Why You Should Keep Licensing and Royalty Management In-House

Licensing and Royalty ManagementWith all the discussion about tackling the music business on your own and choosing not to get signed by the existing industry, it’s hard to keep the two separate.  There is plenty of overlap in several subjects that pertain to both the mainstream and independent industries.  The one thing that most people say you should leave to the mainstream is your royalties and licensing. I personally would beg to differ (cue the critics!).

I will be the first one to admit that I’m no expert in this subject.  This blog post could be 100% false and I’m just stupid because I don’t have an account with the big guys like ASCAP or BMI.  But as a musician with an “on-the-surface” standpoint, giving control to these companies to help you get paid for usage of your music doesn’t really make a whole lot of sense to me.  My biggest beef with this is that it’s pretty much a guarantee that you aren’t getting paid the full amount for material that you wrote.  Why should they get to profit more than you on something you own?  This mindset feels very old school to me.

Well, then Mr. Smarty Pants.  What should I do instead?

The last time I checked, I did not carry a dictionary around in my pocket, but thanks for the compliment, I think.  My (probably controversial) solution to this would be to apply the same “conquer your local market” mindset to your licensing and royalty management as well.  If you are a local band taking the “local markets first” approach seriously, I would suggest you wise up to how to best create your own relationships in the local market you are currently working on.  At the same time, I admit this area is probably one of the worst areas for a creative musician to jump across the board into the business of music.  For any band or artist, forming B2B (business to business) relationships could very well be some uncomfortable and unfamiliar territory.

In business, you have account managers who manage and nurture relationships with other companies or clients to help facilitate ongoing business between each other.  In a perfect music business model, I would imagine the same thing.  Bands, established as a working business entity, would appoint a member (or all members) of the band to act as an account manager for doing business with places and people who want to use your music for commercial and/or promotional use.  This band member would be able to talk shop with the interested parties and come to a contractual agreement for the usage of their music and what the compensation would be, whether it be residual or a one-time deal.

Make licensing and royalty management more profitable for your band/brand

The strongest argument I can make for this is that by doing it yourself, you know exactly, penny for penny, where you’re getting money from, how much you are owed, and where your music is being played.  You can regulate things yourself and even formally request reports as to play statistics and revenue reports so you can keep a close eye on every account you have.  You are not relying on someone else who may or may not be honest about your pay-outs and business performance.

Ok, you’ve convinced me Mr. Pants.  How can I actually implement this process?

As of this writing, I do not personally know of any options geared toward licensing and royalty management for local artists, however, who’s to say that someone may not be working on one?  What I do know is that you could easily create your own using a spreadsheet to manage the accounts you’ve successfully landed and are now nurturing a relationship with.

You could also keep a list of potential buyers who may not be thinking of (or know of) you but you are thinking of them.  Not everyone will come to you, so be sure to keep yourself on the radar too.  A way to do this is to send out an introduction packet or “licensing press kit” (different from a performance press kit) to this list of potentials you are thinking about and follow up with them within a couple of weeks to see if they have received and reviewed the kit for consideration.

Groovy Mr. Pants, but what about non-commercial usage of our music?  

Up until this point, we’ve discussed how to license your music for commercial use.  But what about general public distribution and usage?  What if you just want fans to promote and spread the world about your music and not have to worry about paying you licensing fees for it?

The Solution: release your free product to the world using Creative Commons licenses.  This way your music is the “free offers” and promotional goods being freely passed around to promote you, and in return this should help increase your live performance attendance when you tour and help you gain a following through your online media and social network presence.

And Creative Commons is not just an independent and local band thing.  It works for mainstream artists as well.  For example, when Trent Reznor decided to shake up the music industry through a new distribution model, the Nine Inch Nails front-man used Creative Commons as an anchor point, releasing the Grammy nominated Ghosts I-IV under a Creatve Commons Attribution-NonCommercial-ShareAlike license. While Reznor gave the first disc away for free digitally, NIN sold tiered offerings ranging from a $5 download of the full album to a $300 premium box set. Limited to 2,500 units, the box set netted $750,000 in profit for the band. Ghosts went on to become the #1 paid MP3 download on Amazon.com for 2008. NIN’s next album, The Slip, was released for free under the same license, fueling a sold-out tour.

So young padawan, what have we learned from all this?  

Going back to my biggest beef reference earlier, while it is true that managing your own licensing deals may mean you aren’t getting all the money you’re owed, I would again imagine the case is the same if you did use the royalty companies.  Who’s to say that there isn’t someone out there using your content without your knowledge either way?  From where I stand, I don’t think it’s possible to police this no matter how you do it.  Mainstream has become too restrictive, and the music industry in past years was way more enjoyable when it was more about the music and less about actually capitalizing on every last play of your song in the world.  In my humble opinion, ASCAP, BMI and SESAC are fighting a war they will never completely win.

So what have we learned?
1.) Skip out on ASCAP or BMI and venture out on your own.  Paying a regular membership fee to those guys is money you will never get back one hundred percent.
2.) Learn to track your own revenue and ink your own commercial licensing deals, one local market at a time.
3.) Being active in your own licensing and royalty management will put you in the driver’s seat and allow you to reap more of the financial benefits.

Keep your music licensing and royalty management in-house.  It’s much more profitable.

Matt is one of the co-founders behind Local Sounds, a non-profit organization that helps promote, preserve and develop Madison's local music scene. He has played drums for several bands and was formerly on the MAMAs board.

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