June 30

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How Non-Exclusive Licenses Work In the Music Business

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In this guest post, Keller, the founder of Sounds Sphere (a marketplace for artists and songwriters to get great production at a low price), provides us a deep dive on the non-exclusive model and how independent artists can take advantage of it. Enjoy!


The Basics

The first term we need to define is “derivative work” which means any song created with an instrumental or beat. This is a vocal recording mixed with an instrumental to create a new work with its own copyright.

A non-exclusive license is a type of license that gives an artist (The Licensee) the ability to use an instrumental track (or beat) with a specific set of terms and conditions. A non-exclusive license can be re-sold to multiple artists or Licensees.

An exclusive license is a license that typically removes all restrictions from an instrumental track and gives the artist full control to do what they wish with the derivative song. An exclusive license is sold one time to one artist and cannot be re-sold.

For the purpose of this article we’ll be talking strictly about the non-exclusive license and the derivative songs that get created with those licenses.

We’re also going to use the analogy of leasing a car to better understand non-exclusive licenses and how they benefit artists who use them.

How Leasing Works

When you lease a vehicle, you’re basically renting it from the dealer for a specific amount of time with a specific set of terms (usually mileage restrictions). Some people prefer this to buying for many reasons:

  • Try Before You Buy – sometimes people want to experience an outcome without having to fully commit to that outcome
  • Emotional Connection – being in your car day in and day out establishes some energetic patterns and an emotional connection that should feel right in order to keep the car long term
  • Variety & Selection – if you lease a car, you can lease a new car in a few years so there’s no commitment and you can try many types of cars over a shorter amount of time
  • Financial Implications – lease payments are typically a lot lower than loan payments if you buy a car

These same benefits apply to purchasing a non-exclusive license (essentially “leasing” an instrumental)

  • Try Before You Buy – non-exclusive licenses allow you to write a song to a track, release that song, and see how it performs before spending money on an exclusive license. If a song does well and shows potential, purchasing the instrumental makes sense. If not, then you haven’t wasted money on an expensive “car” that you don’t need anymore
  • Emotional Connection – clearly music is a gateway to emotion for artists. With non-exclusive tracks, all of the music is finished and waiting for you to write your song (or “topline”) the track. You will be able to immediately hear and feel the song and know if it’s right for you
  • Variety & Selection – purchasing non-exclusive licenses give you freedom to put EPs and albums together that otherwise might not have been possible. With a wide range of tracks available non-exclusively, you can piece together songs from multiple genres and producers a lot easier than buying one-off exclusive licenses or hiring 1 producer
  • Financial Implications – nowadays independent artists cannot spend their entire budget on production. If they do, they will have no money left for promotion. Let’s say Jane is doing a 10 track album. Typically she’d pay anywhere from $500 – $2,000 per track for a producer to produce her songs. For this example we’ll assume she spent $1,000 per track exclusively. Sure, she probably owns most or all of the rights to her songs, but at what cost? She spent $10,000 on production and doesn’t have any money left over for PR, social media marketing, or Spotify playlisting pitching.

If Jane got those same tracks under a non-exclusive license through a site like Sounds Sphere, she could have spent as little as $49 to get the same quality production she paid $10,000 for. Then, she could use the “wait and see” approach to see how her songs do.

If 1 song starts to take off and streams really well or she got a film/tv placement opportunity, she could always come back and buy the exclusive license(s).  This way, Jane doesn’t waste money on production for songs that may or may not make her money back. Take a look at the table below for a visual representation.

 

Sounds Sphere - Cost Comparison 10 Track Album - Infographic

 

The Tradeoff

Of course using the non-exclusive model has other considerations that, similar to leasing a car, an artist has to be aware of.

  • Splitting the rights of the derivative song is the main consolation that artists have to agree to when they purchase a non-exclusive license. This means that the producer of the instrumental will split the rights of publishing and master revenue with the artist. Typically that split is 50/50 so where the artist may have owned up to 100% of the song for an exclusive “work for hire” deal, with a non-exclusive license they split those rights with the producer
  • Restrictions on the song are another thing to be aware of. Typically with a non-exclusive license there are stream limitations between 10-50k streams before an additional license would be required. Usually there are restrictions around synchronization for film/tv/ads and video use as well. Depending on the contract, a non-exclusive license can be fairly flexible though. Oftentimes artist’s songs end up doing what they would have normally done even if the track was purchased exclusively.
  • Time limits may be a factor for artists interested in non-exclusive licenses. Sometimes producers set a year or two year limit on the license. This means after that time period is up your song has to be taken down off any distribution platforms or another license has to be purchased
  • Multiple artists could be using the same instrumental with the non-exclusive model. Just like leasing a car, two people could have the same model car, but their own unique individual cars (or songs in our case). Each song is its own derivative copyrightable work so there’s technically no reason why multiple artists couldn’t use the same instrumental. On top of that, many sites like Sounds Sphere, offer stems with every license so you can customize the track to your liking. This enables your song to be truly unique from the next artist’s song.

Wrap Up

The traditional music industry model is fading fast. Bedroom studios, laptop recordings, and YouTube stars are commonplace.

Independent artists are more empowered than ever before to define their own success. It’s no secret that independent artists now make more revenue than major label artists. Because of this, the rise of new technologies and tools for these artists will accelerate and continue to push the boundaries of how songs get made.

Understanding non-exclusive licenses and how they work is important for any artist or songwriter who wants to understand all their available options. Non-exclusive licenses offer a better way to create great songs faster and with less cost. And while the model may not work for everyone, the benefits of being able to keep quality standards high while saving money is certainly appealing.

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