An overview of the industry

The following licensing industry overview comes from Mark Petrie of http://www.royaltyfreekings.com/, who offers this assessment:

I like to think of the music business like a pyramid.

He then goes on to explain...

At the wide bottom of the pyramid are:

• Low ball micro licensing sites [author’s note: I would personally avoid these] who license tracks for $1 - $10
• Royalty free sites that charge $20 - $150 per track but let the customer re-use the track without paying again. The quality of these libraries have improved greatly over the past 5 years, but some are still plagued with a lot of very amateur and dated sounding tracks. This is an area of the business where a lot of re-titling is taking place, as almost every royalty free library is non-exclusive (with a few exceptions).

Only a very small percentage of music in this section of the business ends up airing somewhere that would generate any performance royalties for a composer, so the name of the game here is sales / license fees.

In the middle of the pyramid are:

• Companies that do 'needle drop' licenses of instrumental production music to TV, films, commercials. These libraries are often buy out, i.e. larger companies with deep pockets that pay the composers upfront a nice fee but then keep all the licensing income. Quality is overall quite a lot stricter in these libraries. Examples: Killer Tracks, West One, Ole, MegaTrax.

The libraries at this level that aren't buy out libraries often are non-exclusive, and composers will re-title their music for these types of libraries, or the library will simply put a prefix in front of the track name to identify them as the publisher. Example: Getty, Audiosocket.

• Numerous small 'boutique' libraries, many of which are based in Los Angeles (often owned by a composer that amassed a large catalog of his own music over the years). Most of these small libraries don't have the funds for buy out fees, so they either expect a composer to give up the copyright for free, or give them a small fee (and sometimes even expect all the licensing when they pay a fee). A few of them still re-title, doing non-exclusive deals.

A composer makes their money in this mid range of the pyramid through buy out fees ($200 - $1000 per track) and/or performance royalties (the bigger companies have very good international distribution as well US based connections).

At the top of the pyramid are:

• Trailer music libraries - companies that specifically target big budget film trailers and video game ads. They focus less on volume and more on very high production value. The fees here range from $2000 for a short TV spot to more than $30,000. Examples: Immediate Music, AudioMachine, Two Steps From Hell, Full Tilt.

Composers interested in this area of the business need to understand that the expectation for production value and having the latest 'sound' mean years of honing the craft and keeping up with the latest studio tools.

• Also straddling the top are some of the companies that are in the mid range of the pyramid - these needle drop companies occasionally get huge licenses from international ad campaigns, TV shows (Curb Your Enthusiasm's theme is actually a library track) and a featured track within a big movie. Fees can be more than $50,000.

Composers at this level sometimes still do buy-out deals, but most of the time trailer music companies don't pay upfront, instead sharing the license fees (40% - 60% with the composer (which is a gamble, but one that can pay off very handsomely)

What else is out there?

Separate from the licensing pyramid are those libraries that don't charge anything for use, instead focusing entirely on getting airtime on TV shows to make performance royalties. This is where a lot of composers make their living. Examples are: MusicCult, FreePlay, JinglePunks, ScoreKeepers and a lot of smaller boutique companies.

Most of these companies are non-exclusive, but there is a sea change in the business happening, where more and more TV broadcasters are insisting on only working with exclusive libraries (because of incidents where more than one library was submitting the same music). Some of these libraries are already making moves to convert their catalogs to list only exclusive / non-retitling tracks.