Budgeting Considerations When Using Music in Films

These were notes to accompany a lecture given at a seminar in 2009. They are quite condensed and try to cover a vast topic in a short time. Taking into account the natural generosity of copyright and licensing experts the facts contained herein are substantially correct.

When using music in a film, part of the overall budget has to be set aside for clearing the music rights. You have to start somewhere and it is the generally received wisdom that, in the absence of anything else to use as a base for making calculations, you default to the overall film budget.

There’s a consensus that 10 – 15% is a good starting point figure to have in mind for music. It has to be stressed that the 10 – 15% is a guideline only and not set in stone. It’s just a way of arriving at an initial figure which you then have to adjust depending on many other factors.

For example, if the music is all composed it comes down, if it’s all major copyrights it goes up. If it’s a blockbuster where most of the money goes on special effects and name actors it can go down to 2 or 3%, if it’s a medium budget film using big songs it can go way up because the copyright owner may consider their song more valuable than the film. If it’s just a few tracks it goes down, if there are a lot of tracks and they’re integral to the story it goes up… and so on and on and on.

In the case of major films with name actors, directors, sequels and so on the formula becomes more complicated using presales, marketing budgets, historical box etc etc. The cost of each track used can vary wildly in these cases depending on how much the film maker wants the track.

The reason the budget is used as a guideline is because it is an indication of the expected revenue. If a film goes into profit then the film maker and investors benefit most and if all the rights have been pre-cleared then their gamble has paid off. Options based on territory, media etc can be used to reduce the initial spend and protect the film maker if targets aren’t reached but if and when they need to be exercised this protection comes at a price.

Some might argue 10 – 15% is on the high side but if you allow less at this stage you could face major problems down the line. At least this way you leave room to manoeuvre.

Don’t go thinking that if world wide (WW) somehow equals 10 – 15% then half the world equals 7.5% – it doesn’t work that way. The music owners have done this before and are as canny as the film makers. They are looking at the overall budget, the commercial potential and the likely audience. If the film won’t play in Japan it won’t come into the equation in setting the film budget. If it’s a determinedly language led production then they won’t factor in most non English speaking countries. Deals are done using specifics not generalities.

From the other side of the fence a film maker cannot have the music they want just because they want it. If you want an A list soundtrack you have to pay for it. You have to remember some major copyrights are strictly rationed to avoid over exposure so that they retain their value. The writer or performer usually wouldn’t be interested in or need the money – but does want the prestige – so will default to “No” most of the time. Well known tracks cost a lot despite the proposed use or budget because they have a certain value which the rights holder wishes to maintain.

It is ALWAYS more expensive to have options instead of a single WW clearance. If you know you want a WW clearance then request it at the beginning. If you are unsure then there is no point paying over the odds for more than you need. This is a commercial decision. It is possible to reconsider after having gone down the option route but be warned you won’t get as good a deal as you would have if you had asked for WW in the first place.

A full US distribution deal is quite an achievement for a low budget film… but if there is one on the table, then as part of the distribution deal, you should factor in the increased cost of the music. It is neither fair nor realistic to do a cheap distribution deal just to get the film out in theatres without paying for the music use. Don’t forget there are NO theatrical royalties in the US so the music rights holders don’t get anything apart from the additional fee when a film plays in the cinema there.

The line, “we can’t get the film out in the US because of the extra cost for the music,” will not wash. Without the music the film wouldn’t exist in its present format and why should the owners give it away for free just for the film maker’s benefit? If a TV show in the US wanted to use top end copyrights they’d be paying upwards of $10 – $20,000 for each track.

Each time a film maker sells distribution rights to a new territory there is usually a fee involved and, if they have not previously cleared for that territory, included in this must be an additional music fee appropriate to the new circumstances.

If the budget is flexible enough and there is a reasonable expectation of commercial screenings in a significant number of countries then a WW licence may be best. However, while this is desirable, is it realistic? Of course the director has high aspirations but the role of the producer is to leaven this with practicality without dampening enthusiasm. The producer not only raises money and gets the best deal possible for every penny spent, they also make commercial decisions. Every creative decision has a monetary value, every purchase must be prudent.

Each aspect of a film’s finances must accord with realistic expectations. Returning to the music clearances, there’s the known, the reasonable and the optimistic. If money is tight it’s sensible to clear for the first two and option the latter.

If there’s a bonus down the line such as the film getting a proper theatrical US release then a relatively low budget film is most probably starting to generate more money than it cost to make and that should make more available for the music.

The question most often asked is how much would a track in a film cost? Assuming you have a piece of string to hand, the average Hollywood film using the average amount of pre recorded music of the average duration not used in opening or closing sequence would probably be an average of $25,000 for each of the Master and Synchronisation rights.

Apply the same principles to a UK film and you’ll be talking £5,000 or more per side per track depending on its international expectations.

I feel ill at ease saying any of this because there’s probably no such thing as average.

To get away with paying less you’d have to have some pretty strong arguments. If your budget is very low, say up to £100,000, and you use predominantly music from independent labels you can get away with paying less because it’s accepted there’s a reasonable quid pro quo.

If you want to use a well known copyright especially if it’s attached to a major company you are going to hit minimums. A major will not usually contemplate a use if you go in with less than £1,000. They won’t give you WW for that either. If you request something reasonable even if it’s a bit cheeky, for instance UK and Australasia or UK and Canada (but not both; that’s greedy) you might get away with it but as soon as you stray into major commercial territories like the US and Japan you will have to dig a lot deeper.

One trick found more frequently in the advertising world, which often uses only fifteen or thirty seconds of music, is re-recording. You would always have to pay the publisher for the rights to the composition but recreating the recording, especially in the case of well known songs, could easily be cheaper than paying the record company for the master rights. There are companies and studios that specialise in recreating music and thirty seconds of a hit can usually be managed for less than a couple of thousand pounds.

There are still other ways of cutting initial costs and TV has led the way here. When shows are made specifically for TV in the UK they take advantage of the blanket licence where there’s no significant upfront fee for music use. If they strike lucky and the US wants to buy the show the US broadcaster will often replace some or all of the tracks. This may be because of the audience profile; it may be budgetary as they have to pay per track used in the US. This is factored in when the deal to sell the show is negotiated. Tracks can also be replaced when a programme goes to DVD.

Film makers should therefore try and avoid locking scenes to specific pieces of music as much as possible until they know for certain the track is clearable within budget. This is common sense film making. Remember you won’t get film clearance rights on a TV programme music budget.

All countries pay performance royalties for TV broadcasts but many do not for cinema screenings so with TV programmes there’s a benefit for rights holders over and above the fee. Film makers may be aware of how the PRS works but many are unaware of the PPL or similar organisations which pay performance royalties to master rights holders (record companies). Many countries now have such arrangements in place but again the exception is the US. Record companies do not get paid directly when their music is played in the cinema, TV or Radio. It’s no wonder they are protective of their copyright use. (There is of course Sound Exchange which punches a small hole in this statement but as a generality it still holds most of the water).

In conclusion, be clear about exactly which rights you and your distributors need. You can re-approach once and tweak maybe once or twice more but you can’t move the goalposts too far or too many times. Rights holders will get bored and the deal will grind to a halt. Despite the fact you’ve made this glorious film that the world is dying to see, it isn’t finished yet and won’t be until you’ve added the music. The chances are, right now, you need them more they need you.