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"Get Your Music Heard - A Look At Foreign Licensing" By Paul Irvine Canadian Musician Feature: Sept/Oct 2002In 1963, EMI’s newly acquired Capitol Records was reluctant to release the Beatles first three singles in the US. This caused manager, Brian Epstein and Parlophone (EMI) label Manager / Producer, George Martin to license these recordings to three different US label partners (Swan, Tollie and Vee Jay). Given the overwhelming success of those recordings released under license, Capitol got the message and released subsequent recordings directly. The rest is history. And when the history is good, itís worth repeating. Welcome to the world of music licensing, a not so glamorous area of the music biz that often goes un-noticed. Given the limited number of direct artist signings (i.e., record deals), the license agreement deserves attention as a viable alternative to the record deal and a modus operandi for many indie labels. This deceptively simple phrase (and the associated contractual relationship) embodies a rich, dynamic and varied exchange of commerce and creativity in the music business; it can be pivotal in the careers of new and established recording artists and in the success of production companies and record labels. While music licensing takes on many forms, we’ll limit our discussion to licensing master recordings for commercial release, which we’ll refer to simply as "licensing". We will also focus on the practical side of licensing from the "licensor’s" point of view. To do this, we’ll talk to those whose personal licensing experiences should prove informative, entertaining and at times heart-breaking. A thorough understanding of the process of licensing music is invaluable to anyone who owns and/or controls the rights in the master recordings. There are many books available that address the subject of music licensing (see reference list below); if you are interested in licensing or are in the process of licensing, I suggest you make the investment, as they will, without doubt, prove helpful. Of course, skilled independent legal advice is advisable in any contractual matter. Whether you are a solo artist, a band, a label manager or the heir to a vast catalogue of recordings, it’s a good idea to know the rules of the game. Your ability to discern the real deal from the not so real will keep you focused on the goal of attaining maximum exposure for your copyrights / creative output and a financial return on your investment / acquisition. Popular music styles have multiplied over the past few decades, with genres and sub-genres springing up in every corner of the globe. Business practices for licensing have also evolved within the various genres and have created their own "standards". However, the basic concept remains the same: the "licensor" owns or controls exclusive rights in and to the master recordings and has the power and authority to enter into agreements for those rights with interested parties (i.e., the "licensee") and the licensee is ready, willing and able to manufacture, promote, market, distribute and sell copies of records embodying master recordings pursuant to the license agreement. Of course, the hope is that the licensee will sell lots of records, make tons of money (for you and them) and pay you your share as soon as is humanly possible. How to begin? If you are fortunate enough to have secured the interest of a reputable licensing partner and you are convinced that doing a deal with them is the right decision, move forward and negotiate the best deal you can. If you are not familiar with their reputation and stature in the industry, you’ll need to get a sense of who they are and what they will be able to do for you. Check their website, ask for their company promo and release materials, ask around the industry and speak or correspond with people who have done business with such company. The licensee’s written agreement should set out these basic terms: i) the subject master recordings; ii) whether the license is exclusive or non-exclusive; iii) the duration of the license; iv) the territory covered; v) the advance (if any) and royalty; vi) the terms of payment and audit rights; vii) specific use exclusions; viii) non-assignment and reservation of rights; ix) copyright payments including mechanical royalties and neighbouring rights royalties; x) internet rights or exclusions; xi) governing law clause, particularly for foreign licenses. A marketing and promo plan is a reasonable request. This combined with their agreement, and any other info you can uncover will help you determine whether they are the right licensing partner. Most importantly, if you’re licensing to a label, get a sense of the people behind the label. However, if you are looking for a licensing partner, understand that they have to be convinced that they can successfully market and sell your music. Ivan Berry is currently BMG Canada’s International Manager. As a hip-hop entrepreneur, his Beat Factory Records label was, throughout the 80’s and 90’s, a lone beacon on Canada’s barren hip-hop, rap and R&B landscape. Ivan believes the quest for the perfect licensing partner starts with you doing your homework: "Research the label, identify the label’s strengths; if you want to have true success around the world you have to be familiar with every territory. Travel to those territories. Research everything. When somebody comes to me and says, who’s hot in Japan? I’ll tell you who’s hot in hip hop, rock or fucking R&B and who to go with and who not to go with and who you’ll see royalties from and who you won’t. In my job at BMG, nobody in BMG England could feed me bullshit about what my records are about, why the record can’t work there because I’ll battle them about their own radio stations and TV stations and marketing plans etc., because I know England as well as fuckin’ they do! Yeah, I don’t know the fine changes that happen on a daily or weekly basis, but as far as the market place goes, I could read this marketing plan and say listen you’re fucking smoke screening me. I know it well enough to do that." Okay. Point taken. Do your homework. On the international front, consider subscribing to trade magazines such as Music & Media, Music Week and Billboard or plan to attend an international conference such as MIDEM, Popkomm or the Miami Dance Conference. Do your research and compile that list of reputable licensing partners. Not always an easy task. One would certainly benefit from the personal touch. In fact, many license agreements are the result of established connections, relationships that have developed over time. Harry Hess and his band, Harem Scarem have enjoyed a long and fruitful career in the rock field. Until recently they were signed to Warner Music Canada, for the world. By the release of their third album in 1995, they had secured releases in 33 countries, many by way of licenses. They have maintained a presence in Japan, Asia and Europe. Their most recent record was released under license to the Marquis Records label in Japan for Asia and to the Now and Then label in the UK for Europe. Hess has been building his contacts for years. "Sometimes the Harem Scarem releases were third party licenses that Warner hooked up because there was no Warner in territories like Indonesia. Back in ’95, I started to produce a lot of records that I got licensed to indie labels because of the Harem Scarem connection in Asia and Europe, through promoters or managers that I met out there and also my publisher in Japan. When I started working with these other bands I was able to put it through that pipeline and I built up a network of indie labels and publishers around the world that I started sending material to." "When I was trying to secure some licensing deals for a particular artist, I read about these labels in Billboard’s International Focus (section). It said such and such label sold one million pieces with so and so in Taiwan. So I’d say, "hmmm", and I’d literally phone directory assistance in that territory, ask for the name of the label, hope it’s in a major city, get the phone number, call them, ask for the fax number and then I’d send them some information on what I was doing and 9 times out of 10 they were receptive to me sending them some packages. I actually did a licensing deal in Malaysia with a company that I literally found by calling directory assistance because I read about them somewhere. I did some insane research." To the music consumer, there is little difference between master recordings released under license (as opposed to imports which have foreign labels) and those released under a direct artist signing agreement (a record deal). In fact, some artist recording agreements start off as license agreements. Ivan Berry offers an interesting account of a license deal that spawned an artist signing. As he tells it: "The Dream Warriors was a unique licensing deal. I was over in England (1990) just hanging out trying to learn the business. I had the one Dream Warriors’ song, "Wash Your Face In My Sink", and I played it for a couple of people from 4th and Broadway Records. I said "I’m staying at this hotel, let me know what you think." A couple days later they call me back and it was the day I was leaving and they said "I love this fucking record, I want to sign it and I want to sign it now, where are you?" I said, "I’m in the hotel, my cab is waiting. I’m going to the airport." They go "We’ll meet you at the airport." They came to the airport with a one-page contract. They go "We want it, we’ll sign it right now", and I go "Ok, I won’t really sign anything like that so I’ll take the one page, review it on the plane and I’ll call you as soon as I land." So I called them and I said "yeah it looks cool, whatever." They offered £3,500 (advance) for the one single with two single options and an option for the album. The album was going to be £25,000 advance on delivery. So we said yes to the deal." "But the one pager was for the single only. At the time we never had a lawyer, you know, I was just like, yeah! Great money! You know what the pound was like; so we were like, bring it on! But, it took them so long to do the contract that business affairs upstairs forgot that we weren’t signed. This is the honest to God truth. Eight months into this deal I forgot we weren’t signed. We put out "Wash Your Face In My Sink" - Top 10 Exploded throughout Europe. The follow up was "My Definition". Put out "My Definition" - Top 5 Exploded! So now we’re finishing up the album. The album is almost finished, somebody in business affairs got smart and realized, we’re not signed we only signed for the first single. We’re not actually signed, everybody forgot." "When the first single blew up we did a publishing deal with Paul Connolly, who was the young A&R guy at Universal Publishing who is now the head of Universal Publishing Europe. Paul called me and said "Love this act, want to do a deal". We did a publishing deal for Dream Warriors and a catalogue deal for all my other hip hop stuff I was working on: two separate deals. And at that point I actually had a lawyer in New York. Paul said "You know, Ivan, you should talk to this (UK) lawyer about your 4th and Broadway deal." Paul introduced me to this young lawyer in this powerhouse firm that happened to handle U2 and the Beatles and all these big UK groups and he was the young guy that just came in, and the lawyer guy goes "I can get you lots of money, you have one Top 10 and one Top 5, I can get you lots of money, leave it up to me blah, blah, blah." I’m like "yeah, yeah, whatever, ok." I figured ok, he’s going to bump it up from £25,000 to £30-35,000 and he wanted me to come with him. I’m like "I can’t leave my lawyer, I’m like down with my lawyer in New York and I’m a loyal kind of guy." And he goes "Well, I don’t want to handle all your day to day shit, I just want to negotiate your big deals and all that." I said "Man all this shit for, you know, what are you going to get me like an extra £5,000? You know, whatever." He goes "Just leave it up to me." I said "Ok, you know what, go ahead, I’m not paying you, but I can give you a little cut of whatever extra, whatever over £25,000 you can pull in, I’ll give you a cut of that". "So he went in and the deal went from £25,000 to £275,000 per album. I was pissed off I never just paid his hourly fee, (laughing) instead I had to give him a little cut. And the deal now changed. It went to just albums. We did a four or five album deal, but it was £275,000 advance per album. And they were signed for the world. That was a strange license deal." Started as a license, turned into a signing. "Yup", said Berry, "big signing." When choosing the right licensee here are a few basics to consider:
The above list is not exhaustive and every license agreement has specifics that are relevant to it. If your potential licensing partner meets the above criteria, there is every reason to believe the relationship will be fruitful. The opposite may be true if they promise the world but offer little proof that they can deliver under the agreement. Obviously, this licensee should be avoided or in the very least the agreement should be structured to be of short duration and should include termination rights favourable to you. For example, if the licensee fails to deliver on specific performance obligations (i.e., breaches the agreement) you want to have a clear contractual means to terminate the deal. The courtship / negotiation process can prove most revealing when getting to know your potential licensing partner. Murray Lightburn, the guiding light behind Montréal-based band, The Dears, has experienced much of what the music business has to offer. In the following story he describes a license deal that never quite felt right. The effect of timing and circumstance are clear in this deal that (fortunately) got away: "A friend of ours in New York was working for a fairly reputable American label and she knew a lot of people within those circles, and then some", Lightburn said. "She sent our records out to a bunch of people and one guy heard it and apparently flipped out and wanted to sign us right away (i.e., to a license agreement). In the meantime we were neck-deep in a (license) deal that left us kind of handcuffed. Anyway, this guy was flipping out over our record and he was working for a reputable indie label based in Germany that had offices in the UK. He was basically running the UK office along with someone else. But, he and that someone else were starting a smaller label. They made it sound like their label would be part of the more reputable German label; as an affiliate of that label, which would have been okay, you know, but, anytime I brought that affiliation up he would just talk around it. Finally he did confess to me that they weren’t really connected; that they were working out their own thing and that they were going to have distribution through Virgin and it was all going to be a big deal." "Because of the timing of the situation, and for many, many reasons it just didn’t work out; I mean, once we were freed up to do the deal a lot of time had passed so their schedule was looking pretty tight to release anything from us. And on top of everything there was the dreaded option in their (license) agreement: they were trying to get more than one record out of us. And you know they did have a point because if they were going to put the effort and the money into breaking our band in Europe, then yeah, sure they deserve another record. However, there were doubts, it’s not like we didn’t think that they could do it, they probably could have. However, it was kind of 50/50, it was a real gamble, a gamble we weren’t willing to take because we had already done that kind of gamble." "So what wound up happening worked out fine because one of the partners in the label had committed suicide and therefore the label had just taken a complete downward spiral from there and basically they don’t exist anymore and that was six months after we had unofficially parted ways without doing the deal. When we parted I was left wondering, did we make the right decision and you know when I got the news about the guy and the label I was sort of like, yeah, we made the right decision. Unfortunately, it’s under those circumstances and that is sad. I don’t want to sound callous but you know, these things happen." Yes indeed, things do happen. Smaller independent labels are noted for their upward mobility but, there does exist a downside, and when the rights in your masters are tied to a sinking ship the financial and emotional toll can be devastating. Travis Mitchell, the leader of Winnipeg-based band, Mindstorm found himself in the midst of just such a drama. His band had released two albums on Aquarius / EMI under a master purchase arrangement. Aquarius had secured European releases for Mindstorm’s first two albums. Following their relationship with Aquarius, Mindstorm entered into a license deal with metal label Long Island Records in Germany for Europe for their third album. But, shortly after its release, tragedy struck: the label owner was diagnosed with an incurable disease. He died within months and the label went bankrupt. "It was a real monkey wrench, you’d call it. Especially when he was one of our biggest fans", said Mitchell. "He really believed that he could put us on the map. It was a stroke of bad luck, definitely. The record had just come out and was gaining momentum. With the bankruptcy, we were lost trying to keep track of what had been sold. When that deal broke down we decided to make a new record instead of trying to sell that one again, after it had already had its initial sales in Europe. I really believed in the owner of Long Island, but there was no chance for him to prove himself." As licensor, getting paid under the deal is sometimes half the battle. The agreement should set out your contractual rights (e.g., right to terminate) and process (e.g., 30 days written notice, default and cure provision) if the licensee fails to pay, account, allow an audit or becomes bankrupt or insolvent during the term of the agreement. If you negotiate an advance against future royalties or a bonus payment, such payment should be made a condition precedent to the rights granted; then, if the licensee fails to pay the advance or bonus, they technically have no rights under the license. In any event, it makes sense to receive the advance or bonus prior to commercial release of the recording. Kimberlie Dufresne of Spot Records Canada has found licensees for its growing catalogue of "jazzy house" tracks (Artists: Blissom (a.k.a. Stephane Lefrancois), Rise Ashen (a.k.a. Eric Vani) and Trevor Walker). Or rather, the licensees have found the "good music" that Spot releases. Dufresne takes a philosophical approach to dealing with "delinquent" licensees, licensees that fail to pay or are slow to pay: "I don’t know if you can stop that sort of thing. It’s going to happen no matter what you do or no matter where you go there’s always someone who doesn’t want to pay you right away. You just have to be honest and real with the people and if they don’t want to pay you then fine, you don’t want to work with them again. If they’re not going to pay you, then don’t work with them; it’s their loss." License deals (like any deal) are often the result of hard work and industry on your part with a modicum of good luck. But a couple of sobering thoughts may be in order: 1) If no one gets your music here they may not get it there either, and; 2) To paraphrase an old adage: "The grass is always grass on the other side of the fence". Nevertheless, if you don’t have a ticket, you can’t win, right? Evan Weisblott of Toronto-based American Flag recently signed a license agreement with the prestigious Avex Records label in Japan. As every journey begins with the first step, Weisblott clearly put his best foot forward. "We put out an album with a small label in Ohio, called Rockathon Records (a world-wide license, since terminated) and I had in-the-know to an independent chain of stores in Tokyo called Rough Trade Records. Out of the blue I put a phone call in to the owner of this chain and said "this is who we are, this is the background, are you interested in carrying some of these?" He got a copy and wrote back "We will be selling truck-loads of these things." Rough Trade then got in touch with Rockathon and the initial order was for the entire pressing of the vinyl version of the LPs that they had printed up. The orders kept coming in to the point where it turned out to be the biggest seller of the year (1999) at the Rough Trade chain, which I think was six stores throughout Tokyo." "About a year and a half went by and I got a random email from an A&R representative from Avex Records in Japan who was pretty much shocked that I didn’t have a deal in place. So, I sent her (the Avex A&R rep) some other material we had done that never really made it on the record. She wrote back "when you’re ready to put out your next record, we’ll be interested." So I wrote back saying, if you want it, let’s talk and then a year’s worth of negotiating kicked in." Weisblott adds "You really have to do your part, the lines of communication wouldn’t be there if it wasn’t for me taking the initiative originally." Spookey Ruben tells a similar story in tracking down the interest of Thomas Peckruhn, A&R at Zomba Germany and eventually entering into a license deal for his "Bed" and "Breakfast" albums. In Ruben’s words: "I recorded a track with John McEntire in Chicago that I put on my "Bed" album. John McEntire is kind of like a leader in the underground music scene. He plays in "The Sea & Cake" and "Tortoise". Those two bands have really huge cult followings. People who like him are really into him. Following that, I researched labels that knew who he was and that way, you know, people would be like, oh, this guy works with John McEntire; it must be pretty good, cause, you know, it’s really hard to get to work with someone like that. It immediately causes some attention in the underground scene. So, I was looking at what label they were on in Germany and it turns out they were on Zomba. So, I sent it to a couple of labels in Germany and the guy who responded right away was Thomas at Zomba, who knows bloody well who John McEntire is and also knew of my history in Germany because my first couple of albums did really well in Germany and one of my songs is like the theme song to a cult TV talk show. So, it was good ’cause this guy knew about me and he knew about John McEntire, so it was like a logical progression for him to want to put my album out." Every territory has its own licensing peculiarities and Japan is no exception. In fact, it’s rather unique. The Japanese market is extremely competitive. The price of a CD is high and the market is subject to numerous imports. To quell the tide of imports and entice the Japanese consumer to buy "Made In Japan" product, Japanese labels will offer a bonus track, one that is not available in other territories, and a release date prior to other territories’ release dates, often thirty days prior. Hess explains this requirement: "Basically they’re after a bonus track to make the record different from all the other releases from around the world. They feel that because of the high price of CD’s, it may be cheaper for a Japanese fan to import the record from Europe or wherever as opposed to buying the domestic pressing. So they figure if they put a bonus track on it they’re going to offer something more to the fan and the fan will actually pay more for it. A lot of times with the American and Canadian releases, they’re out like 6 months before they come out in Japan. It’s hard to get simultaneous releases around the world so again, Japan always felt, or Asia I should say always felt that not only were they way behind but, they were overpriced and I guess they felt they were losing sales. So now when I do license deals where I kind of split up the deals between Europe and Asia, Asia usually wants 30 days (prior release) plus a bonus track, that’s pretty standard." Weisblott adds, "I’ve come to realize that Japan is a market that you can’t compare to the North American market. You sort of have to put your trust into knowing that they’re doing what’s best for you. You can’t just assume that the same rules will be applying there as apply here; the consumer has much more selection. They get everything there, there’s greater competition." While the tone of this article may suggest that licensing only happens elsewhere in the world, this is not the case - licensing is alive and well and utilized often within the Canadian music industry. However, one of the lures of international licensing is obvious: stardom in a strange land and the exotic notion that someone in Stockholm or Seattle or Hamburg is a dedicated fan of your music. Also, Canada as a music market represents approximately 2.5% of the global market (IFPI 2000 Recording Industry World Sales); simple math would guide you to other markets to sell your wares. The need to get your music out to the world was a recurring message put forward by all the individuals who were interviewed for this article; to them I am truly grateful. I’ll leave the closing word to Ivan Berry, whose passion on the topic of Canadians licensing music to the world is undeniable. "Canada is in a kind of fucked up predicament because we have to make records that are competitive to American records, ’cause we’re bombard by American media product. So, yes, we’re not going to make the million-dollar video, but we almost have to make something that looks like one and that might cost us one hundred thousand dollars. And yeah, we’re not going to be like Michael Jackson and go through one-hundred 2 inch tapes to make a record, but, that record might cost us one-hundred and something thousand dollars to make so at the end of the day, you’ll have invested a half a million dollars into an artist where the country only supports 50,000 records as gold and 100,000 as platinum. It’s almost like platinum is your break-even point. With that said, you immediately know that you’re not making Canadian records now, you’ve got to be making international records." "Making an international record to me is two things: first of all, creatively and musically you have to make a record that we can’t sit here and say, "well our records almost sound like Lauryn Hill if we had her money, but, we didn’t so we did a shitty version of it." Nobody gives a fuck around the world, especially the consumer, that you didn’t have Lauryn Hill’s money. So we’ve got to figure out a way of how to make a record that sounds as good as Lauryn Hill, for less money, right. We’ve got to make records that sound international. Sonically, creatively, musically: international songs and international records. Once those records are made, we have to treat the artists like international stars. And the last point is that if you have a chance in hell of recouping and profiting for both the label and the artist, you have to secure releases outside of Canada. You have to! If you’re going to be competitive worldwide, you have to secure releases outside this country because, you can’t be competitive based on the Canadian population". © Paul Irvine 2002 The general information contained in this article is not intended as a substitute for skilled legal advice on specific contractual matters. Contact: Paul Irvine / Sanderson Entertainment Law |