Everything You Need To Know About Online Beat Licensing

Online beat licensing isn't a new phenomenon. It's been around since the days of SoundClick and has evolved into an industry in its own right. The ease of online beat licensing means that almost anyone can become a music producer. Understanding how the process works can help you transition your music hobby into a side hustle or full-time job. This guide goes in-depth into what beat licensing is, along with information for both the artist and producer involved in the licensing process...

What is Beat Licensing?

Beat licensing is a straightforward concept. A producer can make a beat, upload it to an e-commerce store on their website. An artist can come in and purchase the beat to use in their music. As part of the purchasing process, you’ll provide a licensing agreement to the artist within your capacity as the producer.

A license gives the artist user rights, defining what they can do with your beats and how they can distribute any music containing the beat. By providing a licensing agreement, you’re allowing your beat to be used by a third party.

You want to remember that your licensing agreement is a legal document, which you should use even if you’re providing a beat to an artist for free. The reality is that you’re not selling the beat itself; you’re selling the right for the beat to be used by a third-party artist through your license agreement.

Non-Exclusive Beat Licensing + Its Limitations

When it comes to beat licensing, there are two distinctive categories: non-exclusive and exclusive beat licensing. Before you provide a licensing agreement for artists, you want to know which is most suitable for you.

The most popular form of licensing is non-exclusive. If you’re an artist, this is usually the best option for you, as it’s relatively inexpensive and allows you to use the beat on music distributed through Apple Music or Spotify. You can still make money with this type of licensing agreement, which is automatically provided when you purchase the beat from a producer’s online store.

A non-exclusive beat licensing agreement is typically auto-generated, filling in the basic information required to personalize your agreement. With this license, a producer allows an artist to use their beat in the production of a song, which can be distributed by the artist. As a producer, you’ll still retain the copyright for your beat as part of the non-exclusive licensing agreement.

Where non-exclusive beat licensing falls short is that they come with several limitations. These licenses usually have a limitation on streams and sales, requiring you to renew your agreement when you get to this threshold. Your non-exclusive license will always come with an expiration date, somewhere in the region of 1 to 10 years after the beat is purchased. If the maximum stream happens before the expiration date, you’ll need to renew your contract.

It’s also important to understand that under a non-exclusive beat license, the same beat can be sold to multiple artists. As an artist, this means similar music to your song could be created by a competing artist in your niche.

Every producer will have their own tiers within their non-exclusive licenses. Each of these levels will come with different user rights, forming the backbone of your licensing agreement. The more user rights you want, the more expensive your licensing agreement will become.

Non-exclusive beat licensing is usually the go-to choice for people starting their journey as independent artists. With a limited budget and smaller audience, you might find it more worthwhile to invest in a non-exclusive beat license than a more expensive exclusive license.

If you think you’re about to get your ‘big break’ with a song, it might be a good idea to level up and purchase an exclusive beat license.

Exclusive Beat Licensing + Rights vs. Ownership

When a producer offers exclusive rights to their beat, it comes with no limitations on the user rights. As an artist, you can do whatever you want with the beat. There’s no limitation placed on the number of streams allowed under your license, and you don’t have to worry about renewing your licensing contract.

While non-exclusive licensing is typically limited to a single project, like a song, your exclusive license will allow you to use the song across multiple projects. After you purchase the exclusive rights to a beat, the producer can no longer offer it for sale.

It’s important to check if the beat was previously sold under non-exclusive beat licensing. When the exclusive rights are purchased, it doesn’t immediately impact holders of the non-exclusive licensing. They’ll remain valid for the rest of their contract, but they cannot be renewed after the expiry date.

Producers can sell exclusive rights through two options – exclusive rights or exclusive ownership.

When you purchase the exclusive rights, the producer is still the original author of the beat and will be eligible to collect their writer’s share and publishing rights when your music is distributed.

With exclusive ownership, the producer gives you all aspects of the beat, including authorship and copyright. In this scenario, the artist will become the author of the beat and own the copyright over the piece.

While exclusive ownership sounds intriguing, it’s usually not in compliance with copyright law and is considered highly unethical within the music industry.

Royalties, Publishing Rights + Writer Share

Where people often get confused with online beat licensing is when it comes to the royalties. Mechanical and performance royalties are the two things you’ll need to understand.

  • Mechanical royalties are generated every time the music is distributed or reproduced, either digitally or physically.
  • Performance royalties are generated every time the music is played or performed in public – whether it’s on the radio, through streaming, or in a live performance.

Mechanical royalties are almost always collected by the artist, regardless of the license type. Most distribution services will pay the mechanical royalties directly to the artist. If you work with a label, they’ll collect the mechanical royalties on your behalf.

With exclusive agreements, mechanical royalties are not as straightforward. Producers will often request a percentage of the mechanical royalties from the music, which will be incorporated into the licensing agreement. The rate will depend on the producer, but it’s usually in the region of 1 to 10%.

The producer will be able to claim their mechanical royalties out of the net profits of your song, with your purchase of the exclusive rights acting as an “advance against mechanical royalties.” With the cost of exclusive rights dropping, most producers choose this method to generate extra revenue, mainly if the song performs well. You can think of it as an insurance policy for producers, who may lose out if the artist purchases their beat for a lower price and then makes a significant income from the music.

You need to consider the other revenue called ‘performance royalties,’  collected and paid by your Performing Rights Organization. Performance royalties are split into two categories – songwriter (known as writer’s share) and publishing royalties. Royalties gathered through the ‘performance royalties’ of a song will be split evenly between these two categories. The songwriter will receive their royalties from the PRO, while the publishing royalties are paid to a publishing company or administrator.

For the sake of beats, a producer is considered the ‘songwriter,’ which also covers anyone who has input in the creative process of the piece. Most non-exclusive beat licenses include a 50% share for publishing and writers. If there is more than one writer involved with the music, their 50% share will be divided between them. If you opt for an exclusive rights deal, the split between the creators of the beat can be specifically decided within the licensing agreement.

A publishing company will oversee the publishing royalties of the beat. The majority of independent artists and producers do not have a publishing deal in place and instead collect their publishing royalties directly through a service like ASCAP or BMI and Songtrust.
As an independent artist or producer, you want to make sure you’re signed up with a Publishing Administrator. Otherwise, you could be missing out on half of your royalties.

Dealing with Copyright

The copyright will decide who owns the music when it’s produced. While this can be complicated, we’ll keep it as straightforward as possible. You’ll want to consider two copyright aspects – the performing arts copyright and the sound recording copyright.

PA-Copyright contains two elements: the music and lyrics. As an independent artist, you’ll have the copyright over the lyrics, while your producer has the copyright for the music. The producer will always have this copyright, regardless of whether you have an exclusive or non-exclusive licensing agreement. PA-Copyright is automatic, coming in place when you write a piece down or save a draft to your hard drive.

SR-Copyright is the master of sound recording. It differs between exclusive and non-exclusive licensing agreements. With an exclusive license, you’ll own the master and sound recording rights. As part of your agreement, these are transferred from the producer to the artist. It’s worth noting that the producer will still be the original creator and have a right to jointly claim the ‘underlying musical composition’ copyright for the piece.

If you have a non-exclusive license, you won’t own the master or sound recording rights. In this situation, we have what we call ‘derivative work.’ This term means the work is a combination of various pieces of copyrighted work, which is combined with the original work of an independent artist. You’ll come across derivative work every day, most commonly remixing popular songs and translations of work from one language to another. You can think of ‘derivative work’ as a ‘new version’ of an existing piece.

Exclusive vs. Non-Exclusive Licensing

As an independent artist, the most important thing for you to consider is whether you want the exclusive or non-exclusive licensing of a beat. While your budget will usually determine whether you splurge for the exclusive license, there are other factors to consider.

You want to take the time to consider your current situation as an independent artist, including your followers and previous music portfolio. You can use your average streams to determine whether you’re likely to hit the limit in a non-exclusive license. If you have a larger budget or a label supporting you, you can likely pay the price tag for the exclusive licensing.

The best of both worlds would be purchasing a more expensive non-exclusive license that includes more user rights, including more streams.

Generally speaking, exclusive licensing is the best choice for individuals with an established following or the backing of a label. If you’re an independent artist just starting, you’ll want to opt for the non-exclusive licensing rights.

Common Questions about Beat Licensing 

Whether you’re an artist or producer, you probably have a few questions about beat licensing. Our FAQ section should cover the most common questions. Still need help? You can reach out on Instagram and drop me a DM at @adelantemusic or email me at info@adelantemusic.net

2 thoughts on “Everything You Need To Know About Online Beat Licensing”

  1. Hi Adelante!
    I’m King Samuel_
    The Genius Writer,
    from Nigeria.
    Thank you
    for taking the time to put up this great information for producers, songwriters and artists.

    I like the way you break down every aspect of it.
    I Really appreciate.

    Hope to work with you too someday.

    Do have a great time until then!

    King Samuel_
    The Genius Writer.

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