The Mechanics of Starting A Music Library Business

Music Library businesses have increased dramatically over the last decade or so as artists have sought to bring in extra income by placing their music in television shows, movies, and commercials. As record sales declined during the digital age, the negative stigma that existed for artists that sought these opportunities diminished. Since then, more entities have been aggressively pitching music either licensed to or assigned to them by artists. There are a variety of different deals that music libraries can enter into with composers to secure income from synchronizing music with video.

The license that covers the pairing of a composer’s music with film projects is called a synchronization (“Sync”) license. Sync licenses are obtained from songwriters, who own copyrights in the underlying composition of songs. Master use licenses are secured from either record labels or artists who own copyrights in the recorded rendition of songs.  Both sync and master use licenses are needed to sequence music with video in the presentation of film projects because these two copyrights accompany every musical piece. In the music library business, each license is referred to as a “side.” Music libraries typically receive a flat fee for each side that can range widely from a few hundred to tens of thousands of dollars in some cases depending on the popularity of a song and how that song is used in conjunction with a featured video. The flat fee for each side is typically equal to the other. If there are separate contracts for each side, to different parties, then each contract will usually have a “favored nations clause” that dictates the flat fee for one side be no less than the flat fee for the other side of the placement. A placement of music in film can only have two sides connected to it, however, there can be multiple parties involved within a side. While the master use license side is usually controlled by one party (either the record label or artist if the artist self-released), the sync license side can involve multiple artists (if there are co-writers) and multiple publishing companies (if there are multiple co-writers and some if not all have publishers).

The value of music libraries to music supervisors at television studios and film production companies is that they are a one stop shop where licenses to both sides of a placement are controlled by the same party. Whether two copyrights to a given musical piece are held by one composing artist or held by two or more different parties, the music library does the work of putting together a vast catalog of songs where they control both sides of a potential placement. This process is referred to as pre-clearance.

The easiest way a music library can pre-clear a song is to contract with an independent artist who is the songwriter for and also self-recorded their track. This artist would control both copyrights to their music and would be in a position to either license or assign both copyrights to the music library for the purposes of placing their music in a movie or television show. If an artist wrote their own song but signed with a record label that owns the recording of that song, a music library would have to contract with both the artist and the record label to pre-clear that particular song.  If the music library wanted to avoid contracting with the record label because of the hassle of dealing with an additional party, they could hire session players to make a new recording of the artist’s composition (thus controlling the new sound recording as well as the artist’s composition). This example makes clear that music libraries can get around the master use side if they need to but clearing the composition side of a song is a necessity for making placements. Another scenario music libraries navigate is how to deal with artists who write songs with other songwriters. Composers of these tracks are joint-owners of the songwriter copyright. An artist in this situation could not grant exclusive licenses and or assign an exclusive right without the consent of all the joint owners.

Once a music library has identified artists whose works they would like to include in their catalogs, the music library must then enter into deals to either license or obtain these songs outright from copyright owners. There are roughly four different types of deals a music library can enter into with copyright owners to pre-clear songs.

The first type of deal a music library enters into with a copyright owner to pre-clear and catalog a song is the exclusive contract with an advance to the artist in exchange for both the songwriter and sound recording copyright. An exclusive contract in this setting means that the composer cannot enter deals with other music libraries to pitch music that is the subject of the contract to television and film studios. The artist will receive an upfront fee for composing a song that may also involve recording the performance of the composition. This arrangement is known as a “Work for Hire” in copyright law. The party commissioning the work owns the copyright even though the artist created and fixed the work in a tangible medium. In addition, the artist also agrees that they will not receive a portion of the sync and master use license fees should the music they compose and record be placed with a television program or film. Lastly, the artist also relinquishes the publishing for that song. This means that the publishing half of public performance revenue that they would otherwise receive (public performance revenue is split into two halves – a publishing half and a writers half) when the song is publically performed over the television airways would go to the music library. While the artist would still collect the writers half of this public performance revenue, they would receive less than they would under a deal with a traditional publisher that ordinarily takes half of the publishing half (25% of public performance revenue).

The second type of deal a music library enters into with a copyright owner to pre-clear and catalog a song is the exclusive contract with a lesser advance to the artist in exchange for both the songwriter and sound recording copyright. This deal mimics the deal above except that in exchange for receiving less of an advance, the artist gets to share in the flat fees generated by the sync and master use licenses. The typical share in this arrangement ranges from 25% to 50%.

The third type of deal a music library enters into with a copyright owner to pre-clear and catalog a song is the exclusive contract without an advance. This deal does not require an upfront payment to the composer. As such, this is not a Work for Hire transaction. The composer owns both copyrights (in an ideal case) but is licensing to the music library the right to exclusively use the song to secure placements in film and television. Under this deal, the music library has the right to use songs exclusively for 2-3 years with successive yearly options that could be terminated by either side.  This deal also involves artists sharing half of sync and master use license upfront fees paid by television studios and production companies to the music library. The composer gives up it’s publishing for placements made by the music library, which means that the publisher’s half of any public performance revenue earned for plays of the placed song over the airwaves goes to the music library. The artist would receive the entire half of the writer’s share of public performance revenue for the same plays of placed songs over the airwaves. At the end of the initial term or when either side exercises their option, the artist would assume full control of their composition and recording. They would reassume the ability to pursue and collect synch and master use licenses, however, any publishing that resulted from placements from the music library during the term of the agreement would still continue to be sent to the music library.

The fourth and final type of deal a music library enters into with a copyright owner to pre-clear and catalog a song is the non-exclusive contract with and right to retitle. This deal mimics the deal above except that the composer contracting with the music library has the ability to enter into similar deals with other music libraries. When multiple music libraries pitch the same songs to supervisors of film projects across the industry, confusion can ensue in sorting out the music library responsible for the placement.  To alleviate this confusion, music libraries have started the practice of retitling. Publishers register songs with one of the Performing Rights Organizations (“PROs”) to collect public performance revenue (some PROs include ASCAP, BMI, SESAC). When there are multiple publishers (music libraries are quasi-publishers) this can cause the wrong publisher to get publishing income when a placement is made. If Mike Lawrence Publishing places a song that is publically performed but New York City Publishing is also representing the same song, ASCAP can mistakenly send performance income to New York City Publishing. To prevent this for a song like Imagine by John Lennon, Mike Lawrence Publishing would rename this track “Imagine_Mike Lawrence Publishing” in ASCAP’s database (assuming ASCAP is Mike Lawrence Publishing’s PRO). Music supervisors fill out cue sheets ( a document that details when a song appears in a television program that plays over the air) for their projects and submit these cue sheets to ASCAP. When cue sheets have the correct names of songs as re-titled, that ensures that the correct music library gets the performance income due to them. Non-exclusive deals explicitly give music libraries that right to re-title tracks with their PRO so they can receive this performance income.

This concludes the basic rundown of the mechanics behind a music library business. There are a variety of deals music libraries can enter into with composers to license songs to film and television projects. Each deal has different positives and negatives to the music library and composer. Composers have to think long and hard as to whether to contract with a music library or engage with a more traditional publisher that can also seek out these opportunities. There are advantages and disadvantages to each approach. It is best to consult with an experienced attorney to determine how working with a music library can enhance the overall income portfolio of an artist.