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Trends: Sync licensing – A beginner’s guide

By | Published on Sunday 27 September 2015

Film Slate

While sync has long been a key part of the business for music publishers, we’ve seen record companies really up their game in this domain in the last fifteen years since CD sales went into decline. Although, overall, sync is still a relatively small part of the recorded music business, many labels keen to diversify their operations are now much more proactive in seeking licensing deals with the TV, film, gaming and advertising sectors which wish to synchronise music to their video output.

Given publishers remain active in the sync space too, and with many music rights companies owning both label and music publishing businesses, you might expect this to be the one area where both sides of the music rights industry would work together.

And some labels and publishers in common ownership have made some moves in this direction, some by encouraging songwriting artists to sign ‘combined rights’ deals. But sync licensing nevertheless remains complex, with rights frequently fragmented so that licensees have to locate and negotiate with multiple stakeholders for each track they use.

Here we review how sync licensing works, in the UK and beyond, and explain why the complexities exist, and how that fact has created an opportunity for middle-man agencies. We also look at how sync deals are done and the variables that influence the fees a licensee may pay.

The music industry controls and exploits a number of different kinds of intellectual property, with the key music rights being the copyright in songs (lyrics and musical compositions) and the separate copyright in sound recordings.

Although many artists create both songs and recordings, the music industry generally deals with the two sets of rights separately, with the music publishers dealing in song or ‘publishing’ rights, and the record industry in recording or ‘master’ rights.

This is important for the sync market, because many ads, films, TV shows and games are looking to use existing recordings of songs, which means they need to do at least two deals, one with a publisher to cover the publishing rights, and one with a record company to cover the master rights.

As mentioned above, there have been some moves in the music industry to try to offer sync clients combined song and recording licences, what are often called 200% licences, because they cover 100% of the publishing rights and 100% of the master rights.

Some reckon that offering such one-stop-shop licences is sufficiently attractive to sync licensees that it can give rights owners a competitive advantage over those publishers or labels only able to licence the song or the recording. Though the supervisors we spoke to seemed divided on how important and therefore how attractive 200% deals really are.

The challenge for the music industry in this domain is that, by convention, artists who write most of their own material usually do separate deals for their song and recording rights, working with a publisher and a label that are not in common ownership.

Splitting rights across two deals and two business partners has, for various reasons, usually been seen as best practice amongst the managers and lawyers who advise musical talent.

When music rights companies merge, artists may find that their recording and song rights end up being controlled by one corporate entity, though even then the label and publishing divisions of music firms tend to work autonomously.

But some efforts have been made by some rights owners, where song and recording catalogues cross over, to foster more joined-up thinking when it comes to sync.

Meanwhile some music firms are now encouraging new artists to sign ‘combined-rights deals’ to begin with, usually citing increased sync opportunities as a reason to do so. And some smaller and niche indies have been insisting on such arrangements for sometime. But in the main, combined rights deals remain the exception rather than the rule, meaning that 200% sync licences are far from the norm.

A further complication in trying to offer one-stop-shop sync deals is that copyrights can be and frequently are co-owned. Actually, master rights are more often than not controlled by one record company, but song rights are frequently split between multiple publishers, simply because collaboration is so common in songwriting and each collaborator will usually get a stake in the copyright of any song they help create.

If those songwriters are signed to different publishers, which they often are, multiple publishers will now control a stake in the copyright. Sync licensees looking to clear use of that song will therefore have to negotiate separate deals with each publisher. And any one of those publishers may scupper the deal, either by asking for too much money or simply by refusing to license.

In theory, under US copyright law each stakeholder publisher can actually negotiate a licence that covers 100% of the publishing rights in the song, providing they share any revenue with the other stakeholders pro-rata. Though industry courtesy and side agreements between songwriters means this often doesn’t happen, meaning American sync licensees must negotiate separate deals with multiple publishers just like their counterparts elsewhere in the world.

Copyright provides the owner of a piece of protected content with a number of controls over how their content is used, and while these controls vary from copyright system to copyright system, they commonly include the reproduction, distribution, rental, adaptation, performance and communication controls.

In the music industry it is common to group the reproduction and distribution controls together and call them the ‘mechanical’ or ‘dubbing’ rights, and to group the public performance and communication controls together and call them the ‘performing’ or ‘neighbouring’ rights.

Sometimes, and especially in publishing, these different elements of the copyright are licensed differently and separately.

This is important in sync because, if you intend to synchronise a track to a TV programme, say, you are exploiting both the mechanical/dubbing rights and the performing/neighbouring rights, the former when you synchronise the track to the video, the latter when the programme is broadcast.

You may be able to cover both the mechanical and performing rights in your sync contract with a rights owner, or you might only cover the mechanical rights in the initial deal, and will then require a second licence to perform or communicate the advert, programme or film to the public. Label sync deals often cover both elements, while publisher sync deals often do not.

So, a licensee looking to secure the rights to sync a track may need separate deals to cover recording and publishing rights, multiple deals to cover the publishing rights, and separate deals to cover mechanical and performing rights.

It is also not always so easy to work out who, exactly, you need to do these deals with, because there is no central database of copyright ownership. Unlike other kinds of intellectual property, copyright is not usually registered with any statutory body, and while databases of copyright owners exist within the industry, they are never wholly complete, and often not publicly available.

Often it is easier to identify sound recording owners, because websites like Amazon normally list which record label released any one album or track. Of course, the owners of sound recordings can change over time; a label doesn’t necessarily own the rights in a recording worldwide; and you might need to know that Columbia is a subsidiary of Sony Music, but there is usually some information online as a starting point.

Publisher information can be harder to come by. It will usually be provided in the small print on an album, though that may require finding a physical copy of the release. Many publishers are now better at providing lists of the songwriters and songs that they represent, and some have special portals aimed at the sync market. Though a little detective work may still be required to work out each and every stakeholder that will need to be dealt with in order to secure a sync licence.

Sometimes the music industry licenses directly – so that licensee and label or publisher negotiate and agree a bespoke deal – and sometimes the music industry licenses collectively, whereby all or most rights owners appoint a collecting society (otherwise known as a ‘performing rights organisation’ or ‘collective management organisation’) to licence on their behalf.

Where collective licensing occurs, generally the collecting society agrees terms with groups of licensees and then provides so called blanket licences at industry-standard rates, so that a licensee can make use of all or any songs or recordings in the society’s repertoire, paying either a set rate per usage or some kind of revenue share arrangement.

Most sync deals are, at least in part, negotiated directly, so that producers and advertisers have to negotiate direct deals with any labels or publishers which have a stake in the recordings or songs they wish to use. The big exception, however, is television, which in some countries – the UK included – can be licensed through the collective licensing system. In the UK that means PPL representing the record industry’s rights and PRS For Music the publishing sector’s catalogue.

As mentioned above, a TV sync exploits both the mechanical and performing rights of the song copyright, and in the UK those respective elements of the copyright are actually controlled by separate collecting societies, MCPS and PRS respectively. However, the two societies both appoint PRS For Music – a subsidiary of the PRS – to represent their rights, so both elements of the publishing rights can be secured under one licence.

Participation in the TV sync blanket license is compulsory for PPL, PRS and MCPS members (ie rights owners, artists and songwriters), so any UK-based TV broadcaster that has such a licence can make use of all and any recordings and songs represented by the UK societies. That is a large selection of music including many hits and big name artists and songwriters.

However, it’s not every song and every recording, and whereas concert promoters and radio stations operating under similar blanket licences often assume that their PPL/PRS licences mean they can make use of pretty much any song or any recording (even though for them too there will be gaps in the repertoire their licence covers), generally licensees in TV sync need to be more careful about what songs and recordings are not, for one reason or another, covered.

The other thing to remember in TV sync is that even though a blanket licence may cover broadcast in a programme maker’s home territory, directly negotiated licences may be required if the show is aired elsewhere, especially the US. And while both PPL and PRS offer licences for DVD release, there are opt-outs for rights owners in this domain, so direct deals may be required for some recordings and songs for any future DVD distribution.

Although collective licensing only really applies to TV in the sync domain, the music publishers’ collecting societies do actually get involved in other kinds of sync, but only usually on the performing rights side.

Which is to say, whereas labels, when dealing directly, will usually provide both mechanical rights (or ‘dubbing rights’ as they would call them) and performing rights in the one deal, publishers may only provide the mechanical rights (or ‘synchronisation rights’ as they would likely call them) in the initial agreement.

Additional performing rights fees would then need to be paid each time the resulting film or advert is screened, broadcasted or communicated, usually at industry-standard rates set by the local collecting society.

The reason for the split is that, by convention, songwriters often directly appoint collecting societies to represent some elements of their song rights – and especially the performing rights – so that their publisher only has a share in those revenue streams, rather than full-on control (in many cases these elements are actually assigned to the society). This convention means that publishers cannot license the performing rights in songs in their catalogue without involving the collecting society.

Because securing music rights can be so challenging – what with the song/recording and mechanical/performing splits before you even get to the issue of co-ownership – this has created an opportunity for those willing to navigate the complicated world of music rights, in that they can charge sync licensees to secure all the rights they need.

Although the growing number of agencies that sit between sync licensees and the music community – while in many ways capitalising on the complications of music licensing – still need to make their ultimate clients aware of the complexities and challenges, because it can be easy to over-promise to a budding sync licensee, when you know that there are actually several variables that can scupper a deal on the rights owner’s side.

Once a sync licensee – or their representative – has worked out who they need to do deals with, the negotiations begin. Where blanket licenses are used, a collecting society will usually have pre-agreed rates that will be the same oblivious of what song or recording is used. But with directly negotiated sync, the value of deals can vary hugely according to an assortment of variables.

This includes the kind of film, advert or game that wants to use the music; the kind of budget such a project commands; the perceived fame and profile of the songs, tracks, artists and songwriters involved in the deal; the promotional value of the sync (this is generally of more interest to labels than publishers); whether the licensee wants any exclusivity (which is particularly common in ad syncs); and how important a certain song or track is to a project (if rights owners reckon their song or recording is key, then they will exploit this to increase the fee).

Other considerations will include the territories, formats and time-periods covered by the deal, how the song or recording will actually be used, and whether the licensee will need to pay any additional royalties down the line, mainly the additional performing rights royalties that will be due on the screening, broadcast or communication on synced songs.

Although each rights owner with a stake in a track will negotiate its own deal with the licensee, each stakeholder will usually be keen to ensure that they secure the same value from the arrangement as all the other stakeholders, so that the recording and publishing rights generate more or less the same sum of money, and each of the publishers receive the same rate pro-rata according to their stake in the song.

This can be achieved through so called ‘most favoured nation’ clauses inserted into sync contracts, which basically say that if any other stakeholder involved in the deal secures a higher rate, then the other stakeholders get the same rates pro-rata. It means that if you are one of the first stakeholders to do the deal, you don’t lose out if another stakeholder subsequently secures a better rate.

Labels will often seek to secure the same value from a sync deal as the publishers who control the accompanying song rights – employing most favoured nations in order to do so – though there are some variables here. For example, if the song is much more famous than the artist performing it. And ultimately the publisher has a stronger negotiating hand, because the licensee can always re-record the song, providing the publisher would allow such a thing (a singer-songwriter might insist that only their version is used). Ad agencies are perhaps most likely to commission a new recording.

It is, of course, much easier to commission a new recording than it is to commission a ‘new version’ of a song. Agencies do exist to create ‘sound-a-like’ songs – or ‘style-a-like’ songs if you want to be more diplomatic – where the rights to a specific song cannot be secured, though such commissions are a grey area in copyright terms (when does inspiration become infringement?) and can result in PR headaches for the advertiser if the original artist or songwriter hit out at the brand for going down this route.

Although songwriters and artists routinely assign the copyright in their songs and recordings to publishers and labels (respectively), they will usually retain certain contractual rights in relation to their work.

The most prominent contractual rights relate to the songwriter and artist’s right to share in revenue generated by their songs and recordings, but they may also include a right to consultation and/or vetoes over how their work is used. Sync is a common domain where these latter rights exist, meaning artists and songwriters may be able to veto a sync deal. This right may be subject to the artist being “reasonable”, but could also be at the act’s absolute discretion.

Generally speaking, labels and publishers want to do the deal if the right price can be agreed, because they are in the business of exploiting copyright and need to drive revenues. Artists and songwriters, however, may reject a deal on ethical or reputation grounds.

As other sound recording revenues have declined, most artists and songwriters do recognise the value of sync. Some actively seek such opportunities and will choose labels and publishers to work with based on their ability to secure sync deals. But that doesn’t mean they won’t refuse to allow their music to be used by brands or productions that they don’t want to be associated with if their contracts allow them to. There are examples of big-name artist turning down million dollar contracts.

Even where an artist or songwriter doesn’t have a veto right, if the sync could be in any way contentious it is worth ensuring that they are nevertheless happy with the deal, because you don’t want to PR headache of the creator hitting out at the sync once it has gone public.

For licensees on tight budgets – or simply unable to license the music they require – there are some other options, including original commissions, public domain works and production music.

Original commissions aren’t necessarily cheaper, depending on who you commission and the scale of the project, but they can be easier to manage from a rights point of view. Although the producer needs to be clear what they are buying – in rights terms – from the composer they engage.

Public domain works are songs and recordings where the copyright has expired, meaning that anyone can now exploit those works without the permission of the original creators or rights owners. These works can be synced without doing any deal or paying any fees.

However, copyright lasts for a long time – 50-95 years from release for recordings, and life of creator plus up to 70 years for the songs, depending on country – so most songs and recordings from at least the latter half of the 20th century are still in copyright, especially if your film, advert, programme or game will be distributed globally and therefore into territories with the longer copyright terms.

It’s also important to remember that while the recording copyright might have expired, the song may still be in copyright, so the publishing rights will still need to be negotiated. Or, with classical music that is out of copyright, the recording you’ve set your heart on may still be in copyright. Also, when a piece of music is rearranged, or a recording remixed (or maybe even just remastered), a new copyright is created, so you have to be certain you are using the version of a song or recording that is out of copyright. (Though, on the flipside, if you then rearrange the original song for the purposes of your production, you create a new copyright that you will own).

Perhaps the most useful other option to syncing commercially released recordings is using so called production music, which is often designed with sync in mind and as a result is much easier to license.

Sometimes commissioned specifically for undefined future sync requirements, or other times music that was commissioned for TV or film and has subsequently been made available for others to use, production music can usually be licensed through one deal which covers both recording and publishing rights.

Production music libraries, which are more often allied with music publishers, despite providing finished recordings, are usually set up with film, TV, advertising and gaming clients in mind, and often provide tools to navigate their catalogues according to specific requirements and budget. Production music libraries can be particularly useful for classical music, which can be expensive to license from labels, and is not so easy to re-record.

Although licensing production music is generally quicker and cheaper, it is still important to be clear on what rights come with the specific licence.

Depending on how the production music company works, and the composers and musicians it works with, separate performing right royalties may still be due whenever the finished film, programme or advert is screened, broadcast or communicated, and these would be paid through the local collective licensing system at industry standard rates.

Some TV and film production companies now have their own internal production music libraries, where they store musical works commissioned for past projects on which they secured all the rights, and which can now be used for other projects with minimum hassle or spend.

Indeed, some production companies make those libraries available to third parties, and become part of the production music industry in the process. Though producers need to ensure that they have the rights to do all of this when they agree terms with any composers and musicians during the initial commission process.