Music Licensing Concepts

You should understand a few things about licensing in order to make accurate business decisions regarding your music. How much you earn in the music business is dependent on the way you license out your music, and who you license it to.

Income for your music can be split into two categories: licensing fees, and royalties. Beat Brokerz is your vehicle to get placements and collect licensing fees.

Licensing Fees

In the music business, you make money by licensing your music, and the fee you collect is based on the budget and the needs of the music buyer. The principles are fairly simple: the more the buyer wants to do with the music, the higher the licensing fee should be. This makes sense, because a greater ability for the buyer to exploit your music for profit should also result in a greater upfront compensation (licensing fee) to you (the author).

Royalties

Licensing fees are only one part of your potential income as a music producer. Royalties are how profit is split between contributing authors of a work after it has been licensed and exploited in the music business. The amount that each author is entitled to is based primarily on what was agreed to when the music was licensed.

There are basically two different types of royalties that you can earn as a music author.

The first type is called "mechanical royalties" in the music business. You earn mechanical royalties when your music is distributed for individual use (singles, albums, mp3 downloads, etc). The maximum amount an author can expect to get from each copy distributed would be what is called the "statutory rate" (9.1 cents at the time this was written), which happens to change from time to time as determined by the government. The person or company distributing the work (such as a record label) is responsible for accounting for how many copies they have distributed and paying out royalties to authors.

How "mechanical royalties" are addressed by your Beat Brokerz licenses.

When you set the "royalty rate" in the mechanicals section of your licensing terms, you are setting a percentage (between 0% and 100%) of the current full statutory rate that you agree the buyer will owe you for mechanical copies distributed. If you license your music at a 100% royalty rate, you'll be entitled to a full 9.1 cents per copy distributed of your music. If you license your music at a 50% royalty rate, you'll only be entitled to 4.55 cents per copy distributed.

The second type of royalties are called "performance royalties". You earn performance royalties when your music is performed for an audience (radio, internet streaming, live shows, jukeboxes, etc). The amount that you collect in each scenario will vary depending on how/where it was performed, and more importantly; if you have somebody to collect the royalties for you. Performance royalties are collected by PRO's (Performance Rights Organizations). Some notable ones are ASCAP, BMI, & SoundExchange. You must register your work with these organizations in order to have any hope of collecting performance royalties for your music, since they are set up to monitor and collect for these types of uses.

How "performance royalties" are addressed by your Beat Brokerz licenses.

Your right to collect performance royalties are always specifically preserved when you license your music through Beat Brokerz, regardless of what "royalty rate" you have agreed to. This is a key benefit of licensing your music through Beat Brokerz.

Pre-Approved Licensing

Beat Brokerz is built around the concept of "pre-approved" licensing, or purchase options. By defining a range of pre-approved licenses (terms and prices), you make your music instantly available for purchase by the most common types of music buyers. Think of it like placing a pre-packaged product on your shelf that buyers can purchase without a negotiation. If you have a pre-packaged product that fits the buyer's needs, they can simply pay the asking price and instantly get the music + license without any hassle.

On the flip side, buyers that need to license your music for uses that aren't addressed (covered) by your pre-approved licenses will have the opportunity to negotiate a customized license with you through the Beat Brokerz "make an offer" system.

Default Licensing

The following licenses are "default" for music licensed on Beat Brokerz. These terms represent the standard license agreements offered for music sold in the Beat Brokerz marketplace. With a paid membership, you can change these or create your own licensing terms.

Basic License

Mechanical
  • 1 Recordings
  • 2,000 Free Copies
  • Free Term: 12 months
  • Royalty Rate: Full
  • Credits: Written or Audible
  • Non-Exclusive
Sync / Performance
  • No Synchronization
  • No Performances
Overview:
Record a single song ("master recording") on this beat. The first 2000 copies that you sell or give away in the first 12 months will be royalty free! If royalties become due, the author requests to receive the full current statuatory rate per unit. The author requests either an audible credit ("shout out") to be recorded on the completed song, or a written credit to be included in the title or credits section of the completed song.

No "exclusive use" warranties are granted by this license.

Premium License

Mechanical
  • 1 Recordings
  • 5,000 Free Copies
  • Free Term: 12 months
  • Royalty Rate: Full
  • Credits: Written
  • Non-Exclusive
Sync / Performance
  • Music Video
  • YouTube Video
  • Live Performances
  • Radio Play
  • Term: 2 Years
  • Worldwide
Overview:
Record a single song ("master recording") on this beat. The first 5000 copies that you sell or give away in the first 12 months will be royalty free! If royalties become due, the author requests to receive the full current statuatory rate per unit. The author requests a written credit to be included in the title or credits section of the completed song.

You are permitted to perform this music in a live show or concert. You are also permitted to receive radio play under the terms of this license.

Also, synchronize this composition in a Music Video, or YouTube Video with the right to broadcast it Worldwide for a period of 2 years.

No "exclusive use" warranties are granted by this license.

Basic Professional

Mechanical
  • 1 Recordings
  • 5,000 Free Copies
  • Free Term: 12 months
  • Grace Period: 3 months
  • Royalty Rate: 75%
  • Credits: Written
  • Exclusive: 3 months
Sync / Performance
  • Music Video
  • YouTube Video
  • Live Performances
  • Radio Play
  • Term: 2 Years
  • Worldwide
Overview:
Record a single song ("master recording") on this beat. The first 5000 copies that you sell or give away in the first 12 months will be royalty free! You will also have a 3 month grace period to release your song before the royalty free period begins. If royalties become due, the author agrees to a discounted royalty rate of 75% of the current statuatory rate per unit. The author requests a written credit to be included in the title or credits section of the completed song.

You are permitted to perform this music in a live show or concert. You are also permitted to receive radio play under the terms of this license.

Also, synchronize this composition in a Music Video, or YouTube Video with the right to broadcast it Worldwide for a period of 2 years.

By purchasing this license, the author warrants that no additional licenses will be issued for this composition, constituting "exclusive use", until you have released your first recording, or a period of 3 months have elapsed.

Custom Offer Negotiations

When a buyer has special requirements or needs that aren't addressed by any of your standard licenses, then it may be necessary for them to get special terms or pricing from you.

The Beat Brokerz "make an offer" system allows buyers to define their own licensing terms, and send them to you for approval. You have the opportunity to negotiate the terms + pricing, and issue custom licenses to buyers on an individual basis. For professionals, this negotiation process is an essential part of the music business which can determine whether you even have a shot at getting the business.

The Offer Process

Each beat in your catalog that is available for purchase on Beat Brokerz, has a "Make An Offer" button associated with it. When the buyer clicks this button, they have the opportunity to create their own custom licensing terms (including a price) that they will send to you as a custom offer.

Offer Review

You will receive an account notification when you have a new offer which needs to be reviewed. Your responsibility as a seller is to log into your account, click the link to review the offer, and give your consideration to the buyer.

Note: The key points to examine for each offer are the specific terms that the buyer is requesting, the files that they are requesting to download, and the price that they are offering to pay. If the terms don't seem to fit the pricing, you will have the opportunity to change them before accepting the offer.

When the buyer submits an offer, part of their offer includes whether they require only the "mixed down" beat (such as mp3), or whether they require the track separated files "trackout". Regardless of which files they have selected, you are responsible for providing the music in the requested format if you accept the offer.

Negotiation

When you receive an offer (or an updated offer) from a potential buyer, you always have the opportunity to modify the pricing to match the terms or vice versa. When you choose to "offer new terms", you will change the offer in any way necessary so that it makes business sense. When you offer new terms to the buyer, the buyer will receive a notification and have the opportunity to purchase under the updated terms.

Of course, you may also communicate back and forth with the buyer in the form of "offer comments" in order to better assess the buyers needs before accepting the offer or offering new terms. This process is called the "negotiation process". It allows you and your buyer to come to an agreement before any transaction is made.

Offer Acceptance

After you've reviewed an offer, in order to allow the buyer to purchase you must do one of two things:

  • Click the "Accept Offer" button - or -
  • Click the "Offer New Terms" button and update the offer
If you don't accept the offer, or offer new terms to the buyer, the offer will sit for a maximum of one week without activity before it "expires". If after accepting the offer or offering new terms the buyer does not purchase within 5 days, the offer will also expire. Negotiation can be re-opened on an expired offer only by offering new terms.

Offer Completion

Once you've accepted an offer, and the buyer has made the purchase transaction, the offer will be updated with the order information and permanently locked and archived. You can review it at any time, but no new negotiations or comments can be posted to it.

Samples Clearance

Sampling is one of the staples of hip hop music. Unfortunately, many producers don't understand (or sadly... don't care) when it's legal and when it's not. The truth is, a good sample can make your music sound great, and kill your chances of any real placements at the same time.

Copyright Ownership

Whenever you create an original work, either music composition, lyrical content, or sound recording, you own an inherit copyright on that work. That means that if anybody wants to use what you've created in their own work (such as sampling), then they are obligated to get your permission (via a license) and typically pay you royalties on the backend. This is what is called "clearance".

It works the same way when you sample somebody else's work. When you take an audio sample of another recording, re-use a melody, or record another performance of existing lyrics, then you are obligated to get permission to do that and work out an agreement for paying royalties to the copyright owners of the work you borrowed.

Label Repellent

It's illegal for an artist (or record label) to release music which contains samples that have not been cleared. For that reason, no serious music buyer will consider purchasing music which contains samples for the simple fact that they cannot release it! And if they do, they could be sued for damages by those who own the copyrights to the samples.

Even if a clearance has been obtained for samples on your beat which can be legally transferred to your buyers, serious music buyers are still on the hook for paying royalties to each sample owner (including you) after their music has been released. Each author with a copyright interest in the beat represents another hit to the artists bottom line. So unless you've got a cleared sample for a major artist (not typical), no record label (independent or major) is ever going to touch your beat.

Sales Strategy

The bread and butter of online sales are buyers that buy impulsively. If a buyer makes a decision to buy, you want to have something ready to sell them on the spot. These are the types of people who you will target with your pre-approved licenses. Typically, these types of buyers are concerned less with how tightly the license fits their needs, and more with how easily (and quickly) they can access the product.

A good pre-approved licensing strategy (such as the default Beat Brokerz licensing options), includes purchase options that appeal to a range of buyers.

Low Budget Buyers

  • Targeted by Basic Licenses

Certain music buyers are only willing (or able) to pay a small fee, typically $25 or less to get the untagged version of your beat. We understand that your work is worth a whole lot more than $25. But the name of the game is to offer people something for $25 rather than offer them nothing at all. For this reason, we recommend a license with a basic right to use the music, and a simple high quality untagged MP3 download. Remember, this type of user is not going to be doing anything major with your music, but they are willing to put a little bit of money in your pocket anyway.

Industry Buyers

  • Targeted by Premium Licenses

These buyers are more serious about their work than low budget buyers, and typically aren't motivated primarily by a tiny budget. They are willing to pay a premium price as long as they know their interests are well taken care of. We recommend a pre-approved license option with a mid-range price point (around $65.00), more generous rights, and the inclusion of WAV + Track Separated (trackout) files as a download format. Trackouts serve as an additional incentive for these buyers on top of the more generous licensing terms.

Exclusive Buyers

Occasionally, buyers come along who just absolutely fall in love with your music and want to take the beat off the market while they work on their project. These buyers are willing to spend more than the premium rate, and we suggest you give yourself the opportunity to make impulsive 3+ digit sales by offering a "limited time" exclusive option license for these buyers. Refer to our guidebook section on exclusives for more information on "limited exclusives". Besides this, a more expensive license option also serves another purpose in the sales strategy (outlined in the next section). So even if you don't want to offer an "exclusive" type pre-approved licensing option, we recommend you design some sort of higher end license.


Default Licensing Strategy

Your default licensing option is like your "recommended license" to the buyer. We recommend you make your premium license the default recommended license. The reason for this is simple; buyers are more likely to purchase your "premium" rate license if it is suggested to them by default. Look at it this way... you want to make the buyer decide to buy your "cheaper" license rather than hoping that they decide to buy your "more expensive" license. Also, when given multiple options to buy, buyers that are not budget-restricted, (more often than not) make a choice that's not the cheapest, but not the most expensive either. So assuming you've offered at least one other "pre-approved" license above and below your suggested price point, you have set yourself up well to make the sale at your "premium" rate.

License Documentation

Licensing out your music is a contractual agreement. It's pretty safe to say that documenting the agreements you have with your buyers is an extremely important part of your business, and is the primary insurance policy you have on your music.

It's easy enough to write up a contract and send it out with your music as part of a transaction. But if push comes to shove and your music is being exploited for big money, what documentation do you really have? If you don't have a signed document, then the defense of your rights is effectively reduced to a "he said she said" argument. The honor system may be a good choice if you loan a power tool to a friend, but it's a poor choice for a business strategy.

The Problem

Getting physical signatures in the "give it to me now" digital world can be a problem. That's why most producers (and sadly, most beat selling websites) ignore the problem completely. If you pull out an unsigned document and claim it's what a buyer agreed to, then the buyer can easily pull out their own unsigned document and claim the same thing. Who's telling the truth?

The Solution

Beat Brokerz solves this problem by using digital signature technology and a public access verification system to document the agreement. It all happens instantly without any delay to the buyer, but provides the same comfort and protection of a physical signature without you lifting a finger.

Here's How It Works

When your music is licensed, a certificate is generated which contains the exact terms of the agreement between you and the buyer. This certificate is then signed by us digitally and sent out to both you and the customer. This certificate is your insurance receipt and documentation of the agreement.

The authenticity of the certificate can be verified at any time using our online verification tool. It can also be verified offline in the case of court litigation. If any of the terms in the certificate are altered, then the certificate will fail validation indicating that it's not the official agreement. It will also fail validation if the buyer did not complete payment under the agreement, or if the buyer is refunded or requests a chargeback.

Demonstration

  1. Download our sample certificate. (Right click, choose "Save As")
  2. Use the form below to validate the certificate.
  3. Open the file with a text editor, change something, and try to validate it again.


License Validator
Upload a license to verify that it's valid and untampered.