This is a guide to the basics of producers licensing beats (instrumentals) to artists, labels, and other parties.
When dealing in produced beats many producers and artists enjoy the flexibility of selling their beats under a limited license. The limitations on a license can take many forms and the more limits on the license, the lower the price paid by the artist or label. The main limit on a license is usually exclusive vs non exclusive license that is explained below. When parties agree to a beat 'lease' (as it is often called) under a limited license the limitations are most often related to number of units the buyer may sell under the license. Some artists limit licenses at 5000 units, 7500 units, or more, and with each tier of limit their prices may increase. Also limited licenses may restrict the purchaser in various other ways such as the license may reserve all sync and mechanical royalty rights for the producer. Also very importantly, a limited license allows the producer to license the same beat to another artists.
The main differentiator of licenses is the exclusive vs non exclusive license. Exclusive licenses allow the buyer much more freedom to use and 'own' the beat. An exclusive license usually does not have a units restriction and allows for more ownership of all (or most of) the royalty streams and income that may come as a result of the finished track. A producer will almost always retain a songwriter/producer share of the royalty income, but under an exclusive license the control of the instrumental rests in the hands of the buyer without limitation on the number of units. Furthermore, a particular royalty split ratio may be agreed to under an exclusive license, whereas limited licenses are usually split 50/50 as they are seldom pre negotiated.
As you might already imagine prices between limited licenses and exclusive licenses vary highly. Furthermore, prices of exclusive licenses vary highly. Exclusive licenses usually price according to the level of experience and clout held by the producer, but prices may vary based on the reach and popularity of the artist with whom they are working. Producers may charge upwards of 10,000 to 50,000 per track at the highest levels, but many well qualified producers price exclusive beats between 500 and 5000 dollars per track. Limited licenses are priced much lower and may start at 5 to 20 dollars per track.
Contracts for beat licenses are widely available online and many producers and transactions between parties are just fine using a beat license from a template contract. Nevertheless it is important to get a contract even if that contract is a generic template contract, because the scope of the limited license, (or exclusivity) needs to be clearly understood between the parties. On the other hand, many exclusive licenses should be agreed to between the parties under a contract drafted specifically for the transaction between the parties. This may include details about limitations or lack thereof, royalty splits, multi song deals between the parties, or other marketing, authorship, payment, or any other particulars. Its usually a good idea to have an attorney or experience manager review an exclusive license agreement.
When evaluating a deal between producer and label or artist, the first step is limited vs exclusive license. Limited licenses are a way people may experiment working together in a limited way, it is also a good way for artists starting out to get started. Obviously price is an important consideration and limited licenses allow an artist to get started for a lower price, but there is a risk in starting with a limited license. What happens if the song is a hit? In some cases this may make an exclusive license harder to secure ! Therefore, it is always worth considering the cost benefit of obtaining an exclusive license. When it comes to exclusive licenses, there are many aspects of the license to consider when drafting an agreement between the parties and the help of an experienced attorney and or manager is almost always a good way to protect the parties and their respective interest.
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