Synch Licensing: Why Old Thinking Is Leaving Money on the Table (Opinion)

Music is the ultimate good news-bad news business. Streaming is the future but it earns much less money than CDs, and although the live-music economy is booming, part of the reason for that is because artists have to tour — they can’t make money from selling their music.

Like the rest of the industry, synch licensing has good and bad news. The good news is there’s money out there — for artists, songwriters, labels, publishers. The bad news is that the current mindset of many labels and artist-management companies leaves money on the table — they pass on small opportunities because they only want big opportunities; or they don’t set up the infrastructure — in-house or through a third party — to capitalize on the smaller, quick-turn license market.

To recap quickly, over the past 20-odd years synch licensing has become one of the biggest sources of revenue in the music industry. Every time music is used in a commercial, television show, video game, motion picture or its trailer, the creator must negotiate separate licenses with the owners of both the sound recording (usually a label) and the underlying composition (usually a music publisher). Take Marvel Studios’ use of The Sweet’s 1975 hit “Fox on the Run” in the motion picture “Guardians of the Galaxy” and its trailer. Copyright law requires the studio to obtain separate licenses from RCA Records and TRO Essex Music publishing. The cost of the licenses depends on several factors, such as the types of use (theater, DVD, streaming, TV, etc.) and geography (United States, ex-United States, global, and so on).

The Recording Industry Association of America’s report for 2016 (covering just recorded music, not publishing) showed synch revenues were flat in 2016, with just a 0.7 percent revenue increase — basically the same zero-growth we’ve seen for the last handful of years. It’s completely counterintuitive: People stream 6 billion hours of video on YouTube alone each month. More and more familiar songs are heard in TV commercials every year. Synch revenue should be going through the roof, right? Not according to this report.

However, the RIAA’s numbers don’t tell the whole story. For its members, revenue is flat because the growth in the number of synchs is being cancelled out by lower average revenue for each synch. But there’s a lot of activity — and revenue — that’s not captured in that RIAA report.

Sure, a big synch can put an artist or a song on the map. Apple’s use of Feist’s quirky “1234” in an iPod Nano ad in 2008 boosted to the Canadian singer’s young career and helped earn her four Grammy nominations. Marian Hill’s single “Down” reached No. 21 on the Billboard Hot 100 thanks in part to an Apple Airpods ad. Older songs have been reborn thanks to synchs: Badfinger’s 1972 hit “Baby Blue” reached a new generation when it was played in the final scene of AMC’s hit series “Breaking Bad.”

But in most instances, the synch simply provides unspectacular yet important royalties to an artist or label without much fanfare — especially in recent years, with the licensing opportunities that have come alongside the explosion of online video. Artists have access to placements in pre-roll online video advertising by brands of all sizes, short films, brand videos on YouTube and Facebook, and even from nonprofits producing fundraising videos. Smaller music production companies and artist-representation houses have created a marketplace where indie artists can make a good living on synch royalties alone.

So how much income can these smaller opportunities bring? Musicbed has seen some independent artists double or even triple their existing six-figure licensing revenue by opening the doors to these new synch opportunities.
We’ve also found completely new revenue for Sun Records — the first to record Elvis Presley, Johnny Cash, Jerry Lee Lewis and so many others. A large portion of Sun’s catalog was dormant when we signed a deal in 2016. Johnny Cash needs no introduction, but we’ve seen some licensors using lesser-known recordings that aren’t even available at retail. Tasteful brands and filmmakers don’t want to settle for cheap soundalike recordings — they want Sun’s authentic sounds.

For many labels and artist managers, this hidden market of microlicensing is scary because it’s an unknown territory. They wrongly worry the synch business is a zero-sum game — or worse — and assume any microlicense will hurt their opportunities with larger synch licenses. But that’s archaic thinking: In six years of business I’ve seen artists and labels do both microlicenses and big licenses without one having a negative effect on the other.

In fact, small synchs can actually be additive to an artist’s other synchs. Small licenses can help an artist get momentum, and put money into pockets, on the way to bigger synch opportunities. A more established artist who takes both big and small licenses can make more money and have their music heard more often. Too often I see an artist lose synch royalties after signing with a major label because the new label wanted only big synch deals. As a result, the artist missed opportunities in high-volume synch licensing (the higher volume of syncs make up for the lower per-sync royalties).

If the industry can change its views on everything from downloads and streaming to lyric sites and video-game licenses — all of which have brought in revenue that didn’t exist before — then views on synchs can evolve, too. It’s time to rethink synch.

Daniel McCarthy is owner and CEO of Musicbed — which represents more than 650 musicians and composers for synch licensing and custom score — and footage licensing agency Filmsupply.

 

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