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Understanding Music Library Contracts Part 3

Panelists: Erin Jacobson, Bob Mair, Pedro Costa, Michael Eames
Moderator: Michael Laskow

This questions is for Michael Eames, because he has given the single best explanation I’ve ever heard when I had you and Bobby Borg on an episode of TAXI TV. I so badly want more indie filmmakers to run listings with TAXI. The ones who do are always super-happy, and it’s not unusual that three, four, five, as many as eight pieces of TAXI-member music have been placed in a single indie film. We’ve had really good luck with films on the Hallmark Channel as well.

But when I reach out to the indie filmmakers, many of them say, “Oh, I only use royalty-free libraries.” And there is such a grotesque misunderstanding of what royalty-free is. When I see a TAXI member post on our Forum, “TAXI didn’t forward this song; however, I got it picked up by a library on my own. Very often, when I do the research, I find out that they are in royalty-free libraries, which in many cases, in my personal opinion, are a lower tier of music libraries. It’s more like a parking garage with a bunch of stuff where you can go in and pick it, the prices are cheaper, the music isn’t curated very well—if at all—the quality isn’t there. You get what you pay for in most instances.

So I’ve been on a mission to educate … indie filmmakers think that when something is not royalty-free, that when royalties are paid, that they’re going to have to write a royalty check on a quarterly basis. They don’t understand that there are PROs that collect this money, assuming that it’s outside of a theatrical situation. They really don’t get it, so can you explain to our audience what royalty-free means?
Michael: Yeah. Well, and of course you can tell me if I give you the same answer as the one you remember. But to me, there are a couple of misnomers in that terminology. Let’s say that the filmmaker’s perspective is, “Oh, I only use royalty-free music.” Well, the first misnomer that everyone needs to understand is that, really, that you are using music for which there is no upfront sync fee. A royalty-free music library is not going to charge on the upfront, but they are absolutely going to get paid royalties on the backend, otherwise they’re not making any money, and they’re certainly not a charity. But I would say generally, I would agree with you; most of the royalty-free music libraries that are not going to get paid an upfront fee don’t historically have the greatest quality of music. And I would certainly explain to a filmmaker, “Hey look, you know you paid for the lighting, you paid for the costumes, you paid for the catering… Even if you cut a deal and you didn’t pay full rate, as it were, like you still paid something that you didn’t think twice about paying for it. So there’s a value in paying something for music to feel that you are getting the quality high enough of what you feel is appropriate for what you’re doing.”

And then the second aspect, which you’ve kind of already really debunked, which is making sure they realize that once they have that license, all those backend royalties, they [the filmmakers] aren’t responsible for it. So it is whatever the outlet that picks up their film, whether it is like these days a Netflix or Amazon or it goes to broadcast, or it goes to theaters, like all these sorts of things and all the performance licenses that exist in those various mediums, the money is coming from the distribution outlet rather than the actual filmmakers themselves. So I applaud you in trying to get filmmakers to understand this stuff, because, frankly, their projects will end of being better as a result if they know that they are still getting quality stuff and they are making decisions with accurate information and not inaccurate.

Michael: So was that the same answer that you remember?

Absolutely. I just want to have our members here be clear on royalty-free libraries. I’m sure that 100% of them are not terrible. Maybe none of them are terrible, but in many cases, the ones that I’ve looked at—and I’ve looked at a lot—the music just isn’t that good, and the indie filmmakers think that’s their only choice. It drives me crazy.

Bob: It’s interesting. This conversation brings up an interesting scenario, reality TV, where 99.9% of those deals are gratis [meaning no upfront money paid for the uses of music].

Yeah, started by MTV 20 or more years ago, and everybody freaked out.
Bob: Well, what’s the difference?

Um, the difference is…
Royalty-free, no upfront money—gratis, no upfront money—performance royalties, performance royalties.

Right, but the indie filmmakers don’t understand that the performance royalties are NOT paid by them! And because of that—in my opinion—they go to the wrong libraries and get music that is less good because they think that they can only get it from these lesser-quality libraries because they have that misguided belief that getting music from a royalty-free library means that they don’t have to pay royalties, which they don’t have to do under any circumstance.
You understand what I’m asking? They are synonymous from a contractual standpoint. It comes back to that perception thing that I’m so against, you know. It’s like, I never liked the term library.

Understanding Music Library Contracts Part 3

They don’t get it.
I’ve done deals with films, and you get the sync fee, they go, “Yeah!” Then all of a sudden, they go to your website and they go, “Oh, you’re a library, but we’re not paying you that.” And you go, “What?” It got past the editor, it got past the producer, it got past the supervisor, went up the full chain of command. You love it, you want to put it in; why is my fee half of what you quoted? But it’s an interesting thing, when I hear those scenarios, it sounds exactly like a reality TV deal.

I was hanging out with the producer/director of indie film with a really well-known actor in it. The producer/director is himself a musician and composer, and he was wholly ignorant on this topic and only wanted to use royalty-free music, because he thought that he was going to have to write a royalty check every quarter. That blows my mind. Anyway, it’s a problem and it’s industry-wide, and I think we could all do better in educating filmmakers about it, because it would create more business for everybody in this room—you guys included.
Pedro: To pick up on what Bob just said about gratis deals, from our company’s experience—we do a lot of reality TV—I would say that less than 50% of those deals are gratis. There are certain situations… And that kind of brings up the point of when people are looking at contracts; as a composer [myself] a lot of the contracts that I signed ended up that even though upfront, they were saying, “I’m giving you 50/50 of everything.” On the other hand, there was a little line saying, “except for blanket licenses.” So blanket licenses in the reality TV world end up being that the [music library] company gets paid, [but that upfront money doesn’t always get split proportionately with the composers]. So, when we put together our agreements, we made sure that it’s specified that blanket license upfront fees will also be shared with the composers. So I’ve had so many composers who are very surprised with the checks that we send to their homes, with the amount of money that’s coming from the upfront blanket licenses on these reality shows.

I think this is something I learned from Erin (Jacobson) a few years ago. Do you guys in the audience know what the term blanket license means? Okay, some do, some don’t. “Blanket” means that they [the TV show or the production company, or the network] get an all-you-can-eat deal. Let’s say Pedro’s got 2,000 pieces of music that are applicable for reality TV, and The Kardashians—I’m just throwing them out as an example—say, “We’d like to license this entire catalog on a blanket license for next season. We will pay you $10,000. And that means we can use all that we want to of this music.” It also means that the usages go onto cue sheets and that the composers get paid through their PRO for the performances when it airs on television. However, that $10,000 (with many of the libraries) does not get distributed in any sort of equitable way (with the composers), or oftentimes in no way at all. Erin brought this up years ago, and I went, “Oh, never thought about that.”

So what Pedro is saying… Let’s say that he does that deal, like $10,000, 2,000 tracks, all you can eat, the PROs are involved, the stuff lands on cue sheets, everybody gets paid for the backend performances and Pedro gets $10,000. Some libraries won’t share that. A lot of libraries won’t share that, and they should. Their logic for not sharing it is that it’s a pain in the ass to figure out who got used and for how much and do that math on that and distribute that money. Because what if one person had 172 usages throughout a season, and somebody else had four. So they can’t just parse it out equally by saying that X number of musicians had music on that show, and give everybody an equal share. That would be a step in the right direction, but not enough of a step, because it’s not really equitable. If one person has 172 usages and somebody else has four, the person who had 172 usages should be compensated proportionately.

So that’s what Erin said to me years ago was, “That’s a clause they should always look for: On blanket deals, are they cut in on upfront fees generated by blanket deals or not?” Is there terminology or legalese that you would advise these guys? I know this is only for entertainment value, not actual legal advice. [Laughter]
Erin: Yeah, give my little disclaimer: Not legal advice, but, yeah, I mean, a lot of agreements are silent on that, so sometimes they will say explicitly, or it might not use the word blanket, but the language will suggest these wider licenses. But like I said, a lot of times it’s silent, so if you are looking to sign with a library and that’s a concern for you, you might want to ask the person that you are working with at that company, “How do you guys handle payments for blanket licenses? Is that being shared with the composer?” And if they are sharing it, as Michael alluded to, it’s a formula that usually involves fractions, because it’s how many times one person’s music was used, over the amount of total uses in that library. But then, the library has to calculate, compare that with the fee that they received and do that for every composer. So that can be a lot of work. But that’s not exclusive to libraries either. Blanket money, or even black-box money, which is money that is not getting paid out or maybe gets paid in a big chunk to a company, because wherever it was getting paid from, like a royalty-collection society, does not know exactly what it’s attributed to, but they [do] know it goes to that company. You know, that’s in publishing deals, that’s in record deals, that’s in pretty much every kind of deal in the music industry where the money is coming through. And it’s very common for companies not to pay that out.

Bob: Would those be companies that have done work-for-hire deals?

Erin: Could be, could not be.

Bob: I’m just saying from a standpoint of if you are a company that is writing a check for every track—every song, every track—that would be the company that I would think that wouldn’t pay those royalties. But if you haven’t written a check, my understanding is that money goes. So if you haven’t received that money, that’s a bad on the company that’s representing your music [if they don’t do a split on the upfront fees]. I mean, yeah, it’s a lot of work, but that’s part of why our deals are the way they are. We have a lot of internal accounting that has to be done. I mean, I’ve got a blanket with HBO promo; we did blankets with Hashtag, Biker Live and… I know exactly what you are talking about. At the end of the season, you’ve got to get all the cue sheets; you’ve got to see who did what… You’re right, it’s a proportionate share of that blanket.

Which answers the question, “Why does the library get half the money? I created this masterpiece.” Because musicians don’t see the all that backend work. If you are working with a good library that does all this right stuff, it’s a lot of work.
Michael Eames: Can I ask a question of the other three panelists? In reference to Bob’s comment earlier about side deals that some libraries have done, I understand that some of them have had arrangements where if they choose to do a side deal where they are having to give away some or all of the publishing share to someone who is using the cue, that the library has the ability to cut into the writer’s share and share of this use that they got, because they had to give away the publishing share. To what extent—maybe starting with Erin—has anyone run into that, or do we feel that that practice, which I heard of a number of years ago, is just not existing anymore.

Erin: I haven’t really run into that, because the libraries that I work with don’t do that. So it hasn’t been an issue for my clients.

Bob: There are very large companies that are doing that, and it becomes an even bigger mess. I mean, I’ve seen some of those companies that are doing it that are huge, and then they sell themselves. And I know who they sell themselves to, so you sell this entity to… I scratch my head and go, “Okay, this entity that just bought this one that was doing all that. What did you buy? How can you even get into the weeds and know what you just spent X million dollars for?” It becomes a hornet’s nest. So it exists out there, Michael…still.

Pedro, any observations on your end?
Pedro: I just ran into it as a composer and not as a publisher. There was one particular publisher that came to all of us as composers and said, “We have this deal. We are going to do it this way; do you want in, or do you want out?” At the time I was brand new, and I said okay. It was just for the one show. And of course, after that a lot of us talked about it, and regretted agreeing to let them do that. So it was just as a composer. Other than that, I haven’t really run across it. I don’t know what other companies out there are doing.

Don’t miss Part 4 of this Panel in next month’s TAXI Transmitter!