Music Licensing Agreements for Live Events

Who Negotiates a Licensing Agreement?

Music plays a vital role in setting the tone of any environment, but its impact is notable for live events such as sporting events, parties, or other organized functions.  It has become an expectation for anyone attending such events to hear music playing in the background, whether it’s to hype up the crowd, enhance the mood, or even add a comedic touch.  From a business perspective, capturing an exciting atmosphere generates a memorable experience for attendees, and selecting the right music that resonates with the crowd can greatly contribute to the experience.  To play music at any live or public event, hosting organizations must work with a Performance Rights Organization (PRO) to establish a licensing agreement in which the relevant artists are compensated for their works being played or performed.

A PRO, such as the American Society of Composers, Authors, and Publishers (ASCAP) acts as an intermediary entity that negotiates licensing agreements on behalf of their member artists and collects any royalties to then redistribute back to said members.  As such, PROs serve as an entity which engages on the legal aspects related to licensing music (ASCAP, Publisher Warranties…) and resolve disputes for their members, some of these services may include the following: Royalties Collection and Distribution, Global Reach and Partnerships, Music Licensing and Protection, Songwriting and Publishing Support, and Advocacy and Legal Support (ASCAP, Why You Should Join Us).  While multiple PROs exist, we focused on ASCAP to better understand some of their licensing agreements and issues surrounding their entity, primarily related to transparency and accountability when negotiating licensing agreements with certain small, nonprofit, or educational institutions.

To better understand ASCAP, some of their member artists include Taylor Swift, Ed Sheeran, Billie Eilish, Drake, Kendrick Lamar, The Weeknd, and Rihanna, and their membership encompasses many other artists in various genres or mediums, like composers such as Hans Zimmer for his cinematic soundtracks.  ASCAP primarily focuses on music, but other PROs may instead handle written works such as books, literature, playwrights, or other protected materials.  It is also important to note that while ASCAP works with many artists, other labels or recording artists may work with Broadcast Music, Inc. (BMI) or Society of European Stage Authors and Composers (SESAC), depending on the needs or services offered by these various groups, such as international licensing agreements.  Additionally, while ASCAP is listed as a non-profit, other PROs are considered for-profit entities (such as SESAC).  ASCAP gathers and publishes data related to the number of times songs may be played at events and the gross revenues generated each year by licensed works.  Its 2023 annual report indicates that ASCAP is the largest U.S. PRO with a $1.737 billion in revenue for all their licensing agreements, and given their non-profit standing, most of that money goes back to artists since other corporate or financial fees (debt, shareholders or private owners, equity owners, etc.) are not considered and operating costs are generally lower (ASCAP, “ASCAP Annual Report 2023”).

What Goes into a Music Licensing Agreement?

ASCAP standard agreements can be readily found online (https://www.ascap.com/music-users/licensefinder). We focus on the standard agreement between Colleges and Universities and ASCAP, as it provides the terms and conditions applicable to music performed at university sponsored events (ASCAP, “COLLEGES and UNIVERSITIES…”).  The “Colleges and Universities License Agreement” between ASCAP and a college or university touches on the following key points:

License Scope: ASCAP grants the Licensee (university or college) a non-exclusive license to perform non-dramatic musical works on their premises, including events organized by the institution or its affiliated groups, and over the internet or through television owned by the Licensee.  With the scope being left intentionally broad for any affiliates of the institution being covered under this agreement, this means that any sports clubs, fraternities, sororities, clubs, etc. are also held to the same responsibilities as the host institution.  This can create some additional challenges for the host institution to adequately enforce those rights if they do not directly oversee the events hosted by these affiliates.

Definitions:  A few of the more critical definitions outlined within the agreement, below:

  • The “premises” which the music may be performed, which can also include events hosted off-campus which would need to be documented, and relevant information submitted to ASCAP.   

  • The “full-time student” definition, which will also apply to the “Fee Structure” section later, is a little misleading, as both full and part-time students are considered in this definition.  According to ASCAP, any part-time student is also automatically converted to a full-time equivalent, so this definition really covers all enrollees at the institution. 

  • The “CPI Adjustment” definition, also referenced in the “Fee Structure” section, ensures that any fees remain in line with inflation each year, instead of using a flat increase or require a renegotiating of the price.

  • The definitions related to “Internet Site or Service” and “Internet Transmissions”, are used to define how the host institution may be charged if they use licensed works on the internet or social media.  These terms define what is constituted as “content distribution online” and extends to any host owned websites, domains, or other forms of social media.

  • The definitions surrounding “Locally Originated Programming” and Licensee’s Cable Television System”, reflect the institutions broadcasting rights for any licensed materials and how they can share derived content through these broadcasted channels (ex. A recorded excerpt which includes a copyrighted song).  These definitions also apply to 2.d. above and provide some overlap on the broadcasting rights online.  Both sections 2.d. and 2.e. are also tied to the “Internal Transmissions” and “External Transmissions” definitions which further outline sharing or broadcasting anything through a host institution’s own methods of communication within or without the school.

  • The “Radio Station” definition itself is relatively standard and applies to the broadcasting rights mentioned already, but the indication of a “non-commercial educational…” component is important to mention, as the understanding for entering into an agreement with an institute of higher education is that they are almost always “non-commercial” entities.  This, in effect, also maintains a flat fee or modest variable pay structure based on enrollments, vs. a profit-based model for royalties.

Fee Structure:  Licensee agrees to pay ASCAP annual license fees based on the number of full-time students.  These fees are then adjusted for inflation, specifically the Consumer Price Index (CPI), each year, this guarantees ASCAP will maintain a competitive market rate on their agreements each year.  Additional fees may apply if streaming services are used to broadcast live events, further layering additional fees into the contract.  The flat fee referenced in the agreement is a greater value between $257 (a flat fee) or 32 cents per full-time student.  All fees are to be paid annually based on the above structure as a flat fee. The variable fee structure based on student enrollment is a unique way to determine the cost of licensing but is also one that can disproportionally affect schools which may charge lower tuition fees and have a larger student population, such as state schools when compared to private institutions.  Finally, ASCAP requires regular reports on student enrollment numbers and any upcoming events, with a detailed description of the content used (such as any performed arts like music or other copyrighted material represented by ASCAP).

Limitations:  The license is limited to performances on the Licensee’s premises, as determined by the definitions under item number 2 above.  It further excludes any works being performed involving third-party or for-profit entities.  ASCAP can also remove certain works from the agreement at their discretion.

License Term:  Unless otherwise specified, all of these agreements are active for a period of five years and are subject to renew automatically on a yearly basis unless either party decides to terminate the agreement.  This is important as it means an agreement can live on in perpetuity without the requirement for annual renewals or modifications to the agreement.

Breach or Default:  ASCAP can terminate the agreement, after a 30-day notice period, if the Licensee does not honor the terms of the agreement.  The agreement can also be terminated at the discretion of ASCAP without a breach or default of contractual obligations.  In some cases, if the host institution has entered into another agreement with a PRO, ASCAP can determine if the “Comparable Fees” exceed the Base, Minimum and Cable License Fees of their agreement, they may be allowed to terminate the agreement.  This allows ASCAP the ability to renegotiate their rates based on an established fair market valuation from a competitor.

How are Royalties Paid to Artists?

The fee structure, particularly for a university or college agreement, is arguably the most notable, as it directly ties to the number of full-time students, creating some questions as to how songs are tracked to pay royalties to various artists.  These types of agreements are only negotiated between the PRO, acting as the intermediary with the artist or recording label, and a legal representative with the licensee entity (usually someone in a legal or compliance role).  Given that the agreements are fairly boilerplate, and an established template is used for almost all entities, there isn’t much room for negotiation, and this creates a straightforward process to execute the agreement.

ASCAP has generated some controversy regarding how they calculate royalty payments to various artists, in which smaller artists believe they do not receive an amount representing the amount their songs may be played when compared to established artists.  A part of this controversy stems from how ASCAP collects and quantifies payments based on a weighted scale of their design, in which larger venues (music festivals, events, etc.) and broadcast centers (nationally broadcast tv, news, movies, etc.) do receive a sort of higher “grade” when compared to artists whose work is presented in smaller, more localized areas, or similarly, if two artists played at the same music festival and one received a larger audience than the other at their set an hour later, both would be entitled to similar royalties.  This means that even if artists receive a similar number of plays or hits in a smaller community, the dollar amount tied to that attention is not the same as someone’s work being played on a national or international level (ASCAP, How Does ASCAP Pay Royalties?).  It is a difficult position, as ASCAP also has thousands of members and adequately tracking data tied to actual revenue can sometimes be subjective; However, as technology and tracking mechanisms increase, it will be interesting to see how royalties may be dispersed, especially for new, budding artists, in the future.

References

ASCAP. “ASCAP Annual Report 2023.” Www.ascap.com, 2023, www.ascap.com/about-us/annual-report-23new .

ASCAP. “ASCAP Publisher Warranties, Representations, and Membership Agreement”. ASCAP.com, https://www.ascap.com/~/media/files/pdf/join/ascap-publisher-agreement-english-spanish.pdf?sc_lang=en&hash=9F708B6FCFBB986B2C5B55DDE926DDCA

ASCAP. “COLLEGES and UNIVERSITIES LICENSE AGREEMENT.” ASCAP.com, ASCAP, www.ascap.com/~/media/files/pdf/licensing/classes/licensing-agreements-current/collegetier1-license.pdf .

ASCAP. “How Does ASCAP Pay Royalties? | ASCAP Explained.” YouTube, 22 Dec. 2022, www.youtube.com/watch?v=_8wtmGDMmBA .

‌ASCAP. “Why You Should Join ASCAP for Free.” Www.ascap.com, 2024, www.ascap.com/about-us/why-join-ascap-general.