Home > Features > General: The Value of Music
This chapter is dedicated to Martin Cohen, who wasn’t afraid to walk
away from a deal
This chapter is written as a subjective defense against those who devalue or undervalue music. Just as those who overvalue and overprice music have damaged the legitimate consumption of music and instead encouraged rampant theft, so too have some people in the music world damaged their own product by undervaluing and underpricing it.
Music is a unique commodity with the ability to touch the soul or evoke an emotion or feeling. In a film, it might take minutes of dialogue or visual exposition to create a mood or tell a story, while music can instantly convey a mood or direction and give cues to the director’s vision. Try imagining Apocalypse Now without the Doors’ “The End” or without “Ride of the Valkyries,” or Casablanca without “As Time Goes By.” Typically, a feature film has at least 40 minutes of musical scoring. When was the last time you saw a film that had no musical score?
Likewise, some sports—figure skating, for instance—would not be possible without music. Imagine a college football game without a marching band. Restaurants and stores set the ambiance for you by playing background music.
Yet in the music publishing industry, no day goes by without someone who recognizes the value that music brings to a project nonetheless belittles its value, complains about its cost, and tries to pay less than a fair fee. It is important that writers and publishers stand tall and recognize and respect the value of their own property. If they themselves fail to recognize the worth of their product, how can others be expected to see its worth and pay a reasonable price for it?
Today, many creators of music are finding it tough to make a living and are being forced into second jobs or alternate careers. The media is full of articles about “file sharing” and how it hurts the music industry. What a nice euphemism, file sharing! Sharing is good, right? We are taught to share from the time we are little. But why does the media not do stories about the theft of intellectual property or copyright infringement? “File sharing” sounds so much more innocuous than “willful copyright infringement,” which, by the way, is a felony. If I steal your car, is that “ride sharing?” By spinning articles and headlines in this manner, the media contributes to the devaluation of songs and artists.
More and more people who used to just get by on low-budget music careers, maybe by playing a few sessions, putting out self-released CDs, and doing a two-month tour of small clubs or coffeehouses, are no longer able to do so. There are many who must now work in fast-food restaurants and other low-paying jobs. It’s getting harder to eke out an existence and to buy time to develop one’s musical craft. This is not a simple problem, with only one cause and one solution. While piracy and copyright theft each play an important role in this phenomenon, and while overpricing makes theft feel more justifiable, writers and publishers who lack enough self-respect to value their songs appropriately contribute to the problem.
“This Is a Low-Budget Production”
Almost every license request a music publisher receives includes somewhere in it the words “This is a low-budget [film/TV show/record/ad campaign blah blah blah].” No one ever sends license requests that start off like, “This is a big-budget film, with two stars who are each getting 20 million dollars and a director who won the Academy Award for Best Picture last year. We would like to use the ‘cherry’ of your catalog and pay you a really nice fee for doing so.” Or like this: “We have a multinational client who burned down half the Amazon rain forest last year and sold 300 million hamburgers and made 10 billion dollars in profit, and we would like to pay you some very significant money to join us in our destruction of the planet.” It just doesn’t happen.
Why is the same company that is paying 2 million dollars for
the network broadcast time of its Superbowl spot balking at paying
$250,000 to use your song for an entire year, and not just on the
Superbowl? Budgets are low because people set them low. If there
is no money in the music budget of a TV show, it is because the
money they put into catering and hairdressing and makeup artists
dwarfs the money allocated for music. Don’t stand for it!
If you tried the same tactics in real life that are used in licensing music, you’d be laughed at. If you went into a Bentley dealership and said, “Gee, I sure like that $375,000 Azure, but I only have $30,000 to spend on a car, so do you think you could accept that?” you’d be shown the door along with some shoe leather. The idea that music has no intrinsic value leads to the proposal that “you should price your product according to our budget.” Don’t do it—especially if the song being inquired after is a standard, was a major hit, or has a lyrical or other connotation that is truly special. The situation may be different, though, if someone is inquiring about a generic punk song and the artist and song could be easily interchanged with many others.
“It Will Be Good Exposure”
Once they get done telling you how low they’ve set their budget and how you have to conform to what they’ve predetermined, they will pull out the old “good exposure” argument. While the licensers themselves are only working for real dollars and maybe profit participation, they would like you to please take your compensation in the form of good exposure.
Vaudeville entertainer Sophie Tucker, so the story goes, was once offered a gig at far less than her normal fee. The reason she should do it, the argument went, was that it would be good exposure. “Exposure?” she is said to have replied. “Isn’t that what you die from?”
The worst cases of “licensing by exposure” lately seem to be in the realm of video-game music licensing. With some of the “shoot the whore”–type video games now selling for $30 a pop and shipping 4 or 5 million units, you’d think they’d be able to spare more than $5,000 as a flat fee to license a song. Let’s do some made-up math.
Let’s see, that’s around $150 million in gross over-the-counter revenue, and maybe half filters back to the game developer. And paying $5,000 for each of 50 songs would be $250,000. And double that fee to clear the master recordings, so we’re up to $500,000 out of the $75 million. It doesn’t seem fair, does it, when music is so integral to the game. Why not at least pay a royalty instead of a flat fee? We’re just now starting to see meaningful royalties on video games in lieu of flat one-time buyouts.
In the early days of video-game licensing it was typical to get a flat fee of $20,000 per song, and sometimes as much as $50,000 or more. Now, many of today’s top young bands have bought into the good-exposure theory and license top nationally known songs for $2,000 to $5,000. Yet, as publishers, we don’t see the results that all this good exposure will bring. We don’t see a sudden surge (or even any surge, for that matter) when a hot new extreme sport game ships 2 million copies with your song blaring throughout various levels of the game and on the TV advertisements for it. It would be great to see some scientifically documented correlation between appearing in a video game and record sales, band awareness, tour ticket sales, or even public goodwill.
Another example of licensing by exposure has entered the TV world lately in the form of ad cards. The deal goes like this: If you let your song be used for a pittance, we will give you a two-second ad card at the end of the show stating, “Joe Schmoe’s new record Sing-along with Schmoe is available on Schmoe-Tone Records at stores everywhere.” Again, for these ad cards, it would be nice to see some correlation or documentable benefits attained by foregoing a fair license fee.
A good way to weigh the “exposure” argument is to ask yourself a few questions. How unique is your song, and how special is it to the proposed use? For example, are they asking for a break on “You’ve Lost That Lovin’ Feelin’,” which is an iconically unique song, or for a song your brother wrote that no one has ever heard yet called “I Like Playing in the Bathtub?” Is your song likely to be the best one for the use (Weezer’s “Beverly Hills” to promote Beverly Hills 90210 or Neil Young’s “Ohio” in a documentary about the 1968 Democratic Convention), or are there lots of other songs that would generically work just as well? What will be the long-term effect on the fees you are able to realize for the use of your music if you give in and let a major studio use one of your songs for half of a normal fee? Will they always want and expect similar pricing in the future? Is there any way to quantify or evaluate the worth of the exposure you will be getting? Will people even know it is your song being used?
Weighing these questions is a lot like playing poker with your own livelihood. If you always fold your hand, you’ll never get any traction with a good hand. Likewise, if you always bluff, you’ll lose credibility and they’ll always take advantage of you in negotiation. Try to price your music fairly and in accordance with market norms, and to not give into the temptation to devalue your own assets.
A Foreign Idea
One approach to valuing music is more common overseas than in the United States. That approach, used primarily in advertising at this point, is to assign a percent value to the music in a given campaign. Typically, this value is based on about 5% of the total cost of the advertising campaign. This 5% pool is then allocated to all the music being used in the project. If a $10 million European advertising campaign embodies your song, a $500,000 music licensing fee (half each to the publisher and master owner) would fall within current norms.
Such an approach is admirable in that it takes a bigger-picture look at the value of music, but it can skew unreasonably when the project it is being applied to has either a very big or very small total cost. In those instances, subjective minimums and maximums within current norms should be applied.
Perhaps the reason that this approach is more common outside
of the United States is that mechanical royalties in most countries
are not based on penny rates (e.g., 9.1¢ per copy) but on percentages.
For example, it would be typical that 8.3% of the dealer selling cost
of a CD in a given territory might form an aggregate mechanicalroyalty pool according to local law or custom, and that pool is then
allocated according to each publishers’ number of songs or prorated
aggregate playing time.
Step This Way
Another approach to valuing a music license (usually involving motion pictures) is with what is called a step deal. Typically, an up-front flat fee is paid for a use. Then, if the film does well at the box office or in home video sales, there are bumps, or performance rewards. For example, a license might provide $5,000 up front, and then if/when a film hits milestones of $5 million, $10 million, $15 million, and $20 million, the producer pays the music publisher an additional $5,000 for each respective box office level.
The nice thing about this approach is that the producer is acknowledging the worth of the music, and even if he can’t or won’t pay you what it is worth now, he is willing to pay you a fair value, and maybe then some, if he has a success. The bad thing about this approach is that too many step deals can overexpose a song for little or no money, and drive a paying user away from a song that has too much low-budget exposure and association.
You might conclude at this juncture that the pricing of music licenses is a difficult, subjective decision. Music is a unique commodity, and it has high intrinsic value that should not be discounted by either creators or licensers. There are many ways of looking at the value of music, and also many people who would like to pay you less than what it is worth on any reasonable scale.
Publishers and songwriters must both internalize and publicly exude the conviction that what they possess is valuable. Through education and through discussions with experienced industry professionals, fair win-win license fees can be determined.
It is often prudent, too, for songwriters and individually owned publishing companies not to handle their own negotiations. It is much harder to play poker and make the right decisions if your own money is on the table. If you are playing with your own money, you are more emotionally involved and less able to make the best-odds decision. Your representative will be able to take a more levelheaded approach.
Inevitably, and by definition, maintaining a license value results in fewer licenses. But doing so ensures that others know you attach an intrinsic value to a work. You might lose a certain percentage of the low-cost opportunities that are presented, but obtaining fair and reasonable quotes for the ones that do come to fruition will more than pay for the ones lost, and ensure the long-term value of a given song.
An example of this scenario is played out frequently by a music publisher who owns a very well-known song with a catch phrase that easily lends itself to advertising. In connection with the song, the publisher is pproached for advertising campaigns every year or two. The publisher has priced the advertising use of the song in a one-year U.S. TV campaign at $500,000. When the publisher is offered $75,000, he declines it. While some may look at this as $75,000 foregone, he looks at it as $425,000 gained. For if the publisher had approved the $75,000 use, no other firm would want to run advertisements during that same time period with that same song. His experience has taught him that $500,000 is what advertisers are willing to pay for his song, and his experience has convinced him that there will be a significant use request every couple of years.
Unfortunately, some potential users will not be willing or able to pay a fair fee. But for the long-term health of the music, it is important not to devalue the song by licensing it for whatever a user offers. Bentley would go out of business if its dealers negotiated car sales that way, and so will you.
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