Music Licensing Business Plan

I’ve included 5 sections of my 13 section business plan on this page. The information is broken down so a loan officer can grasp the concepts of the macro (the big picture) and the micro (the small bits) componets of the music industry. However, anyone who is interested in licensing out their music will understand the subject matter in depth...once the preliminaries are covered.

I'll outline basic terms and define certain roles associated with the business of music licensing that is mandatory reading.

Note: This business plan was approved by the University of Iowa Small Business Development Center (SBDC)
* The complete plan was 1 of the top 10 finalists in the 2008 John Pappajohn Iowa Small Business Plan Competition.

Knowledge is power, and this is powerful stuff for the veteran musician, aspiring producer, or record label executive. The excerpts from my business plan is bonus information for those involved in making music and quality advice from those who are new to the game…all wrapped up into a nice 5 part package.

All I ask is that you, the reader, pass this powerful information along. If you see links that might be of assistance in your quest for music business knowledge…follow them. If you like what is presented and how its worded…drop me an email.

Get up to speed, pick up the facts, and enjoy the material!

The Music Business
The Business of Music
The Music Market
The Target Market
Marketing the Music

It's common knowledge...the record business has been impacted by file sharing of music, and more consumer choices have divided the entertainment dollar into smaller increments. Yes, the record business- sales of music in hard, tangible form like records and cds- is always in a state of flux. However, the music business is much greater than a single commodity.

Individuals making their living thinking outside the box, like producing instrumentals for visual media, are receiving a tidy sum of cash currently- and the market is growing. Video games, independent film, cable television, satellite radio, ring tones, remixing and the rise of the independent artist are all adding to this burgeoning bottom line.

The downturn in cd sales only opened the door to a demand in visual mediums that devour music. The old business of selling packages of music to passive consumers will remain a large business for the time being. However, a very different sort of media associated with music is growing up along side of it.

All things considered, the music business is just fine, thank you.

The money is now in licensing music for television and other media outlets. As an added bonus, when an artist places a tune for a television show, it delivers much more than just a synchronization fee or performance royalty check, it also gives the stamp of “media credibility” to the artist’s resume.

Synchronization fees and performance royalties are how you get paid if someone licenses your song for a television show or commercial. Every television show licenses songs to be played throughout the show. The artist still owns the song and royalty fees are paid out every time it’s aired on TV. Cable television as expanded over the last 10 years and there’s music for every one of those shows. The internet has made the playing field level and the 85 decibel Monks are poised to jump in the game.

Music demands are also coming from places traditionally uninvolved with music or mediums which are “feely” consumed by people as they listen to the radio, watch television, as so on. Industries as far flung as book publishing, computers and telecommunications are setting up music divisions and galvanizing new music placement opportunities as a result.

The lesson here? Ask not where the music is sold, but where the music is used. For the existing and emerging artist, the future of music as a career is wide open, full of options and possibilities in new media.

New Media

Loosely described as convergence, new media is the intersection of information, entertainment, and business. It’s where the latest technologies for the Internet, computers, cable or satellite television, broadband delivery, movie and music coverage. Music placement opportunities are exploding just as fast as the industry races to develop and deliver the most compelling content to a worldwide audience hungry for information and entertainment. TV programming including the major networks, cable satellite, and pay-per-view is $64.6 billion industry.

Meanwhile, Apple’s successful iTunes music store recently sold its 1 billionth download, while the rate of paid downloads more than tripled from 2004 to 2005. According to Standard & Poor’s projected spending on digital downloads and music subscription services such as Rhapsody & Yahoo! Music with grow from $900 million in 2005 to more than $2.4 billion in 2010.

The 85 dB’s have received checks in excess of $**,*** in television placements and digital downloads since 2005.

Supply & Demand

The supply of music that’s available for a visual project far exceeds the demand for musicians and producers who want their music licensed. It means that in order to better your chances for success, you have to take advantage of every single ethical opportunity to better your skills and status in the business. Serious job searching strategies must be implemented to discover what your earning prospects are.

Schmooze or Lose

It’s a simple fact that the entertainment industry is relationship based. Basic research and identifying “targets of opportunity” cannot be overlooked.

But, the most important tactic you can use to receive more music placements is networking. It’s only through networking that you uncover “hidden” opportunities. Net-“work” or sit back and hope Steven Spielberg discovers your music on the internet.

Networking with people whose star is on the rise is the preferred route. History has proven that you’re more likely to hook-up with someone on the way up than with someone already on top. It’s about meeting people with common interests and then developing those contacts.

The music business is radically different from other industries. It’s built on a vibe; is tied to trends, fashion, and media; it communicates an intangible commodity capable of expressing profound emotions. Music business deals are a direct result of personal relationships or contacts. It’s about connecting to others who share your aspirations, energies, and enthusiasm and allowing those collective talents to shine for all involved. The key is to deliver above and beyond what is expected and do it with joy.

Competition is central to the industry. There’s always new blood coming in- new bands, songwriters, musicians- it’s the nature of the game. A competitive streak and the drive to soak up knowledge like an information sponge helps, however, the only constant is our dedication to the craft and the support of those around us. Talent, information, and ability are all necessary ingredients for developing a career, but people power will ultimately determine success in this field.

The music business is not a stable environment- To stay in the mix, sacrifices are required, and it is up to the individual to not only find a way to survive, but to thrive. It is vital to understand the people who make music and run the music business.

In this world, commitment and resourcefulness, imagination and creativity are shared trademarks. It’s a business with no safety net, no guarantees, no rules, no predestined career paths to follow down the road. This business is made up individuals who don’t fit other models.

What is Music?

Music is a savvy combination of what is fresh and what is familiar, in this day and age, anyone hoping to cash in the multi-billion dollar music industry has to prove themselves with compelling music and a career trajectory. Those that make it to the pinnacle have been working at their craft for years with fanatical devotion and unerring instincts toward their art.

The role of the music producer

A music producer cannot make things happen. It’s about the big picture, the lifestyle a producer lives, working with sounds, chooses them. Recorded music is a sonic illusion or sound painting. A producer must build up a music library in the mind of what instruments sound like naturally- singular and in ensembles. Time spent listening to various styles of music and developing a full understanding of audio is crucial. If a producer chooses “something to fall back on” and plays it safe, possibilities can be undermined. If the commitment is not total, you cannot expect others to be 100% behind the work. Those that succeed in the music business have no other options. It’s who they are.

Understanding the business is a prerequisite, but you can’t let logic derail your heart and soul. Because if a music producer was truly logical and normal, he wouldn’t be in the music business.

The role of music publisher

When a publisher makes a standard deal with the music producer, it takes on the obligation to “administer” the compositions for use. The music publisher now has administration rights to actively find users, (TV shows, motion picture companies, & advertising agencies) issue licenses, collect money, and pay the music producer.

Traditionally, the publisher splits all income 50/50 with the music producer. The publisher’s 50% is for overhead. (office, staff, ect.)

The share kept by the publisher is known as the publisher’s share. The balance paid to the music producer is called the writer’s share.

The success of the music publisher and the catalog he delivers is directly tied to moves made by the music supervisor.

The role of music supervisor

A music supervisor oversees all aspects of music in a visual production. This includes facilitating the shows creative needs with the background music, handling all of the licensing and contractual paperwork, and keeping track of the music budget. The music supervisor is the liaison between the music and film/television worlds.

The cold reality of the business is this:

Artists record many tracks, some don’t stick. The calendar of what does stick has no relationship with the real world. Television shows, and films plus the music behind them call all be dropped and the last possible second. Surviving the hits and getting back up is to persevere, the more projects you have in the works, the better the odds of getting paid for the work.

Like any part of the music business, licensing can be feast or famine, goldmine or sand dune – the best protection is to do the homework, build relationships with the players involved, and understand how it’s all put together.

The music industry means commerce, which means there’s a basic law of supply and demand. No demand for your music means that’s its not valuable. It becomes valuable when several music supervisors have concluded, “That’s a fit for my visual presentation!”

Terminology

To understand the ebb and flow of this particular market, a few fundamental terms and phrases need to be defined.

The 85 decibel Monks create music, or in legal speak, “intellectual property.” (creations of the mind in the form of artistic works) The intellectual property is then copyrighted by the songwriter. When a client asks for permission to use the intellectual property, a performance license is issued by the copyright owner, granting the right to transmit the artistic work in public. When the copyright owner grants the right to synchronize the musical composition in timed relation with a visual image, the copyright owner issues a synchronization license.

A license issued by the copyright owner to a record company is a mechanical license. This grants the record company the right to reproduce and distribute the music for an agreed upon fee per “unit” or compact disk manufactured and sold. The money received from intellectual property to the copyright owner is defined as royalties.

The Primary Market

The primary market for any film or television show is the exhibition of the motion picture or show in a wide variety of outlets. DVD’s for purchase or for rental, pay cable services (HBO, Showtime, The Movie Channel) to the television networks (ABC, NBC, CBS, & Fox) or basic non-pay cable services. (USA Network, Lifetime, MTV) Soundtrack albums are often released, in turn creating additional income from mechanical royalties (cd sales) and commercial advertising.

The Process

Almost every feature film or nationally broadcast television show has a music supervisor. A supervisor locates the type of pre-recorded music used in coordination with a scene. Part of the job also becomes the fine art of ensuring fair compensation for the artists involved (the 85 dB’s for example) while at the same time staying within the studio / production company music budget. Next, going about the business of clearing and licensing the music is negotiated with the publishing company (those who “pitch” the songs in their catalog to the music supervisor) and the songwriter (the artists who make the music) before permission is granted to sync the song. (a synchronization license is a fee paid by the film or television company to connect a song to a visual image)

The Checklist

When a call comes in from the music supervisor of a motion picture or television show, a number of factors must be considered in determining how much to charge for the inclusion of a song.

  • How the song is used (musical theme, instrumental background, or ending credits)
  • Budget for the project as well as the music budget
  • Type of visual project (major motion picture, independent film, network television, or cable television)
  • Stature of song being used (current hit, rock & roll classic, or new song by an undiscovered artist)
  • Duration of use (30 seconds to 3:00 minutes)
  • Terms of license (two years to life of the copyright)

The Payout

Synchronization royalties (compensation for applying original music to a moving picture) is what the songwriter is paid. Once again, this could be TV commercials, shows, movies, and internet podcasts. There are no hard and fast rules in this area because the fees are negotiated in the context of each individual visual project, and different rates apply. For instance, any film or television show made for less than two million dollars is considered low budget and 3-6% of the budget us used for music licensing. The synchronization fees charged by music publishers for a major studio film can range between $15,000 to $40,000 dollars.

The 85 dB’s joined the performance right organization BMI in February of 2008. BMI tracks public performances of its members, and then collects license fees on behalf of its songwriters, composers, and music publishers. BMI distributes the revenues as royalties to those members whose works have been performed. Under copyright law, songwriters and music publishers have the right to be paid for the use of their property.

Formed in 1939 as a non-profit making performing right organization, BMI was the first offer representation to songwriters of blues, country, jazz, r&b, gospel, folk, Latin and, ultimately rock & roll.

375,000 songwriters, composers & music publishers are represented by BMI and more than 6.5 million compositions are in their catalog. As a result, BMI has implemented a number of technological innovations in its continuing effort to gather the most accurate information available about where, when, and how its members’ compositions are used, as well as ensuring that payments are made in a precise and timely manner.

The 85 decibel Monks target market is music publishing agencies that cater to television shows seeking an urban, up-tempo jazzy style of music as background, known in the industry as the underscore. (music underneath the dialogue, action, & transactions between scenes) A good underscore can make an impact on the visual presentation. This niche style of music will cut through the clutter of all music selections submitted by other artists. The key is to locate the proper agency that is known for placing the type of music, and once its identified, continue to submit high quality recordings to that agency on a regular basis. We will only seek agencies that agree to represent our music on non-exclusive terms, (nothing prevents our company from using our music for other business purposes) committed to building a music industry that is fair to working artists, and will service clients easy access to music at a reasonable price.

One of the largest barriers to artists getting music licensed in the past was simply the search costs. A television music supervisor has to listen to a stack of cds, track down the music label, and hammer out a deal. It’s a dated process that can be time consuming and costly.

The publishing agencies the 85 decibel Monks submit to help reduce the search cost and time spent by the television music supervisor to practically nothing, and they automate the contractual part. With the ease of finding and licensing the songs through the agency on the web, legal music licensing can and will expand greatly. As more and more serious web video shows and podcasts get produced, they are going to need some good back beats to keep people watching. The 85 decibel Monks intend to fill this need in the present and in the future. Our production company has been licensing through several agencies since 2005, so we do have a track record and an outstanding reputation.

Our music stands a better chance of getting represented and placed than a new artist on the scene or an established pop group under contract by a record label. A condensed production team like the 85 decibel Monks can sign off on a license quickly. Time is always an issue, and television supervisors know an indie production team will be much easier to work with. The 85 decibel Monks are completely in-house and independent, thus less expensive to the advertiser or television show – a huge advantage.

Marketing is creating an identity for a certain genre of music. Music that is made takes on value through development, positioning in the marketplace, and marketing to a certain segment. Present the target market with a strong, clear and consistent identity. Pinpoint the specific group of music publishers (those who pitch the songs to movie and television supervisors) and pick them off with great accuracy. The intent is to motivate them to take a listen, make an emotional connection, and have them put the music to use. The measure of success is gauged by reaching, at the lowest possible cost, the greatest number of people who can and will use our music service. Networking costs almost nothing in money, but plenty of time. However, there is one tool that can be used to our advantage that can accomplish two tasks at once.

The artist web site

A web site dedicated to the artists that is attractive to the eye, has quality content, and is easy to navigate can really make a difference. It provides prospects an opportunity to stay informed by visiting the site, and the artist can forge a better relationship with the prospective clients by email, which encourages song placement. Value is added by offering free music (mp3’s) for download on the web site for evaluation. People who may want to use 85 decibel Monk material will probably return to the web site or spread the word to others who are looking to use our music for various purposes. Because our website is not strictly aimed at music publishing companies, it attracts all types of fans who enjoy our music, as well as people involved in other branches of the music business. Our company offers t-shirts with the company logo, has music available for all kinds of uses, and gives music fans an enjoyable interactive web experience.

For the 85 decibel Monks, the internet does only 3 things: increase awareness, provide access to music, and exchange information. Having a web site does not in and of itself guarantee success.


Wanna check out the 85 decibel Monk style of music? It's available @ cdbaby!



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