What Has to Be in Your Royalty Free Music Licensing Agreement

Music is an important part of any project. It adds pace, emotion, and excitement. However, many media producers and creatives can't just compose and perform music on their own, which means they have to explore licensing music.

Music licensing is complex. In short, licensing involves an agreement between the owner of the music with someone who wishes to use it, without transferring ownership. What’s involved in the license depends on the context and the kind of use someone wants regarding the music.

What Is a Typical Licensing Agreement?

In the case of music, the licensor is either its creator or the company that holds the copyright on it, which simply gives them the right to copy a piece of intellectual property, or allows others to do so. Royalties refer to ongoing payments based on usage of the intellectual property. For example, if a popular song is featured on a film's soundtrack, a licensing fee is typically paid upfront, followed by royalties based on how many copies of the soundtrack are sold, when the film is played on cable TV, and so on.

In the case of royalty-free music, the licensing agreement provides that the licensee only has to pay a one-off fee, after which the licensee is free to use the music as many times as they wish, without paying additional royalties. Royalty-free music is still copyrighted, not copyright-free.

This is in contrast to rights managed music, in which the licensing party (like a radio station or a gym) has to pay every time it plays a particular song.

What Are the Three Kinds of Licensing Agreements?

Any online search will yield different numbers of possible licensing agreements and their components. There are three kinds of licensing agreements relevant to royalty-free music, which we’ll explore below.

1. Sync Licensing for Royalty-Free Music

The “sync” in “sync licensing” is short for “synchronizing the music to a piece of media.” That means using the piece of music against any other material — and not just visual material. It could (and often does) refer to using music in a TV show or commercial, but it can also refer to using music in:

• Radio ads or podcasts
• Books on tape
• Meditation recordings
• Video Games
• Other media

Forms of media come and go (like CD-ROMS replacing vinyl, and MP3s replacing CD-ROMS) but sync licensing will still cover the usage of music in conjunction with other kinds of media.

"Royalty-Free Music" means that a user pays for a piece of music once and then has the license to use it, forever. A one-time "sync" fee gives the user usage rights for life, and they never have to pay another usage fee.

2) Sync Licensing for Rights-Managed Music

Sync licensing for right-managed music is different.

It’s the opposite of royalty-free. With rights-managed music, every year the media owner and the broadcasters must renegotiate the contract to use the music. This licensing is usually carried out by larger labels that manage bands and acts. Rights-managed sync licenses can be quite expensive — the licenses can cost millions of dollars if the music is used in a high-profile context, such as in a Super Bowl commercial or as the introduction to a popular television show. For every year that the media using the music is in circulation, the contract will need to be renegotiated.

Rights-managed music can also involve the payment of royalties on the backend. Most popular music that’s used in movie soundtracks, for example, operates on this model. Performance Rights Organizations (PROs) like ASCAP are responsible for collecting royalties (and they mean business).

Royalties can be welcome for artists, but difficult to manage for small business owners. They represent a lot of paperwork and must be factored into an ongoing budget.

3) Public Performance License

A Public Performance license is required anytime music is played in public. The music could be  synced to media or not — all that matters here is its public element. So if music is played in settings like restaurants, gyms, or malls, it requires a public performance license. When music is played in public as a "music only" product, users must pay a PRO a specific fee for the Public Performance license.

When music is played in a TV show, even royalty-free music, a fee still has to be paid (and is collected by a PRO). The size of the fee varies depending on factors like audience size, prime time, and how the music is used (for example, introductory music versus background music, the length of the music excerpt played, and more).

With a royalty-free sync license, the PRO still requires a fee to be paid. The fee is usually paid by the broadcaster, not the media producer. The broadcaster pays the PRO in the form of a percentage of their revenue from advertising.

Stockmusic.net offers a Public Performance license for publicly performing "music only" products. This is mainly for streaming at restaurants, retail, on-hold systems, malls, and the like. By purchasing this license, media producers secure the rights to publicly perform the music without paying the PROs royalties. If a PRO approaches an establishment for the music usage bill, the establishment can simply show them their royalty-free public performance license. By law, the PRO should not charge you a fee for usage.

What Are the Main Components of a License Agreement?

License agreements can be tough to understand, especially for laymen. There are 4 main components of a license agreement. Let’s take a quick look at each one below.

1. Identities of Parties

The agreement needs to specify the legal business names of both parties involved in the transaction. These must be accurate so as to avoid confusion or conflict in the future (complications can sometimes arise because agreements are between subsidiary companies). This section should specify the business structures involved, as well as their names.

2. Grant of Rights

This part specifies who owns the rights to the IP, the specific IP they're licensing (such as a single musical track or a whole album), and to whom the IP is getting licensed. This should be very detailed and accurate — any and all involved parties should be listed so there will not be any disputes in the future.

3. Scope of the Rights Granted

This section lays out the nuts and bolts of the agreement. It should answer questions such as:

• How will the licensee be able to utilize the Intellectual Property?
• Will they be able to make changes of a certain kind, or none at all?
• Where is the agreement geographically valid?
• Is the agreement worldwide or only for certain territories? When it comes to music, licensees typically look for worldwide rights, as projects are published on the web and should be universally accessible.
• How long does the agreement last?
• Is the agreement in perpetuity or only for a limited amount of time, such as a year?

These are the really important questions, and we’ll explore in greater depth below what users should be looking for.

4. Termination

Under what circumstances can the agreement be terminated? This section should detail the situations in which the agreement can be voided by the licensor, and the situations where the licensee can be considered in breach of contract. It could also simply lay out the agreement's expiration date and what the licensee must do if they wish to extend or renew the contract.

To sum up, if you're wondering, "What should be included in a licensing agreement?" the answer is:

• A clear and succinct explanation of two parties' obligations to each other
• The territory and duration of time covered by the agreement
• The licensee's needs to keep up the terms of the agreement
• Information about licensing fees
• Notice about the agreement's expiration date (or how to end the agreement, if the licensee so wishes)

What to Look For in a Royalty-Free Music Agreement

When considering the scope of rights granted in any licensing agreement, be aware of what constitutes fair and less fair contracts. These important details and inclusions are what make a royalty-free music agreement worth pursuing:

1. The License Should Never Expire

Licensees should find music they can use in perpetuity. The whole point of a royalty-free music license is that media producers don’t have to renegotiate rights or renew contracts every year. It would be extremely inconvenient to take an ad down after a set amount of time has passed, for instance, if the ad is long-running. If producers create an ad that’s successful, or a presentation whose content will remain valid for a number of years, it shouldn’t cost more to keep reusing the content.

2. Usage Rights Are Unlimited

Many libraries limit usage for media they believe is controversial, like political ads, adult material, or religious work. Media producers shouldn’t feel themselves stifled in how they can utilize the piece of music they’re choosing to license. The point of music is to enhance creativity, not to frustrate it, and users of music shouldn’t be limited in how they can use the music they are, after all, paying for.

3. Number of Projects Is Unlimited

Having paid the fee, users ought to be able to play the same track in other media without requiring another license. For example, if the same piece of music ties together a number of web spots and radio ads as a motif, media producers shouldn’t have to pay for the music every time they use it. Similarly, if a media producer is working on a series of commercials, they should not have to pay a fee for every ad in which the music is featured. While this seems obvious, it’s not always a given in contracts.

4. No Limits on Audience Size

The audience should be as large as the project can potentially reach. There should be no additional fees to pay once it reaches a certain threshold of audience size, which is akin to paying a penalty for success.

5. No Limits on Geographical Distribution

The media should be playable worldwide, without limitations — particularly in today’s day and age where projects live and thrive on the web. There shouldn’t be any regional limitations or locks on the success of a project. Media producers should want their projects to go viral without worrying about paying additional fees for different geographical territories.

6. Ability to Use Music Appropriately

When crafting an ad spot or podcast, musical tracks don’t always come in the exact right length. Users should be able to alter music in ways that make sense, including:

• Fading music in or out
• Layering voice overs or sound effects
• Cutting excerpts or trimming it at the start or end
• Looping

The user should have the freedom to make the music work for anything they need.

7. Transfer Rights Should Be Granted

Many media producers use music when contracted to produce content for a brand. That means they need to ultimately transfer the sync license to that brand (or to whomever is the ultimate owner of the content). That process should be free and easy, allowing brands to use the content they paid for, without putting too many obstacles in their way. Many libraries, however, require purchasing another license for this.

Media producers should be on guard against this practice, and always carefully read contracts to avoid having to spend money on yet another license.

8. Mechanical Rights Should Be Granted

Mechanical rights, or the rights to make and  distribute a physical recording of the music, should be included in the fee, so media producers can distribute their content to any audience. For example, if they wish to send DVDs of the ad or CDs of a meditation recording out to their older audience members, they should be able to do so without paying any additional fees.

Many royalty-free libraries DO NOT include this and charge additional fees depending on the intended audience.

Where Can I Find Music That Fulfills These Criteria?

All these criteria are satisfied by contracts offered by Stockmusic.net, which are written in plain English and easy to comprehend. Music rights are complicated, but Stockmusic.net does its best to simplify matters and provide quality music at a fair price.

The music they offer is granted under licenses that allow it to be used:

• In perpetuity
• Without caps on its usage
• In any number of projects once the one-off fee has been paid
• For audiences of any size
• All over the world with no regional limitations
• With alterations so that it works for specific projects (so long as it’s still recognizable)
• By other parties who need to ultimately own it, like brands, without an extra fee
• With mechanical rights included

Stockmusic.net is there to help reduce headaches and maximize creativity and profits. Creators should be able to focus on creating, not disputing the terms of a contract. With Stockmusic.net, creators can read terms and conditions that make sense, and can fully understand the crucial points of an agreement.

What Is a Fair Royalty Percentage?

Royalties are an important part of the creative ecosystem. They are a way to ensure that artists get paid in perpetuity for their hard work. Still, even royalty-free music synced to a broadcast TV production will have to pay Public Performance fees to the PROs.

For live performances, venues have to submit playlists of the songs bands perform. Satellite radio companies like SiriusXM have to submit their playlists, too. Streaming services, movies and TV, commercials — all these media have to make sure they are paying agreed-upon royalties to PROs, who then distribute them to artists. Every kind of licensing platform uses a different formula to calculate royalty percentages paid, so there's no blanket answer to this question. Royalties are calculated differently in different situations. Below is a brief primer on what's considered a fair royalty amount and how that number is reached.

Live Performance Royalties

ASCAP takes into account various parameters when they determine royalties owed for live performance, including the size of the venue being played. In the words of the ASCAP site, "Venues with larger capacities pay a larger license fee to ASCAP [so] the royalty generated by these venues will be larger than venues with smaller capacities."

Streaming Royalties

Streaming royalties are supposed to reflect market interest and the popularity of a particular piece of IP. With streaming services like Spotify and Apple, the ways in which most listeners consume music these days, there are three steps used to calculate royalties:

1. Digital streaming platforms negotiate global payout rates with content owners.

2. This revenue is divided between all artists with music on the platforms.

3. The split each artist receives is determined by how large of a share an artist has of the listening pie, or how many listeners are streaming their music.

Whether or not that's fair is another question, but it's how the streaming giants do it. Spotify is notorious for paying very low averages "per stream." In 2015, their average payout per stream was between $0.006 and $0.0084. Calls for Spotify and other streamers to pay more to artists have been loud and sustained, but have had no noticeable effect as of yet.

Satellite Radio Royalties

When it comes to satellite radio services such as Pandora and SiriusXM, the system may seem more equitable, as these services are governed by older rules related to mechanical rights. The US Government insists that 45% of performance royalties go directly to the featured artists on any track, and 5% are paid "to a fund for non-featured artists. The other 50% of the performance royalties are paid to the rights owner of the sound recording." Their site, SoundExchange, is set up to collect royalties and to look out for backup musicians and session players. SoundExchange has helped pay out $7 billion in royalties. Their payments are based on how often songs get airplay.

So as for the question, “What's a fair royalty?" There may not be a satisfying answer.

It depends partly on the medium on which a song is featured, how often it's played, and which platform is playing it. Many musicians find it easier to make money with other income streams that support their music, like selling merchandise (and not licensing the rights elsewhere). That's because it is such a complicated landscape, and what's considered "fair" tends to favor the needs of tech giants.

Non-Exclusive Royalty-Free Music Licensing Agreement: Final FAQs

Can a User Purchase Both A Royalty-Free Sync License and a Public Performance License and bypass all PRO fees? 

Unfortunately, it is impossible to bypass PRO fees for all media broadcast on radio, TV and movies. Purchasing a Public Performance and a Sync license to attempt to bypass that will most likely NOT be honored by the PROs.

However, if a user wished to sync a musical track to media, and then also play the music as a "pure music product" as background music at an event (for example), then the answer is yes — purchasing both licenses would cover this usage case.

Where Can I Find High-Quality Royalty-Free Music?

StockMusic.net offers a singular location for business owners looking for great music that doesn't come with a world of copyright issues and licensing headaches.

Anyone looking for great and affordable royalty-free music, with licensing agreements that are easy to understand and simple to execute, should get in touch with Stockmusic today! They make life easy for anyone who wants to include music in their media creations.

Is Royalty-Free Music of High Quality?

Yes. Royalty-free music at Stockmusic.net is of high quality, created by high-end artists who are looking for another creative outlet. It's a great way for business owners to source excellent music to fit their needs. For videographers looking for music for their productions, royalty-free music allows them to avoid headaches for themselves and for future users of their creations.

If I Have More Questions About Royalty-Free Music, Whom Do I Ask?

Reach out to Stockmusic.net today! Their experts know all the ins and outs of music rights and are happy to help you navigate the specifics of your situation.