Songs in movies, TV shows, and ads: How do the licenses work?
I get asked this question (or a variant on it) more than just about any other music business related topic. I get it; it ain’t easy to understand, but it’s not that hard, and, understand it you must.
Also, as much as I believe that the “music business” is dead, and it’s all just business; the one thing that is unique to the music business is how copyright is handled. That’s not to say that you have different intellectual property interests in music than in other businesses; you don’t. Rather, there are just various “terms of art” related to © that are unique to the music business.
So…here we go: an attempt to explain the rules and licenses around songs being used in films, tv, and ads. Let me know if you have any questions; I’ll try to answer them in the comments, and maybe this can be an evolving document that we can reference.
Any time a song is used in a film, tv show, ad there are two licenses required:
This license gives the producer of the above the right to synchronize the ©’d song (important: not the recording of the song, but the underlying composition - the lyrics and melody) with the moving images in the tv show, ad, or movie.
2. A master usage license: the producer of the above must negotiate a license with the person who holds the © to the recording of the above underlying composition (i.e. the version of the song found on the CD). Typically, the master usage holder is the label. If there is no label (i.e., it’s self-released by the artist), then the producer of the movie, etc. negotiates directly with the artist who self-released.
Thus, in the case of an artist who has not assigned their publishing rights to anyone and self-releases their own record, the producer of the movie, etc. negotiates “both sides” (i.e. the synch and the master usage) with the artist herself.
If the artist has done a publishing deal and a record deal, the producer negotiates with the publisher for the synch rights and the label for the master usage rights.
Unlike with mechanicals (i.e. the payment labels make to songwriters for the rights to mechanically reproduce a ©’d song on the album the label releases), there is no compulsory license for either synch or master licenses. Because there is no compulsory license for the synch or master usage, the producer must negotiate both of these licenses, and either the master holder or the publisher can deny the request.
In reality, the producer will approach one of the parties (the label or publisher - typically, publisher first - see below for why), and see if they can get the writer interested in the synch (most writers, of course, are falling all over themselves to have their music used).
Sometimes, the publisher will want to do the deal, but the label won’t. In this case — as you saw, for instance in I am Sam, where the publisher for the Beatles cleared the synch rights for the song, but the label wouldn’t make a deal for the master usage — the producers used different masters (i.e. they had artists cover the songs).
Importantly, in the US, when the Ad or TV show or Movie is publicly performed on TV (i.e. it’s broadcast), a performance royalty is generated for the writer and publisher of the song (often the same person). The performer (i.e. the person on the master) sees none of this performance royalty. Do note, that no performance royalty is generated from public performance in movie theaters, as they are (wink, wink, nod, nod) exempt from paying public performance royalties.
Additionally, in 1995 Congress enacted the Digital Performance Right in Sound Recordings Act (DPRA). This act — in conjunction with the Digital Millennium Copyright Act of 1995 — created a performance royalty obligation to be paid by webcasters whenever they broadcast a ©’d work over the Internet. Significantly, this performance royalty compensates the performer and content owner (i.e., label) of the work. The publisher and writer are still compensated when their ©’d works are publicly performed online via the Performance Rights Organizations (ASCAP, BMI, SESAC), but now — due to the DPRA — the featured performer and content owner are also compensated. This brings the US in line with the rest of the world (with some glaring exceptions, like North Korea) with respect to paying a performance royalty to both the writer and performer. Of course, to date (though efforts are afoot to change this) this only applies to public performance when it is digitally transmitted; for terrestrial radio (i.e. FM/AM), only the writers are paid a performance royalty. SoundExchange collects from webcasters on behalf of their registered members. SoundExhchange's authority to collect for/distribute to these SRCOs comes from a designation by the Librarian of Congress and the US © office.
So, when you’re watching Hulu and an ad comes on with music underneath that has been licensed by a producer of the ad from a label/artist, both the performer and the writer of the song are paide a performance royalty.
Please note, the above really only scratches the surface with respect to licensing. There are, of course, complexities. For instance, when doing a deal for a TV show, you also have to factor in home video, etc.