It’s Time To Completely Overhaul Music Licensing!


We live in a world of democratized production. Anyone with a compelling idea can use ubiquitously available hardware and software to create remarkably popular content. Funtwo, for example, has enjoyed over 7 million views of a video he created with a home video camera (one camera position, very few edits). The subject of this video is Funtwo playing guitar in his bedroom..

There are some who will argue that there are no rights issues associated with this particular video, but most people who make a living writing, performing and selling music would disagree. Funtwo is either playing or phantoming (lipsyching with a musical instrument) to JerryC’s arrangement of Johann Pachelbel’s Canon in D Major. The original song is in the public domain, but JerryC’s arrangement is protectable under current copyright laws. Both of these individuals (whoever they may be) certainly have the right to work for free, but let’s assume (for the sake of argument) that one or both of them wanted to get paid. How would they do it?

First we must understand the rights they might have under the current copyright laws and common practice business rules.

  • Master Rights–the physical master recording (audio and video). These rights are usually owned by the producer, record Company or movie studio that paid for the production. You must negotiate with them to use the work.
  • Mechanical Rights–the 9.1 cents per cut on a CD or per download that is compulsory under the current copyright laws (it is usual and customary to only realize approximately 60 percent of this amount on any give mechanical royalty) These rights are usually negotiated for and collected by The Harry Fox Agency, although they can also be negotiated independently. These royalties are usually divided up by the record company, the publisher(s), the producers, performers, composers and other interested parties.
  • Public Performance Rights–if the work is broadcast or streamed over the public Internet, you are entitled to your personally negotiated fee or, if you are so inclined, you may be non-exclusively represented in the USA by one of three performing rights societies, ASCAP, BMI or SESAC. Although the split is often the subject of negotiation, traditionally composers and their publishers split these fees 50/50. And, for the most part publishing companies administer and, therefore negotiate with people who wish to use the work.
  • Sync Rights–if the work is a piece of music that is synchronized to a piece of video (title music, theme music, background music, music for a music video, music for a film or TV show, etc.) you are entitled to a fee. Although the split is often the subject of negotiation, traditionally composers and their publishers split these fees 50/50. And, for the most part publishing companies administer and therefore negotiate with people who wish to use the work.
  • Unions & Guilds–If union performers have contributed to the work (singers, musicians, etc.) there are residual payments to be made. And, even if the performers are independent, they may still be entitled to a share of the profits from their creative contributions. This depends, of course, on how egregious the terms of the non-union performers’ contracts were with the original producers of the work.

There are other types of licenses, but these are the most common. Now, let’s say that you want to create a piece of video content that includes a music track. Where do you start? Do you have a legal department? How about a music clearance department? No, I didn’t think so. Most people don’t even know what rights they are violating when they upload or download a piece of music.

As we enter into the year of user-generated content and we start to see big sites like YouTube and MySpace as well as smaller sites like BlipTV start to profit from the sale of advertising around this content, we must create an automated marketplace for aggregated music rights. The computer technology required to create this type of automated clearing house is trivial, but the business rules and negotiations with all of the various rightsholders is not.

Internet distribution at a profitable scale is still in its infancy. We are just starting to see ways to transform value into wealth online. If Chris Anderson’s “Long Tail” theory is correct, digital content will ultimately, and counterintuitively, start to sell under the 20/80 rule (as opposed to the classic Pareto 80/20 rule that currently governs most sales curves on or offline.) Now would be a great time to get out ahead of this explosive math problem, before it actually explodes! Shelly Palmer

About Shelly Palmer

Shelly Palmer is the Professor of Advanced Media in Residence at Syracuse University’s S.I. Newhouse School of Public Communications and CEO of The Palmer Group, a consulting practice that helps Fortune 500 companies with technology, media and marketing. Named LinkedIn’s “Top Voice in Technology,” he covers tech and business for Good Day New York, is a regular commentator on CNN and writes a popular daily business blog. He's a bestselling author, and the creator of the popular, free online course, Generative AI for Execs. Follow @shellypalmer or visit


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