Production Music - Business Model

Business Model

The business model of production music libraries is based on two income streams:

• License or synchronization fees: These are the fees paid upfront to the library for permission to synchronize its music to a piece of film, video or audio. These fees can range from a few dollars for an internet usage, to thousands for a network commercial usage. Some libraries, especially in the UK and Europe, split these fees with the composer of the music. In the US, it is more common for a composer to be paid a work-for-hire fee upfront by the library for composing the music, thus waiving his/her share of any future license fees. In the UK, license fees for production music are nationally standardized and set by the MCPS. In the US and elsewhere, libraries are free to determine their own license fees.

• Performance income (or performance royalties): Performances income is generated when music is publicly performed - for example, on television or radio. The producer of the show or film that has licensed the music does not pay these fees. Instead, large fees are paid annually by broadcasters (such as television networks and radio stations) to performing rights organizations such as ASCAP, BMI and SESAC in the US and the PRS in the UK, who then distribute income among their members. To ensure it is distributed fairly and accurately, most broadcasters are required to keep note of what music they have broadcast and for how long. This information is then used by the performance societies to allocate income to their members. Typically, a library will receive 50 percent of the performance income (this is known as the publisher's share), with the composer receiving the remaining 50 percent. Like license fees, performance income is highly variable and dependent on the nature of the usage; local radio usage will yield modest income - perhaps a few dollars each time it is played. Repeated use in a primetime network TV show can generate thousands of dollars.