ music could be played without needing a musician. Since artists’ compositions were being reproduced without benefitting the artists, the concept of a “mechanical license” became necessary to protect their work and was first enshrined into law as part of the U.S. Copyright Act in 1909.

How Music Licenses Work

For a license to be granted, there are two main parties who must agree upon the contract:

LicensorThe party, either a person or entity, who owns the work. They have the ability to grant licenses. In plain English, this is typically a record label or artist.

LicenseeThe person or company that receives the license – an advertising agency, film production company, brand content producer, etc.

This contract can take different forms. For sync licensing in movies, a flat fee is considered typical, although it is not uncommon for bonus payments to be made if a project reaches a certain level of financial success. In advertising, sync license fees may depend on the scope of the advertising campaign – how long it will last, the medium on which the advertisement will run (television, social media, radio, etc.), and the geographical territory for the campaign.

In some instances, the Licensee will make royalty payments to the Licensor based on the amount of revenue generated in association with the project. In the simplest terms this relates to distribution deals; the licensor receives payment based on the copies produced and sold. When there are no royalty payments written into an agreement, this is called a royalty free license.

How Much Does It Cost To License A Song?

The standard music budget for a film is between 2-3% of the total budget, although this figure can vary depending on the production. For an original song by a well-known artist, the budgets can approach sky-high numbers. Christina Aguilera was paid $1 million for a single song in Shark Tale, and Kanye West is reported to pull in similar numbers. Generally speaking, the more well-known a song, the more it will cost to license.

Licensing music in ads is similar to film in many ways, in that there is no universally agreed-upon rule for budgeting, but 3-5% of the total production budget for a campaign is a pretty good rule of thumb. For a commercial production with a $50k budget, brands and their agencies should feel comfortable spending at least $1,500 on music.

That being said, even though only a very brief clip of a song may be played in an advertisement, budgets can still go very high – brands often pay upwards of $500,000 to use just a few bars of a pop song chorus in a national television campaign.

Considering the power of music to engineer moods and create subtle perceptions in the subconscious minds of consumers, it makes good sense for brands, agencies, film production companies, and television showrunners to shell out the big bucks for the right track. But when money is an obstacle, one way music supervisors can reduce the budget is to license similar tracks from lesser-known artists. It is common to look for ‘songs in the style of’ popular songs, often referred to as ‘soundalikes.’ If you need to match the energy and tone of a song, but don’t need the audience to recognize it, then this will be much cheaper.

Scandals And Rule-Breaking In The Music Licensing World

Every year, billions of dollars are siphoned from the global music industry by way of fraud and copyright infringement. Although it would be fun to believe this massive amount of fraud is all the doing of cutthroat, mafioso executive types sneaking off with master recordings and forging license agreements, music licensing fraud often takes a more boring, yet quietly damaging form.

According to Nielsen, over $2.5 billion of lost revenue in the music industry stems from small businesses. Rather than acquiring a blanket license to play music in their stores, many business owners stream music from personal accounts. This makes sense – good music makes people stick around, and puts people in a good mood to buy more goods and services. And considering how rarely this sort of fraud is prosecuted, crime literally does pay in this case.

But not every bad actor in music licensing fraud is just your average mom-and-pop shop owner on the corner. Sometimes, the conspiracy really does go all the way up to the top. For example: The Rolling Stones are threatening to sue Donald Trump for using their music in his rallies despite not having a license, and in the face of cease-and-desist directives from their lawyers. Tom Petty’s estate has also issued cease-and-desist letters for the same reason, not wanting their music to be played for politicians they don’t support. 

Beyond outright fraud, the often-tangled web of rights holders can result in some technically legal, but ethically dubious outcomes for artists. Take the case of Taylor Swift – who, in 2019, was blocked from performing some of her older songs by the record label who controlled the master rights. After a convoluted story involving numerous labels, managers, contracts, and regrettable early career decisions on the part of Swift, her former label controlled the master rights to the songs. Swift’s old label argues that performing these songs on TV would be a re-recording of them – and although she owns the composition of the music (publishing rights), she does not have the right to record it.

This changes in November of 2020 when she can record new versions of these songs, even reproductions of the original recordings. But the new versions will not replace the recordings on her old albums on streaming services, meaning her old label will take a piece every time the songs are played. We feel bad for you, Taylor.

How to Navigate the Music Licensing Landscape

Strangely enough, it can sometimes be quite easy, (albeit more expensive) to license tracks from professionally managed bands signed to big record labels. Many top artists are represented by top agents who know the music licensing game very well, and who actively field requests to license songs from their artists.

Lesser known and independent artists don’t have this luxury. Having a professionally produced album is only the beginning. Given the growing volume of platforms and libraries, it can be dizzying to find the right one, even if a musician understands all the legal and financial implications surrounding their music.

The key for both sides is working with partners that streamline the process, treat artists well, and connect music to those who need it. If you want to license a famous track from a Rock & Roll Hall of Fame-enshrined artist, but you don’t want to risk getting ripped off by greedy agents or deal with the headache of herding dozens of rights holders in for negotiations, consider using a third party done-for-you music rights clearance service. But if you want to dip into the massive pool of talented, independent artists with production-ready tunes for your films, you have three main options available:

Free Stock Music – There is truly an ocean of freely-available stock music on the internet, but the landscape is even more fragmented than it is large. While it is possible to find some quality tunes for free, you may have to spend hours of valuable time going down rabbit holes to find them. We believe that this path is best reserved for those with a very small budget, or for smaller personal creative projects. If you do choose to look for free stock music, make sure you select a platform that provides you with an actual license agreement for the song you download – this will provide you with at least some peace of mind re: the legitimacy of your rights to use the track.

Custom Music Houses – True to their name, custom music houses will write and record custom music for your production. Practically speaking, a custom music house might be a producer in their basement studio or a full-blown symphony, and pricing can range from quite affordable to very expensive. Some custom music houses maintain a library of pre-recorded tracks that can still be licensed, often for a lower fee than a truly original piece of work, and all of them employ or have relationships with a cadre of musicians who are ready to get paid to give you music. If your project has a very specific sound that must be created, time to wait for a music house to compose something, and the budget to pay them, this may be a good path to explore.

License Providers – This category runs the gamut from freelancers who will try to secure the rights to an individual song on your behalf, all the way to full-blown SaaS platforms with tens of thousands of tracks available to license. Some license providers provide advanced music search tools to help you find tracks with specific, precise sounds or moods. License providers are the only type of company that could potentially help you get the rights to a Top 40 track or connect with an undiscovered independent artist. Pricing and ability to handle various project scopes will vary, but if your project has even a small budget, it’s safe to say that you’ll be able to find a license provider to help you get the right song for your production.

Summary / Final Thoughts

Music is the most emotionally-potent substance in the world, and it’s a vital part of any creative project.

But music licensing is complicated. There are myriad ways to buy the rights for a song. Some of them are expensive and time-consuming – and sometimes, the expensive and time-consuming option is the correct one. When you’re looking for a song for your advertisement or film production, it’s important to understand the basics of the music licensing landscape, so that you can make the right decision about how to get the song you need.

We hope this article has been a good jumping-off point for you to start gaining the knowledge you need to make the best decision about where to find your next track. If you want help understanding some (or all) of the information covered here, or need somebody to assist you with your next music search, feel free to contact us – our team will be happy to help.