This is an informational viewpoint for advertisers and agencies from the Association of Music Producers (AMP).

We live in an era of endless music resources. As new terminology appears and old terminology becomes reframed, it is more important than ever to define exactly what rights are being granted, and if it is necessary to require those rights.  This article seeks to address some specific questions, and provide answers, for the benefit of both ad agencies and brands.

• What does it really mean to choose a “Royalty-Free” or “Performance-Free” music provider? 
• How does it affect the artists and composers trying to build a career in composing for media?
• Do the benefits outweigh the risks? 
• And does it actually save money? 

We at AMP seek to educate licensees, music providers and composers about the impact of this trend towards using royalty free music. First, let’s define the terms:

“Royalty-Free”
Many music libraries or subscription services (music providers) market themselves as “Royalty-Free.” Despite the name, this may or may not mean that royalties are paid to the original creators of their music (the composers). In many cases, it simply means these music providers are “sync-unlimited.” This means that the party licensing the music (the licensee, in this case usually an advertiser or agency) only pays once for the right to use the music forever in unlimited projects. Royalties may still be due to the original creators of the music. 

“Performance-Free”
These are music providers that are truly “royalty free” in the way you might expect: the original composers of the music have waived their right to collect Public Performance Royalties. These types of music providers will be the primary subject of this article.

Traditionally, as per the Copyright Act, the music provider and the composer retain the right to collect royalties for the public performance of a licensed music track. A “public performance” of music is defined by U.S. copyright law to include any music played outside a normal circle of friends and family that occurs in any public place. A public performance also occurs when music is transmitted to the public, via radio, TV broadcasts, digital service providers, and any other means.

However, in most cases, it is the broadcaster (the channel, network or platform playing back the music), not the licensee, who pays these royalties. Any public forum that uses copyrighted music--from stadiums and venues to nightclubs and bars to TV channels (e.g. ABC, NBC) and online broadcasters (e.g. YouTube, Twitch)--has an agreement with, and pays an annual blanket license fee to, the Performing Rights Organizations (PROs such as ASCAP, BMI or SESAC) for the public performances of the music of the composers that they represent. The PROs then collect, divide, and distribute these fees back to music providers and composers in the form of royalties. 

To offer a real-world example, if a brand or agency (the licensee) creates a series of spots that will air on ABC using music by a PRO-affiliated composer, they would not need a separate performing rights license because ABC is already paying the PRO. So, unless the licensee were to own a broadcast or distribution channel that has signed an agreement with the PROs, there would not be royalty payments due from them--whether the music is described as Performance-Free or not.

However, there are some channels that do not have agreements with the PROs (they are mostly digital). This is what leads licensees to seek out Performance Free music providers, or to simply require that the up-front music license fee include all future Performance Royalties (which is also known as a “Direct License”).

The problem with either Performance Free music or a Direct License is that it denies composers their Performance Royalties, even if the work is used on channels that have agreements with PROs, which means they do not even have a chance to receive royalties. A preferable alternative, which some licensees already use, is to insert a clause in the license agreement stating that there will be no action taken against the licensee should the work end up on a channel that does not have a PRO agreement.  

Why Performance-Free is Unfavorable To Composers

• Performance-Free music production can be financially unfavorable to composers. Beyond a frequently small upfront fee to create the composition, there is often no participation in future license fees received by the music provider. Performance Royalties have traditionally assisted composers by allowing them to financially participate in the usage and success of their works over time, without requiring burdensome deal-by-deal negotiations and payments from licensees.
• Performance-Free music is a high-volume business model by default. Successful composers must frequently produce many tracks per week, month, or quarter, in order to make a sustainable career out of flat fee, upfront payments for their music. Due to the sheer volume and speed of music being created, there could be less oversight and quality control. As a result, more frequent instance of blatant sound-a-likes or use of uncleared samples could occur in Performance-Free music, which makes licensees vulnerable to legal claims.
• AMP’s position is that the Performance-Free library model ultimately exploits composers. Further, it can have even deeper consequences for those striving to get their career started (and who may be unaware of the rights they’re surrendering when agreeing to work under Performance-Free terms), depriving them of an important income stream. In some cases, Performance-Free music providers do not allow their composers to be members of a Performing Rights Organization at all. This not only deprives the composers of Performance Royalties from the work created for Performance-Free libraries, it also deprives them of the ability to collect Performance Royalties for any other works they create.
• The access point for Performance Free music is primarily music libraries, but many respected music libraries do allow composers to retain their share of Performance Royalties. AMP is proud to have a number of such music libraries among their membership.

It is understandable why licensees would seek out music sources marketed as “easy to use” and “free” of further obligations. Licensees may see Performance-Free music providers as an attractive option if they’re looking to wholly avoid future payments, without realizing that they’re not responsible for such future payments in the first place.

For composers, however, the impact is huge. It is our obligation to inform and nurture our talent, not drive it away with a goal to produce the cheapest music possible. This trend is becoming so pervasive that, in recent years, some large scale licensees--most famously Discovery Networks--attempted to deny Performance Royalties to composers, even retroactively, only to relent when faced with industry resistance. (For more on this controversy, go here.)

AMP advocates on behalf of its members for transparency, education, and fair business practices across the industry. We believe it is worth everyone’s time to understand the ripple effect that Performance-Free music sources can have on the health of our industry. They represent an unnecessary erosion of rights, they undermine the financial stability of the next generation of great composers, and they likely won’t save a client even one cent.

(All statements in this document should be considered the opinion of AMP, and do not constitute legal advice.)