As mentioned in my previous post Understanding Royalty Free Music: A Slice of Royalty Pie, the term ‘Royalty Free Music‘ has become an industry recognised term, but people’s understanding of it varies considerably depending on their experience and knowledge of the subject.

A lot of people may not be aware that there is no standard royalty free music licensing agreement in the music industry. Although similar, they all vary. Yes, I know it is hard to believe… and, it is a fact that can often lead to confusion and misinterpretation. Early license agreements excluded the performance royalty, which has continued to be the case to this day.

Why exclude the Performance Royalty?

For a long time, Performance Royalty Organisations (PRO’s) were doing a good job of collecting royalties for broadcasts on TV and Radio (PRO’s do also collect for performance in public venues and major cinematic release, but just for the purpose of this post, I have kept it to TV and Radio for simplicity). As such, it was beneficial to just include the synchronisation royalty in the license agreement and let the performance royalties be collected by external PRO’s.

This was because Radio and TV broadcasters (only 4 TV channels in the UK during the 80’s) were required to pay an annual license to the local PRO. They were also required to document music usage using cue sheets, which would be used to divide the performance royalties between all registered composers.

The composer / music library received an upfront payment through the royalty free music license and the composer would potentially receive an additional performance royalty from music used on TV and Radio.

This was and still is PRS in the UK. USA has three PRO’s: BMI, ASCAP and SESAC and all other countries have at least one.

A Sign of the Times

Direct licensing the synchronisation royalty and allowing PRO’s to collect the performance royalty was working rather well, however, things would not remain the same. Along came VHS, companies started using royalty free music for training and sales orientated corporate videos. This opened up an opportunity for royalty free music sellers to include a mechanical royalty in their license agreement. With both synchronisation and a defined number of mechanical duplications, the royalty free music model gained a whole new market. But, who pays the performance royalty? I hear you ask. Well, officially the company playing the corporate video in the work place.

Look out for the nineties!

So, the royalty free music model evolved in the 80’s to incorporate new markets. Initially, it catered to TV / radio producers, then corporate video production, and then came the 90’s, which saw a huge increase in Internet use. By the 00’s, there were more potential uses of royalty free music than ever before in history.

In the last 20 years or so, thousands of digital and web TV / radio stations have emerged and with the popularity of the web, many potential royalty free music uses now exist, which include: -

• Websites that are media rich with video and music
• Background music in software applications
• Computer games
• On hold systems with mp3 capabilities
• Corporate video
• DVD, CD Roms
• Low budget films
• Student films
• YouTube videos
• Podcasting
• Videocasts
• mp3 ringtones
• Web TV
• Online Radio
• Online advertising

With all these new media uses, the Internet created more opportunities for composers and royalty free music libraries, but at the same time, it helped to start the decline of mainstream music album sales through growing piracy and file sharing.

At one time, PRO’s just had to collect and monitor from a relatively few TV and Radio stations, but with the growth and development of the Internet and the amount of new media uses, they now face an ever growing user base and music use on a global scale. Add to this, copyright infringement of mainstream music is also a big issue that increases the workload of PRO’s.

So, now I have told you all that… this is where the confusion kicks in…

Why So Misunderstood?

Most of the articles and free information on the Internet about royalty free music is brief and tries to explain the subject as simply as possible, missing out many of the potentially confusing aspects. This is usually marketing copy or as I have seen, keyword article fodder that kick out over simplified explanations. Often these are blatantly incorrect.

The fact is, all royalty free music agreements differ when you examine the small print and there is no industry standard agreement. The term itself stuck because it is good for marketing.

It is fair to say all of the agreements include the right to synchronise the music with video, images or voice over. Nowadays, nearly all licenses offer you the option of creating duplications of your product including the music, but there is usually a pre-defined upper limit in the agreement small print. I have seen numbers of 10 to 5000 in recent months. Whatever the number is, you have to pay more if you exceed this limit.

The majority of royalty free music agreements exclude the performance royalty for TV and radio use and are vague about performance aspects for other uses. So, are performance royalties included in royalty free music or not? Unfortunately, this is a massive grey area and is not a simple yes or no answer.

As I mentioned at the beginning, this is not a marketing document, it is an in-depth study of royalty free music licensing and understanding it. By the end, you will have a good understanding of how royalty free music works helping you make informed decisions when licensing music.

Next time, I will explain about why the performance element is such a grey area.

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Tagged as: mechanical royalty, performance royalty, performance royalty organisations, royalty free music industry, royalty free music licensing, synchronisation royalty

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