Licensing Music for Your (Music) Tech Startup - Where to Start

In light of the recent legal actions involving major music companies and tech startups, it's clear that understanding and navigating music licensing is more crucial than ever. Whether your startup involves AI training, streaming, previews, background music, sales, re-licensing, B2B, B2C, C2C (creator to customer/creator to creator), UGC, or any other way you want your users to engage with music, securing the proper permissions in advance is imperative. On that note I’ve written a brief article offering some high level strategies to help you maneuver through this convoluted space successfully.

1. Understand the Rights You Need

Before diving into licensing negotiations, it's essential to do your homework. The way the music exists on your platform/app, the end-user, and how the music will ultimately be used all determine the specific rights you need. Common rights include mechanical, synchronization, public performance, and master use rights. Research and understand the standard framework for licensing these rights to streamline your approach.

2. Prepare to Engage MULTIPLE Rightsholders, even if you’re just licensing one song (which of course is highly unlikely).

Music rights are often fragmented, with different entities holding various rights to a single song. You may need to negotiate with multiple rightsholders or administrators on a song-by-song basis. Even large blanket deals with major rights holders might not cover entire songs unless dealing with a production library wholly owned by one entity. Be prepared for complex negotiations and streamline your efforts to manage these efficiently.

3. Enter Discussions Fully Prepared and with an OPEN MIND

Preparation and an OPEN MIND?are key to successful licensing negotiations. When approaching labels, publishers and other rightsholders, ensure you have:

• Detailed Licensing Requests: Provide clear, comprehensive requests outlining exactly what you need and how the music will be used. (See point 1).

• Understand Market Rates: Know the going rates for different types of licenses to negotiate effectively. Talk to your competitors who have already done what you are trying to do. You’d be surprised how many of them are willing to share information. As I’ve said before music/music tech doesn’t have to be a zero sum game..

4. Consider Temporary Initial Terms that are Significantly More Favorable to the Rightsholders

Alleviate preliminary concerns and pushback by offering equitable if not more favorable compensation for the rightsholder to start.? This not only fosters trust but also paves the way for smoother long term negotiations. A couple of deal points to consider are:

• Making the Initial Term Short: Proposing?a short initial licensing term allows for rightsholders to test your platform. This can reduce their perceived risk and make them more willing to engage in an agreement. If the initial term is successful, it can pave the way for a longer, more comprehensive deal.
• Being Flexible with Royalty/Revenue Splits: When negotiating royalty splits/revenue share, especially with new products, be willing to offer terms that might be more favorable to the rightsholders. This flexibility can incentivize rightsholders to grant you the licenses you need quicker and build a more durable partnership.

5.? Demonstrate Potential Additional Value to Rightsholders

Beyond monetary compensation, think about what additional value you can offer rightsholders. This might include marketing opportunities, preferred placement on your platform/product, or cross-promotion. Demonstrating how your platform/prodct can benefit the rightsholders can make your proposition more attractive.

6. Leverage Other Technology and/or Experts

Consider working with companies or individuals who specialize in music licensing. These experts have the knowledge, expertise and most importantly established relationships to guide you through the process, saving you time and money (in the long run). They can also help you navigate complex negotiations and ensure you're complying with all legal requirements.

Conclusion

Navigating music licensing for your tech startup is a complex but essential task. By understanding the rights you need, preparing for negotiations with multiple rightsholders, streamlining your efforts, and leveraging technology and expertise, you can build a solid framework for obtaining the necessary licenses. Demonstrating value to rightsholders and being flexible with terms can further enhance your chances of successful negotiations. With careful planning and strategic execution, you can secure the music rights needed to propel your startup forward.

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