Negotiating a License for Use of Music in a National Television Campaign
NYSBA Entertainment, Arts & Sports Law Journal, Fall 2001
By Steve Gordon
NYSBA Entertainment, Arts & Sports Law Journal, Fall 2001
By Steve Gordon
We are all familiar by now with the use of pop music in national television commercials, such as the Rolling Stone's "Start Me Up" for Microsoft. Due in part to the success of these campaigns, popular songs are being licensed for TV spots with increasing frequency. This practice has become so common, that any attorney working in the music or television businesses may at some time be called upon to negotiate a license for the use of music for a commercial sponsor. This article addresses the financial parameters of such negotiations, key deal points and practical tips for negotiating the best possible deal for clients in the field of advertising.
The most important element in negotiating the fee for which music may be licensed in a television campaign is the song itself.
Contemporary Mega Hits
As one may expect, the highest quotes, or fees charged, are for contemporary mega hits. There may be little room for negotiation here, because once a song is licensed, its value to another sponsor is radically reduced. Therefore, the copyright owner, who is usually either the publisher and/or the writer, may hold out for the highest royalty price, assuming that the writer is even willing to license the song for a commercial use. The only meaningful leverage is to solicit lower quotes for comparable songs. In any event, the going rate for such "hot" songs may be seven fignres and higher.
A client may be willing to settle for a work that may be recognizable but not currently "hot." Of course one can expect to pay less for a catalog song than for a contemporary smash hit, but a routine call to a publisher asking for the "standard fee" for use of such a song in a national television campaign may well precipitate a response such as: "We will not license any song in our cataloge for less than $150,000 to $250,000 for a one-year period" (a typical term for a license of music for a television campaign, which is discussed below). A classic hit, such as "Strangers in the Night," or a recent rock hit, such as "Wicked Game" (currently being used in a television campaign by Jaguar), may garner prices well beyond the "standard" range. The bottom line is that the more popular the song, the more it will be in demand for commercial use, and the higher the demand, the higher the royalty price. On the other hand, there are many songs in the catalogs of major and smaller publishers alike that, although recognizable when originally released have neither received significant television or radio airplay nor been used in movies or commercials for some time. The fee for such songs, which are of proven quality and which may work perfectly for a client's product, may well be negotiated lower than the standard range. The bottom line is that an offer, even if less than the publisher's standard, is better than no money at all. A publisher may also be hopeful that the advertising campaign will rekindle interest in its song. For instance, the GAP's use of K.C. and the Sunshine Band's "Get Down Tonight" revived catalog sales for the band's records. In addition, the tips that appear in the last section of this article may be helpful in getting the lowest possible rates for songs in this category.
There are also certain sections of a publisher's catalog composed of jazz, New Age and R&B songs that are catchy, but which have never had any real commercial success. The publisher may be eager to make a deal for these underutilized songs. Although the songs never received a great deal of public play and would not be recognizable to the consumer, they may fit the spirit and texture of an advertising campaign quite well. These songs may be secured for substantially less than the standard range. However, one can still expect to pay more taking this approach than by going to a stock music or "jingle" house and licensing or commissioning a work specifically for a commercial.
Publishers also represent songs by unknown artists. They may want to use a national advertising campaign to gain exposure for such baby bands (just as they may wish to gain exposure for older songs that have not been popular for years). If this is the case, one has a reasonable chance to negotiate a deal well below the standard range.
In addition to the identity of the song itself, there are several factors that will be key ingredients in the quote provided by the publisher. As in any negotiation, the initial quote will probably start on the high end. If any of these factors favor the advertiser, however, they may be used to reduce the initial quote.
Manner of Use
If one only needs a song to play in the background while, for instance, a spokesman is making a pitch, one can argue for a reduced rate. In addition, sometimes the lyrics to a song are not needed. Since, in effect, one is only using half of the song, one may be able to negotiate a reduced rate. However, it cannot be expected that a publisher will reduce a quote 50 percent.
Publishers may start off with a quote that includes the concept that an advertiser will use no music other than the licensed song to promote the product or services. This is sometimes referred to as "branding." If an advertiser will actually use different music for different commercials, this should be emphasized as a possible way of reducing the fee.
Radio and Other Media
A publisher will often demand an extra 5 percent to 15 percent for use of a song in radio spots. This charge is usually negotiated as an option to run concurrently with the television advertisement. However, for obscure, catalog or baby band songs, it may be possible to include radio without an additional charge. This may provide the song with some much-needed publicity and public performance income. (See the conversation of public performance income in the first Practical Tip at the end of the article). This may be used as leverage to get as many media as possible (such as theatrical use preceding movies) without an extra charge. Securing Internet rights however, particularly when one is not willing to pay additional fees, may be difficult. Publishers are concerned about piracy when their music is used over the Internet.
The quotes above assume that the territory for an advertising campaign is limited to the United States, its possessions and territories. Of course, one can dramatically reduce the initial fee where an advertisement is targeting a specific geographic market. For example, a very low fee may be negotiated for use in just one or two states. Sometimes, an advertiser may wish to start a commercial in a specific city or state, and if the commercial proves to be successful with viewers, expand the commercial to the entire country. In that case, one may structure an option for the entire United States for a one-year period after the initial limited run.
Publishers will generally try to negotiate an additional 10 percent to 20 percent charge for the use of commercials in Canada. If a song is less than a mega hit or classic gem, it may be possible to negotiate Canadian rights into the basic fee, or at least reduce the standard increase.
Options for Extending the Term The quotes referred above are also based on the assumption of a one-year license. This gives an advertiser time to roll out its campaign and generate momentum. Of course, those fees may be negotiated down for a shorter period. Options generally cost 5 percent to 15 percent for each additional period. For instance, if the fee is $10,000 for a 13-week period, a publisher may ask for $11,000 to exercise an option for the next 13 weeks. This may be avoided by mal~zing the term six months by paying $20,000 up front.
Master vs. Re-recording
Occasionally, the publisher will also control the master right, or the right to the recording of a song. In that case, it may be possible to include the master right in the original fee. If not, one may expect that the owner of the master, which is usually a record company, will insist on a fee equal to that of the songwriter. Use of the master can be avoided by re-recording the song.
Note that publishers are paid twice: The publisher, and the writers it represents, will get paid twice if an advertiser uses a song; first by the advertiser and then by the publisher's performing rights society (ASCAP, BMI or SESAC). The societies pay the publisher and writer based on public performances of the songs on television and radio, as well as in other public venues. The income generated by these performances can be substantial when the commercials appear on network television and in television syndication. If a publisher does not license the song, it has much more to lose, so it is important to reaffirm what it has to gain by negotiating a deal.
Give them a budget: Some publishers will work with you if you let them know how much your client is willing to spend. As discussed above, ask a publisher for a standard range for a catalog song and the publisher will start with $150,000 and up. If you suggest $50,000, the publisher may suggest songs that are in your client's price range. In fact, the publisher may give you CDs containing those songs, which you can then bring back to your client for review.
Consult the experts: There are music clearance agencies that are very experienced in negotiating these deals. You may wish to avail yourself of that expertise. A list of such agents may be found by contacting an organization of clearance professions such as CLEAR (www.clearinc.org).
Approach the writer: If you know the writers or composers, it may be better to first approach them. Writers may be more eager to make a deal for a song than publishers who represent many other writers whose work may bring in higher fees. In certain cases, the writer may be able to make a deal without the publisher 's consent, but if the publisher is the exclusive agent for making the deal, the writer may be your advocate for a reasonable rate.
Don't focus on the number of spots, unless your client is only producing one: The publisher may ask for more money if it knows that your client wishes to make more than one commercial containing the publisher's song. To give your client the greatest leverage, you may try to avoid the issue and hope that the license provided by the publisher will grant your client the right to use the songs in television spots without limiting the number of ads. If you focus the publisher on the notion that your client wants to make more than a dozen spots using the publisher's song, the publisher may ask for more money. Of course, more sophisticated publishers will bring up this point during the course of negotiations. If your client only wishes to use the music in one spot, however, it is to your advantage to emphasize that in an attempt to reduce the fee.
Consider using stock music or a jingle house: If your client is not looking for a recognizable song, you may be better off not approaching a music publisher at all. There are many stock music or jingle houses which may be able to provide music composed on a work-for-hire basis that will work for your commercial. They are also more likely to control the masters as well.