Licensing Interactive Music Rights
By Marie D’Amico of NetGuide MagazineYou’ve designed a spiffy multimedia title with haunting graphics and a plot worthy of Dashiell Hammett. All that remains, besides beta-testing and printing the t-shirts, is a Grammy award-winning soundtrack. You could hire any number of multimedia tunesmiths to score a lingering, Chris Isaak-kinda melody, but the scene in which the heroine morphs into blackness cries out for the Zombies’ classic, “She’s Not There.” How can you get a license to that ’64 No. 1 hit when the ex-band members are now probably raising steers in Jackson Hole, Wyoming? That’s the $64,000 question that even a coached Charles Van Doren couldn’t answer on Quiz Show , but we can.
Step By Step
To obtain one or more licenses to include music in a multimedia title is a long and arduous process. If it’s a week before your code is going golden and the songwriter isn’t your best friend who owes you a whopping favor, you’re up on Cripple Creek without even a boat. The music industry isn’t equipped with warp drive, so you should allocate at least three months to obtain your chosen musical permissions. In addition, you should have alternate choices. Unlike beauty pageants, in the music business you learn runner-ups are just as beautiful as first choices. Use a list with twice the number of songs you want in your title, allowing music publishers to photon torpedo half, which they will, but leaving you the quantity of tunes you require.
Step 1. Find the music publisher who administers licenses for your desired ditty. To locate this company, you must know the name of the song and the name of the songwriter , because many different songs have identical names. Note, the artist who recorded the song isn’t necessarily the songwriter. Contrary to popular belief, unless the performer is the songwriter, you don’t need the former’s permission. You can locate songwriters on the liner notes on LPs or CDs or in books contained in most record stores. Many record chains, such as Tower and Blockbuster, have in-store computer systems, called “Muze,” containing anything anyone would want to know about a song from who sang backup to what the band ate on breaks. Everything but the songwriter’s name. Go figure. A much more useful resource is Phonolog , an encyclopedic reference that’s updated periodically. If you can’t find one at a library, write them at Phonolog , Box 85007, San Diego, CA 92138.
Armed with the songwriter’s name, you may call the index department at ASCAP , BMI , or the Harry Fox Agency (HFA) to obtain the name, address, and telephone number of the administering music publisher. Requests by fax or email are not permitted; although it’s the ’90s, the music industry hasn’t yet found the on-ramp to the information highway. Most songs are registered with either ASCAP or BMI ; if you call one society and they can’t locate the tune in their database, call the other. You’re allowed three requests per call; sometimes the indexer inquires whether you are requesting the information for yourself or for a company. I’m not sure why, but their tone sharply indicates the answer should be a company name, so respond with one.
Hint: If, after hiring a musical bloodhound, you’re unable to discover the songwriter’s name, call the societies anyway. Most indexers have a cranium full of musical knowledge that would scare Alex Trebek. They can usually locate a songwriter if you know the song title, the performing group, and you’re syrupy nice. Think cotton candy. Remember your mother’s cliche about catching more bees with honey than with vinegar? It applies 64k-fold in the music industry.
Step 2. Contact the music publisher and request permission to use the song in your title. If you called HFA and they administer your song, send your request to Mr. Chris Harding at the address listed below. Otherwise, call the publisher and request the individual’s name who is responsible for multimedia or computer musical licenses. Without the right contact, your permission letter will languish eternally in musical purgatory. All requests must in be in writing prior to consideration of a license, so don’t engage your warp schmooze drive until you’ve faxed the necessary information. Keep in mind permission letters are like resumes and you and your multimedia product should leap off the page as so fascinating, hip, and cool you’d be unrecognizable to yourself, your friends, or family.
The initial request letter should contain the following information: song name, songwriter(s)’ name, performing group’s name, name/address/telephone number of your company (or your letterhead), name and description of your title (including platform, e.g. , Macintosh and/or Windows, and format, e.g. , diskette or CD-ROM), description of the song’s use in your product (background music, instrumentals synchronized with visuals), first date of commercial availability, playing length of song (time it), term (request perpetual), territory (request worldwide), fees you’ll pay (offer prevailing royalty rate), other songs in your product, need for a copy of the master tape, and need for lyrics.
Tips: The initial letter is deceptive. There are nuances lurking in this simple list. For example, you should always request a worldwide, perpetual license. Any music publisher who owns worldwide song rights will grant them, but you may need to settle later for a term license of two years with an option to renew. You should propose the amount of royalties that either you’re willing to pay or, even better, the royalties you’ve paid other publishers. If this is your first request, a royalty in the range of $.125 to $.30 per song is reasonable. Keep in mind the music industry is like high school and everyone wants to be BMOC (big-man-on-campus). If you’ve already licensed a popular song, drop this tidbit as subtly as the Enola Gay dropped its cargo. Bold type never hurts. If you want them to send you an actual recording of the song (“the master tape”), this will delay the approval process. Consider carefully whether you need it or whether digitizing the CD will suffice. And finally, multimedia licenses don’t encompass printing the song’s lyrics. They authorize use of only the instrumentals and vocals. If you want printable lyrics, you’ll need to squirm through a separate musical maze and the cheese at the end will cost you extra.
Step 3. Engage Warp Schmooze Drive. Your request is one of tens of thousands received by publishing houses annually so you must do everything possible, but not illegal, to increase your chances of a positive response. Think of the process as the early months of a romance and put your best cyberface forward. Send a copy of your product to your contact. If you’re in the neighborhood, stop by and give him/her a demo. Ingratiate yourself with his/her assistant. Call often, but don’t cross the thin blue line into obnoxiousness. If you know someone who knows someone, give them a ring. Discover the computer your contact uses and mail him/her some free software. If you find out he/she has small kids, send Just Grandma and Me with a nonchalant note, “Thought you might enjoy this.” If you keep knocking, someone will open the door to figure out who the hell is making all that commotion. You might get invited in for a spot of tea, or better yet, a license.
ASCAP (Association of Composers, Authors, and Publishers)
7920 Sunset Blvd., Suite 300
Los Angeles, CA 90046
Phone: LA: 213 883-1000; NY: 212 595-3050
Index Department Hours: LA: 9:00 – 11:50 a.m.; 2:00 – 4:50 p.m. PST; NY: 9:00 a.m. – 5:00 p.m EST
BMI (Broadcast Music, Inc.)
8730 Sunset Blvd., 3rd Floor
Los Angeles, CA 90069
Phone: LA: 310 659-9109; NY: 212 586-2000
Index Department Hours: LA: 10:30 a.m. – 1:00 p.m.; 2:30 – 5:30 p.m. PST; NY: 9:00 a.m. – 5:00 p.m. EST
HFA (The Harry Fox Agency, Inc.)
711 Third Ave., 8th Floor
New York, NY 10017
Phone: 212 370-5330
Audiovisual Licenses: Mr. Chris Harding
Index Department Hours: 9:00 a.m. – 5:00 p.m. EST*
*George Brouillete gets four stars for the best indexer; try him, you’ll like him
Big Shots
To aid your attempts to woo publishers, it’s useful to understand the music milieu. About 85% of the industry is owned by six big shots: Warner, Sony, BMG, PolyGram, EMI, and MCA (see sidebar). Each big shot owns a variety of smaller music companies under its corporate umbrella. This structure is either an elaborate IRS-beating tax scheme or just your basic ball of confusion. While you may discover your cherished tune is administered by Island Records, more importantly, Island is a subsidiary of PolyGram, who calls the shots. You really need to discover if PolyGram is amenable to multimedia licensing. Some publishers are interested in and agreeable to audiovisual licenses and some aren’t. In 1964, Marshall McLuhan said, “The medium is the message,” but the music industry is just now noticing the medium is computers.
Sidebar: Big Shots
| Warner Music | Sony | BMG |
| Owner: Time-Warner, Inc. (U.S.) | Sony Corp. (Japan) | Bertelsmann A.G. (Germany) |
| Major Labels:Atco, Atlantic, Elektra, Giant, Reprise, Rhino, Sire, Warner Brothers | Columbia, Epic | Arista, BMG Classics, Private Music, RCA, Windham Hill, Zoo |
| Market Share: 21.7% | 15.4% | 13.0% |
| 10585 Santa Monica Blvd | 2100 Colorado Ave. | 6363 Sunset Blvd. Suite 300 |
| Los Angeles, CA 90025-4925 | Santa Monica, CA 90404 | Hollywood, CA 90028 |
| Phone: 310 441-8600 | Phone: 310 449-2555 | Phone: 213 468-4000 |
| Fax: 310 470-6399 | Fax: 310 449-2570 | Fax: 213 468-4168 |
| PolyGram | EMI | MCA |
| Owner: Phillips Electronics N.V.(Netherlands) | Thorn EMI (Britain) | Matsushita Electric Industrial Co. (Japan) |
| A&M, Def Jam, Deutsche Grammophon, Island, Mercury, Motown, Polydor | Capitol, Chrysalis, Curb, EMI, IRS, Liberty, SBK, Virgin | Geffen, GRP, MCA, Uptown |
| 12.2% | 11.2% | 10.5% |
| 1416 N. LaBrea | 810 7th Ave. | 3801 Barham Blvd., Suite 300 |
| Los Angeles, CA 90028 | New York, NY 10022 | Los Angeles, CA 90068-1000 |
| Phone: 213 856-2776 | Phone: 212 830-2004 | Phone: 818 777-4552 |
| Fax: 213 856-2664 | Fax: 212 830-5196 | Fax: 818 733-0360 |
I have discovered if a publishing company has experience with digital technology, they are more willing to discuss multimedia licensing. Then again, I haven’t found Warner Music very helpful, but I don’t think it’s for lack of technological savvy. Rather, I suspect their songs are reserved for use by their sister company, Warner New Media, whose mandate is to create multimedia titles. I have no experience with Sony . I found RCA enjoyable and digitally-aware, with nice employees, a network of Macintosh computers, and a willingness to align itself with the cyberworld. Their parent company, BMG , funded David Bowie’s interactive CD, Jump , and Brian Eno’s interactive CD, Head Candy . I found PolyGram , EMI, and MCA agreeable to multimedia licensing, in inverse proportion to the songwriter’s popularity. If the songwriters are bigger than God, e.g. , the Beatles, getting a license approved is as easy as squeezing a camel through the eye of a needle. I discovered Chrysalis and IRS, subsidiaries of EMI, employed young, cool employees who zip along with PowerBooks and Newton MessagePads. Their wholehearted embrace of new technology makes them receptive to multimedia licensing.
If you can locate the songwriter and you do it right, you can also pitch your request directly to him/her. Rent Robert Altman’s film The Player for inspiration. Once again, a songsmith who’s fascinated by technology will be easier to schmooze than one who has 12:00 blinking on his VCR. Joe Perry and Steve Tyler of Aerosmith, Brian Eno, Peter Gabriel, the Grateful Dead, Elton John, and Herbie Hancock are just some of the audio/visually-receptive players. Notoriously reticent songwriters like Bruce Springsteen aren’t worth a request; I know how much that hurts because I’m from New Jersey. Many songwriters have found the Internet. If you can find them, you can make a pre-official permission pitch and probably up your chances of success.
But take heed. Just because an artist tells you you have permission, does not mean you do ., even if they put it in writing! It’s possible that the songwriter has sold the publishing rights or that those rights are administered by a third party. In such cases, the songwriter’s permission is meaningless, beyond the fact that the writer’s endorsement of your project might get you closer to your goal of licensing the rights to use the tune.
Let’s Make Lots of Money
Besides your basic permission, there are an assortment of fees for a multimedia license that you need to negotiate: Fixing or fixation fees, upfront fees or advance amounts, renewal fees, rollover fees, and royalties per unit of your product. Fixing or fixation fees are non-refundable, non-recoupable, administrative charges for the agreement, due upon execution, which are usually $300.00; HFA doesn’t charge fixing fees; PolyGram does. Upfront fees or advance amounts are non-refundable amounts, due upon execution, which are advance royalty fees for a specified number of units and are recoupable against royalties you’ll owe the publisher. PolyGram usually requests upfront fees for 1k units; EMI and MCA for 2k units. Don’t offer to pay fixing or upfront fees. If the publisher wants them, they won’t be coy about asking. Renewal fees are non-refundable, possibly recoupable, expenses for renewing the license once the initial term has expired if it’s not a perpetual contract; they’re due upon renewal. For some publishers, renewal fees are non-recoupable, administrative charges for renewal, similar to a fixation fee. For others such as HFA , they’re recoupable against future royalties.
Royalties per unit are the fees you’ll pay on a quarterly basis for each copy of your product containing the licensed song. Most royalties are a multiple of the prevailing mechanical or statutory royalty, the amount payable to use a song in an LP or CD. The current statutory rate, revised annually, is $.066. Multimedia royalties range from approximately two to five times statutory, i.e. , $.125 to $.30 per unit.
Rollover fees are the only ones aptly-named, because that’s what you’ll do when a publisher requests payments and you madly covet a song. Rollovers are non-refundable amounts, initially due upon execution and afterwards on a quarterly basis, which are recoupable against future royalties for a specified number of units. Rollovers must be repaid each time you sell one more than multiples of the initial number. For example, if the rollover is 1,000 units, once you sell 1,001, you must pay for the next 1,000 units. You won’t pay a rollover fee again until you sell 2,001 units. Publishers rarely request rollovers.
After you’ve executed the license, you’ve paid any fixation, upfront, and/or initial rollover fees requested. Your subsequent obligations are to report and pay ongoing royalties per unit or rollover fees on a quarterly basis. Most agreements grant you 30 or 45 days after the end of each quarter to deliver a royalty statement and pay the publisher. It’s as painful as taxes, but music publishers are less forgiving than the IRS, so don’t forget or your license can terminate. In addition, mark your calendar carefully for any renewals required, since failure to fork up these payments can also terminate your license.
If your license terminates for failure to pay fees and/or royalties, and you continue to sell your title with the now-unlicensed song, these sales shall be deemed acts of copyright infringement and you can be liable to suit in federal court by the publisher. Music publishers are legal pit bulls. You never want to find yourself opposing them in a courthouse unless you have a taste for masochism. And if that doesn’t make you think twice, consider this: Willful copyright infringement can carry fines of up to $10 0 ,000 per instance and up to two years in prison for certain corporate officers . That’s right. It’s a crime. It’s bad. Don’t do it.
Finally, regarding royalty reportage, some publishers, notably EMI, may require a most favored nations clause in your license. This clause requires you to increase that license’s royalty payment if you subsequently sign an agreement with another publisher paying a higher royalty. This proviso imposes a continuing obligation on you to monitor future licenses and compare the royalty with that specified in the most favored nations agreement. It is quite dangerous. Avoid it if possible.
Below is a sample quarterly royalty report including all required reporting information. If you have licensed multiple songs, to avoid arguments at renewal time worse than any dysfunctional family feud, report each song’s statistics only to its publisher, not the other licensers.
Sample Royalty Report
| Date: mm/dd/yy | |
| Quarter: # Quarter Year (e.g., 1st Quarter 195) | |
| Name: Multimedia Developer, Inc. | |
| Street Address | |
| City, State, Zip | |
| Phone: | |
| Fax: |
| Song | Advance | Units | Royalty | Quarterly | Total Units | Amount | License | License | |
| Title | Rollover Amount | Covered | Per Unit | Units Sold | Sold to Date | Payable | No. | Administrator | |
| Hit Song | $500.00 | 2,000 | $.25 | 5,000 | 10,000 |
| S562019 | HFA |
Paradise By The CRT Light
After a whirlwind courtship during which you were charming, cajoling, and convincing, your music publisher has finally pronounced mankind’s favorite word, “Yes.” And conditions have been agreed to. Unfortunately, it’s the ’90s and briefcase-toting demons of doom (lawyers) are legion. Therefore, I advise you to execute a written agreement codifying your agreed-upon terms. If you’ve licensed a song from HFA , they’ll provide you with a Multimedia Rights License (MMERL). It’s immutable unless you’re BillG@microsoft.com or John Paul II@vatican.com. Ensure the numbers on page 1 are accurate and sign. Most music publishers, however, rarely furnish an agreement, because song licenses for multimedia products are so embryonic they haven’t been legally standardized. For a satisfying denouement to this romance, supply one yourself. We’ve included a sample one for use in your musical liaisons with brief explanations where necessary, but it shouldn’t substitute for consultation with an attorney.
Section 1: Names of parties, song, date.
Section 2: Relevant information. Territory should be “worldwide,” because your title could be sold from Louisiana to Liechtenstein. Best term: perpetual. Runner up: Many publishers balk at a perpetual marriage. If so, obtain an annual term with option to renew. In MMERL, territory is “world”; term is two years with option to renew, see Section 6.
Section 3: Your license. You may use the song’s name and performing group in advertising. In MMERL, see Sections 1, 2, 4, 5, 9, 13.
Sections 4, 5: Royalties are paid every quarter. Keep accurate books reflecting your title’s sales. In MMERL, see Sections 7, 8.
Section 6: Publisher is liable for limited damages if he doesn’t own the licensed song. An extremely compliant publisher will indemnify you for such breach (optional bracketed material). In MMERL, see Section 11.
Section 7: Neither you nor the publisher are liable for extra damages. Agreed by publisher if high on PCP or loves endorphins; otherwise, hit delete key.
Section 8: Bracketed material for non-perpetual unions. Remainder addresses divorces for cause. In MMERL, see Section 12.
Section 9: Legal gobbledygook. In MMERL, see Sections, 10, 14-16.
Section 10: Furnish written credit for the song in your product. In MMERL, see Section 3.
Sidebar: Sample Audiovisual License
AUDIOVISUAL LICENSE
1.0 Introduction . This is an agreement (the “Agreement”) for the non-exclusive, audiovisual rights in the song “Favorite Hit” (the “Song”) between Multimedia Productions, Inc. (“Developer”) and Music Publisher (“Publisher”). This Agreement shall become effective Month Day, Year (the “Effective Date”) and shall continue in effect until it expires or is terminated pursuant to Section 8.
2.0 Song Information
Composition/Writer: “Favorite Hit”/Writers (the “Song”)
Percentage Owned: #### percent (###%)
Program: Multimedia Hit for Macintosh and/or Windows computers
Payment: ###### cents ($.##) per unit
Term: Option 1: Perpetual; Option 2: Two (2) years with option to renew for additional term
Type/Time of Use: Background instrumental/one full usage
Territory: Worldwide
Copies: Developer shall furnish Publisher with one (1) copy of Multimedia Hit upon commercial release, at no charge to Publisher
3.0 License . Publisher hereby grants to Developer and Developer hereby accepts a nonexclusive, nontransferable, worldwide, perpetual (except as limited by Section 8) license to record, re-record, use, play, and sell the Song on computer disks and/or CD-ROMs only as part of its Macintosh and Windows product currently entitled “Multimedia Hit” (the “Program”). Developer may use the name of the Song and the phrase “originally performed by <Musical Group>” in its advertising and promotional material.
4.0 Payments . In consideration of the license granted in Section 3, Developer shall pay to Publisher the royalty specified in Section 2 for each copy of the Program sold or licensed by Developer. Royalty payments shall accrue during the calendar quarters in which the Program is shipped by Developer or its licensees. On or before the thirtieth (30th) day following the close of each calendar quarter Developer shall deliver to Publisher a signed written report stating the number of units sold or licensed and the royalty payable to Publisher. The report shall be accompanied by a check to Publisher in the total amount of the royalties payable to Publisher. Developer shall pay interest on overdue royalties at a rate of ten percent (10%) or the maximum amount permitted by law, whichever is less.
5.0 Books and Records . While this Agreement is in effect, Developer shall keep accurate records reflecting the performance of its obligations under this Agreement and Publisher shall have the right to audit the books and records of Developer. Developer shall not be required to submit to any audit more than once during any twelve (12) month period. Publisher shall provide Developer with at least ten (10) days prior written notice of its election to conduct an audit and any such audit shall be conducted during Developer’s normal business hours. If the audit reveals Developer has underpaid royalties by an amount equal to or greater than five percent (5%) of the royalties owed, then Developer shall bear all expenses reasonably incurred by Publisher in connection with the audit. Otherwise, Publisher shall bear its own expenses.
6.0 Representations and Warranties . Publisher represents and warrants that it has the full right and power to enter into this Agreement and that it owns all right, title, and interest in the Song. [Optional: Publisher shall defend at its sole expense and shall indemnify Developer against any claim filed against Developer to the extent such claim is based upon a breach of any representation and warranty made by Publisher in this Section 6 provided Developer notified Publisher in writing of such claim within ten (10) calendar days of learning of such claim. Publisher shall have the exclusive right to control the defense of any such claim and Developer shall cooperate fully in Publisher’s defense of such claim. In no event shall Developer litigate or settle any such claim without Publisher’s prior written approval.] In no event shall Publisher’s total liability exceed the amount received by it pursuant to this Agreement.
7.0 Limitation of Liability; Exclusion of Damages . THE WARRANTIES PROVIDED IN SECTION 6 ARE LIMITED WARRANTIES AND THEY ARE THE ONLY WARRANTIES MADE BY DEVELOPER TO PUBLISHER AND BY PUBLISHER TO DEVELOPER. NEITHER PARTY MAKES NOR RECEIVES ANY OTHER WARRANTY, EXPRESS OR IMPLIED, AND ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR ANY PARTICULAR PURPOSE ARE EXPRESSLY EXCLUDED. UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE ENTITLED TO RECOVER FROM THE OTHER ANY CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES, WHETHER IN CONTRACT OR IN TORT INCLUDING NEGLIGENCE, EVEN IF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. EACH PARTY ACKNOWLEDGES THAT THE FOREGOING WAIVER SERVES AS A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT.
8.0 Termination . [Option 2: The initial term of this Agreement shall be two (2) years. This Agreement may be renewed for an additional two (2) year term if no later than one (1) month prior to the expiration of the initial term, Developer gives Publisher written notice of its election to renew this Agreement.] This Agreement may be terminated upon thirty (30) days’ prior written notice in the event of breach by either party so long as such breach has not been cured during the thirty (30) day notice period. If the breach is uncured at the end of said notice period, this Agreement shall be terminated and the party not in breach may pursue any and all rights and remedies that it has under this Agreement or otherwise.
9.0 Miscellaneous . This Agreement shall be governed by and enforced in accordance with the laws of the State of [State]. If any provision of this Agreement is determined to be illegal or unenforceable, all other provisions shall remain in full force and effect. This Agreement is the complete and exclusive expression of the understanding between Developer and Publisher relating to the subject matter of this Agreement. It supersedes any and all prior and contemporaneous, oral and written, communications relating to the subject matter of this Agreement. This Agreement may not be modified or amended except by a written document signed by both parties. Neither party shall assign, transfer, or sell any of its rights pursuant to this Agreement, or delegate any of its duties pursuant to this Agreement, without the express prior written consent of the other. Any attempted assignment, transfer, sale, or delegation in derogation of this Section shall be void. This Agreement shall be binding upon, and inure to the benefit of, successors in interest to and permitted assigns of, Developer and Publisher.
10.0 Credit . Developer agrees to accord Publisher credit on the documentation accompanying each computer diskette or CD-ROM which contains the Song in the following form: “Song” / Writers, originally performed by Musical Group c <Year> Music Publisher. All rights reserved. Used by permission.
11.0 Notices . All notices provided pursuant to this Agreement shall be delivered by personal delivery, overnight courier, or facsimile, and shall be deemed effective on the date on which delivery to the intended recipient of the notice was accomplished. Such notices shall be delivered to the addresses listed below. Either party may designate a different address for the delivery of notices on ten (10) days prior written notice.
| Developer: Contact Name | Publisher: Contact Name |
| Developer Name | Publisher Name |
| Street Address | Street Address |
| City, State Zip | City, State Zip |
| DEVELOPER | PUBLISHER | |
| By: _________________ | By: _____________________ | |
| Title: _________________ | Title: _____________________ |
Lawless Avenue
Are there any legal alternatives to an audiovisual license? The answer, to all questions involving the law, is a qualified “Yes.” Many companies hire composers to write songs that are “sound alikes” of
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