M.E.L.O.N.: Music Biz: Hit Songs & Commercials

Even though the majority of television and radio advertising commercials use music or songs written specifically for the advertising campaign, many campaigns use past or present hit songs to sell the product.

By using a hit song, the agencies attempt to capitalize on the instant recognition of the song and the continued recall of the product because of its identification with a familiar song.

Fees Paid To Songwriters / Publishers

Whether the owner of a song is the sponsor, agency, jingle writer, production company, music publisher, recording artist superstar, hit songwriter, Oscar winning film composer, record company, investment company, financial institution or the estate of a deceased songwriter or performer, the business of advertising commercials can be an amazingly valuable source of income.

The fees paid by advertising companies for the use of popular songs in commercials can range from $10,000 for a local campaign to $1,000,000 for a major campaign.

The amount of the fee depends upon, among other considerations:

the past and present popularity of the song (a long lasting standard or a current hit),
the type of media campaign being planned (television, radio, cinema, print, internet or a combination),
the territory involved (the U.S., Canada, a city, a state, foreign territories or the world),
the nature of the product or service being advertised,
the music budget for the campaign,
the number of songs being used in the commercial,
the past unavailability of a song for commercials,
whether master recording rights (the original hit record version) are also being secured,
whether total advertising exclusivity as opposed to product exclusivity is being requested (a prohibition against any other advertising use of the song vs. restrictions only for competing consumer goods),
possible dilution of the present or future promotion of the song because of the commercial tie-in,
the importance of the song to the message of the campaign and
whether the agency wants to alter the original lyrics or add new lyrics to an instrumental hit.

If the territory covers the U.S. and countries outside the U.S. or is a worldwide license for an important product campaign and the song and recording have never before been licensed for advertising, the fees can be in the millions of dollars.

On the other hand, if the campaign's duration and territory are limited and depending on the interplay of all other factors mentioned above, the fees can range from $25,000 to $75,000.

Permission To Use A Hit Song

When an advertising agency wants to use a hit song (i.e. the musical composition embodied in a recording) (i.e., the music and lyrics) in a commercial, it will contact the music publisher of the song for permission and negotiate a fee for a specified term with options.

Advertising agencies can also contact The Harry Fox Agency in New York which represents many publishers in this area.

In most cases, an agency will only use a song for a limited campaign (normally one year or less), but there have been many songs which have become so vital to a product and its success that they have been used for years.

Permission To Use A Hit Recording

If an agency wants to secure the "master recording rights" to a popular song (i.e., the actual hit recording), it must contact the record company that owns those rights since the music publisher can only grant rights to utilize the underlying musical composition contained on the recording.

Because of the double negotiation and double fees inherent in these types of situations (a separate fee to use the song and another fee to use the known recording of the song), licensing a well known song and hit recording can be an extremely expensive undertaking.

Copyright Ownership

Ownership of the existing song is never transferred to the agency as the agreement is merely a license of certain specified rights with no change in the copyright ownership of the hit song.

On the other hand, if the agency creates new advertising lyrics for use in a campaign which features the melody of the hit song, the agency will usually copyright the new material for its client and the owner of the hit song will have no rights to the newly created lyrics.

Duration of License

The term of the commercial license is usually one year for a national campaign plus a number of options (normally one, two or three additional one year options at the election of the advertising agency).

As marketing campaigns take on many variations, however, the term requested by an agency can be for a day, a week, a month, a year, multiple years or any combination thereof.

For example, a license can be for

a one day test in one or two cities with options for up to three one year periods on a national basis if the test results in positive consumer reaction;
one month (as in the case of Christmas campaigns);
a few days or a few weeks (as with Mother's Day, Father's Day, Fourth of July, Easter and Thanksgiving Day promotions); or
one year with a number of option years both on a United States and international basis or for two years firm with options thereafter.

Exclusivity vs. Non-Exclusivity /

Competing vs. Non-Competing Products

Unless total advertising exclusivity is requested by the agency, the music publisher will not be restricted from licensing the hit song to other advertisers during the duration of the commercial agreement for a particular product.

The agency contract will, however, contain language prohibiting the use of the song in connection with commercials which promote competing or related products during the term of the license agreement but the publisher will normally have the right to license the song for non-competitive or unrelated products.

For example, if a song is licensed for a commercial promoting cars, the same song may not be given to another car maker but can be simultaneously licensed for use in a commercial promoting television sets, hamburgers or dish detergent under such a non-exclusive, non-competitive product license.

If the fee being paid for the song is very low, there may be no restrictions placed on its use with other products whatsoever. If the fee is substantial, however, you can almost guarantee that competing product restrictions will be contained in the agreement.

Number of Commercials

The agency contract should also specify the actual number of different commercials which will use the song.

Territory

The territory requested for a major advertising campaign is usually the United States of America and its territories, but depending on the potential consumer base for the product, Canada may also be included for an additional fee.

Sometimes the licensed territory may only be one city, one state, a number of cities or states or any variation thereof. Here are some common situations where you would find this:

the product has a regional base,
the planned campaign is designed only as a test campaign (showing a new commercial to a group of potential consumers in a shopping mall and examining their reaction before making a commitment to use the song in the final campaign) or
the product is new and the campaign is in a limited introductory stage

For example, the territory may only be for the city of Boston, for the state of Florida or for one identified shopping mall in Atlanta.

If the initial territory is a limited one but the product has national potential, the agency will usually require options for expanded territories.

For example, a campaign may be tested in a number of geographically related cities (Los Angeles, San Diego and San Francisco) or states (New York, New Jersey and Pennsylvania) and, if successful, may be expanded into other regions (Phoenix, Seattle and Las Vegas or California, Washington and Oregon).

Or the territory may be defined as geographic areas covering no more than a certain percentage of the U.S. population (5%, 10%, 15%) with options, for additional fees, extending the commercial into areas covering a larger percentage (20%, 50%, 75%, 100%).

At times, the use of a song in specific foreign countries or throughout the world will also be requested, but this usually occurs only in the case of internationally accepted products. This is the exception rather than the rule, and the addition of foreign countries is usually handled on an option basis.

Media

Television and/or radio are the standard media requested, but depending upon the thrust of the campaign, internet, print and cinema usages may also be included in the license.

Additionally, with the advent of commercials on motion picture home videos (DVDs), home video rights may also be negotiated.

Since agencies may also want to use the hit song as part of their in-store promotions (e.g., CD & DVD giveaways or reduced price campaigns), extra monies will be negotiated for such "point-of-sale non-record store outlet" promotions.

For example, an agency may secure an option to distribute CDs or DVDs with the song used in the commercial during the license term for either the United States statutory mechanical royalty rate (currently 9.1 cents per song until 2008), or if negotiated otherwise, a reduced mechanical rate (e.g., 75% of the statutory rate).

Additionally, certain advertising uses of music may never appear on radio and/or television as the campaign may only be designed for use in cinemas, shopping malls, in house training sessions or at sales conventions. The fees for such uses will be reduced accordingly dependent on the license duration, territory and number of potential people seeing the use, among other factors.

Restrictions On First Broadcast Use By Another Product

Since agencies pay substantial fees to use hit songs in commercials, a number will request that the music publisher or writer not license the song to another advertiser for use in a commercial for a product campaign which will be broadcast in advance of the initial airing of its television or radio commercial.

Such a request may be acceptable provided that:

the restriction does not encompass a substantial period of time,
the fee is large enough to compensate for possible loss of other advertising income and
the publisher is not prohibited from entering into non-competing product license agreements during the restricted period for commercials which will be broadcast after the expiration of the non-broadcast period.

Lyric Changes Or Additions

If the lyrics to the hit song are to be revised by the agency to fit the theme of the commercial, or if there are to be entirely new lyrics written which will replace the original hit song lyrics or be added to an instrumental composition, the exact nature of the lyric revisions or new lyrics will always be specified in the license agreement so that there will be no misunderstanding between the agency and music publisher, songwriter or other copyright owner as to what was intended and agreed to prior to the commercial being on the air.

A Final Thought

Negotiating an advertising license is like any other negotiation in the entertainment industry since each deal is finalized or lost because of a wide range of factors - some of which are in your control and some of which are not.

If you do decide to license a song or recording for an advertising campaign, however, it is best to do it with some experience and understanding of how the process works and what the major issues of the contract will be prior to the time that the commitment has been memorialized in a contract.

Note: This article is a summary of information contained in the book "MUSIC, MONEY AND SUCCESS: THE INSIDER'S GUIDE TO THE MUSIC INDUSTRY", written by Jeffrey and Todd Brabec / published by Schirmer Books/MacMillan Publishing (Simon & Schuster).

by Jeffrey & Todd Brabec

edited by Howie Cockrill, Esq.