How to Make Money from Music Licensing

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 (ie. put it on a CD and sell it), four people
the right to synchronize (ie. 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.
• A 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 to others
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 important in 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, though used, 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 harder for 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 the Music
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 a lump 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 its 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 least as 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 is AudioSparx,
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. But 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 is no 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 you in 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.