Online beat licensing:
Everything you need to know

By Gamerro Music

Online beat licensing already exists for a long time but just recently became more popular due to some succes stories of online producers & upcoming rappers. 

But online beat licensing had been around since producers selling beats via soundclick and other platforms. 

Today, everyone can make a website to sell their beats from, but there is a lot more to beat licensing then you might think. 

This article will educate you about everything you need to know about online beat licensing and specifically about the what the different licenses mean and what they consist of. This guide is useful for independent rappers buying rap beats and rap producers selling rap beats.  

When you read this whole article you will know everything you need to know about online beat licensing! Enjoy! ✌

Table of Contents

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Part 1: What Is Beat Licensing?

Beat licensing is fairly simple. Artists can buy beats from a producer who has made a beat and uploaded them to their store. The artist that bought this beat from the store can then use it for their songs.

The producer will then present the artist with a license agreement. This license agreement will outline the user-rights that the artist now has to create and distribute a song based on the beat he or she purchased.

Something to take note of is free beats. Actually, there is no such thing as a ‘free beat’. Even if a producer agrees to send an artist a free beat, there is no legal proof or permission for the artist to use it. This is why license agreements are so very important. With a license you CAN use the beat for commercial purposes. Even free beats sometimes come with licenses.

Actually, there are no such things as ‘buying beats’ or ‘selling beats’. This is because the actual product is the license agreement.

Leasing Beats (Non-exclusive)

The most common form of beat licensing is leasing a beat. Leasing a beat is owning a non-exclusive license agreement. These are comparatively cheaper than an exclusive license agreement, ranging anywhere from $20 – $300. 

With this, you are able to release a song on iTunes, Apple Music, Spotify or YouTube and still make money off it. When leasing a beat, the artist is allowed to create a song and distribute it using the beat originally created by the producer. However, the producer will still retain ownership.

A license agreement will include the details of the purchase, that is, the buyer’s name, address, a timestamp, the user-right and information of the producer. Usually, this is auto generated.

License Limitations

Non-exclusive licenses will usually come with limitations. These could be for example, a maximum of clicks on YouTube, or sales in iTunes, or streams of Spotify and the like. When this maximum limit has been reached, the buyer will need to renew the license as soon as possible.

Non-exclusive licenses can be, or in some cases, need to be renewed either as the maximum limit is reached or before the expiration date, which can be from anywhere between 1-10 years.

Non-exclusive licenses can allow a number of artists to use the same single beat for their own use under the same, if not similar terms.

This can be a problem, but a general rule is that for a beginner artist, to lease a beat would be their best course of action, while a bigger artist might be better of with exclusive licenses.

The Exclusive License

Exclusive licenses are much more expensive than Non-exclusive ones. But they allow the artist to use the beat to the fullest, without limitations. No maximum number of streams or sales and no expiration date.

When buying the exclusive rights of a beat, the beat could have been previously non-exclusively licensed to others. In this case, the artists that have leased the beat previously will not necessarily be affected, as in every exclusive license agreement there is a section named ‘Notice of Outstanding Clients’. This protects the previous artists from getting a strike.

If you purchase an exclusive license, the producer will not be allowed to license the beat to others. This allows the beat to be exclusively owned by the buyer of the license agreement. However, there are two very important and very different ways of selling the exclusive rights of a beat. Selling exclusive rights AND selling exclusive ownership.

The Difference Between Exclusive Rights & Exclusive Ownership

When selling exclusive rights, the original author of the beat is the producer, and the producer can collect publishing rights.

When selling exclusive ownership, the producer is effectively selling everything about and including the beat. This will be all interest made, the copyright, publishing rights, authorship, etc. 

In this case, the buyer of the beat gets complete ownership of the beat. This is usually looked down upon though, as many people only see an agreement crediting both the artist and producer as the right thing to do.

Part 2: Royalties, Writer’s Share, Publishing Rights

This part of the guide will teach you everything you need to know about arguably the most difficult parts of the music industry you need to understand. Most notable royalties, writer’s share and publishing rights.

Royalties are payments of various types to owners of property for use, in this case, to artists for their music. They are sectioned into two types, mechanical royalties, and performance royalties.

Mechanical royalties are generated when your music is reproduced or distributed both physically and digitally. This can be when CDs are manufactured, songs are streamed, from digital sales and hard copy sales.

Performance royalties are generated and distributed when music is publicly performed. This applies to music being played over the radio, in a restaurant, on streaming services or live performances to name a few examples.

Mechanical Royalties

Whether the artist’s license is non-exclusive or exclusive, in most cases, they keep all of the mechanical royalties generated. This is in exchange for the price they pay for the license. However, If an artist is signed to a label, that label collects the royalties and can choose to pay a percentage of the royalties to the artist.

There is an exception to the artist collecting 100% of mechanical royalties that applies exclusively to exclusive license agreements. This is ‘advances against mechanical royalties’. 

Some producers, in exchange for the beat and as stated in the license agreement ask for a percentage on the mechanical royalties. This usually isn’t anything big, ranging from 1-10% of the royalties.

Advances against royalties work as an insurance for the producer in case the song blows up. As the beat market becomes more and more saturated, the beat prices have dropped, so much so that it’s become harder to close deals of 4-figures. 

So, if a song blows up and you had sold exclusive rights may be less than even $1000 and that song generates thousands or millions of dollars, it’s not that fair, is it? This is why advances against royalties exist.

Performance Royalties

Performance royalties work differently and are collected and paid out by Performing Rights Organisations (P.R.O’s). These royalties are divided into two parts, songwriter royalties (writer’s share) and publishing royalties

PROs divide the royalties to these two groups, with every dollar earned on performance royalties half goes to songwriter royalties and the other half publishing royalties.

Songwriter Royalties

The songwriter royalties are also known as ‘writer’s share’ and will be paid to the songwriters. They are paid out to anyone that has had creative input in the song. So, If a beat is licensed here, then both the producer and artist are considered the songwriters.

If you have leased a beat, then the beat is considered one half of your song and the lyrics the other half, meaning the producer and artist usually split the royalties 50-50.

This is different with exclusive beat licenses though, as a different split can be negotiated and depends on all songwriters in question.

Publishing Royalties

Publishing royalties are usually assigned to publishing companies, many independent artists though, don’t have a publishing deal. So, if you are independent or not signed with a publishing administrator, then you should sign up with one straight away. Half of what you earned is still waiting.

Part 3: Copyright

Copyright, especially in the music industry, becomes very tricky to handle. Copyright in regard to licensing beats will be explained here but I’d recommend researching further or even consulting an actual attorney to really understand the ins and outs of copyright in the music industry.

Performing Arts Copyright (PA-Copyright)

Performing Arts Copyright, PA-Copyright, is the copyright for the music and lyrics of a song. If an artist bought a license for a beat from a producer, then that producer will own one of the two copyrighted elements of the song. In this case the music. If you were making some trap or rap music, the music would be the rap instrumental beat. 

The artist will own the second copyrighted element of the song. The lyrics. Whether you bought the exclusive or non-exclusive rights of the song, you will always own the lyrics and the producer will always own the music, or at least, the copyright to the music.

Sound Recording Copyright (SR-Copyright)

Sound Recording Copyright, SR-Copyright, is the master and sound-recording rights of a song. If you owned a beat license and created a song with the producer, that song will be referred to as the ‘master’ or ‘sound-recording’. With SR-Copyright there is a large difference between holding exclusive or non-exclusive rights here.

With an exclusive license, the artist owns the master and sound recording rights. The sound recording rights will become their sole property and can be worry-free from claims the producer may plea. The producer can, however, jointly claim copyright of what is called ‘underlying musical composition’ as they are the original creator of the music, as stated in PR-Copyright.

With a non-exclusive license however, the artist does not own those rights. The artist has the right to use the beat, but they do not own the master right of the song. They do own PA-Copyright of the lyrics, however.

Derivative Work

You have definitely come across derivative works. They are based on pre-existing copyrighted material and then have someone’s original blended into it. These are remixes, parodies, adaptations, translations, etc.

When producers lease their beat, they are essentially authorizing an artist to create a derivative work using their material.

Beats With Third Party Samples

Another very tricky situation to handle in the beat licensing is when beats contain a third-party sample. This means that the beat the producer created was made with some copyrighted material. Some producers may think that the artist they are selling rights to can ‘clear the sample’. That is, thinking the artist can get legal authorization of the sample and they won’t need to.

This is completely false. If a third-party sample was used to create a beat that was then licensed to an artist, both the producer and artist need to acquire legal authorization. If there are numerous artists and producers, this could get very confusing, which is why I recommend against using samples or beats that contain samples.

Part 4: Exclusive or Non-Exclusive?

Whether to buy an exclusive or non-exclusive license agreement is ultimately up to the artist to decide. The artist will have to have a critical look at their work and consider the following:

✔ How many listeners/fans do you have?

✔ Do you have a considerable consistent number of streams/plays?

✔ Are you stable financially? How big is your budget?

These can be hard questions to answer and I would generally recommend non-exclusive licenses for most artists. Especially so if you are relatively new to the music industry or have not yet made it big. 

Hopefully, this guide has helped you learn the ins-and-outs of beat licensing and music production in general. The music industry is a very challenging industry to get into and understanding this information will only prove to help you. A lot of information was told here so feel free to come back or conduct your own research.

Gamerro Music
Gamerro Music

DJ, Producer & Entrepreneur

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