Take the Time to Understand Your Agreements! (Photo Courtesy of DJBOOTH)
Originally published in DJBOOTHSeptember 13, 2018
Not that you need me to tell you this, but the music industry can be intimidating. As artists and producers, you’ll confront a variety of agreements as you navigate your careers. Today, I’m going to break down a problematic but popular type of agreement between artists and producers: Beat Lease Agreements.
What is a Beat Lease Agreement?
Just like in a traditional producer agreement or beat sale agreement, a Beat Lease Agreement allows an artist to incorporate a producer’s instrumental beat into a new recording by the artist. But unlike those agreements, in a Beat Lease Agreement the producer maintains full ownership of the copyright in the beat while giving the artist either an exclusive or non-exclusive license to use the beat, typically for a set period of time (years) and/or a set number of exploitations (sales and streams).
Why Do Beat Lease Agreements Exist?
Beat Lease Agreements arose as a way to address a common problem in the beat sale marketplace: producers want as much money as they can get for their beats; however, since the beats aren’t worth anything sitting unexploited on a hard drive, producers are tentatively willing to part with those beats for less than what they believe the beats are worth, but only if it’s for a limited time. That way, once rights revert back to the producer, the producer can make some more money by re-leasing, or outright selling, the beat. For their part, artists are willing to lease beats, knowing full well that their leases will expire in a few short years, in exchange for the right to use the beat now at a price that’s within their budget.
One problem with Beat Lease Agreements is that they’re often poorly drafted. The most dangerous types of transactions in the music industry are the ones where one or both of the parties don’t understand what the agreement is between them. So whether you’re a producer with beats to sell or an artist who lacks the funds to purchase a beat outright, here are six things you should know about Beat Lease Agreements:
1. Know How Long the Lease Lasts
By definition, Beat Lease Agreements don’t last forever. In a traditional producer agreement or beat sale agreement, the producer typically transfers the beat’s copyright to the artist. In a Beat Lease Agreement, however, the artist is either exclusively or non-exclusively leasing the beat for a period of time or for a set number or type of exploitations or both. For example, the lease might expire the earlier of three years or 1,000 downloads or streaming equivalents, i.e., the number of streams it takes to equal a download. Once you hit either of those targets, your lease automatically expires and you can no longer use the beat.
No matter what, both parties should know how long the beat lease lasts. This is called the “Term.”
If you’re an artist, then you should know what the Term is so that you don’t accidentally exploit the beat after the lease term has ended, thus accidentally infringing upon the producer’s copyright. If you’re a producer, then this is so you know the earliest date on which you can lease the beat to someone else or re-lease it to the artist for more money (or threaten to sue the artist for infringing your copyright).
As an artist you should try to get the longest possible lease for the beat, ideally with some options to extend the lease, or convert it into a transfer of copyright by making additional payments down the road. As a producer, you clearly want to get the rights to the beat back as quickly as possible so that you can re-lease it, but you also want the song that incorporates your beat to become a hit, and that may take time. You want the artist to feel secure enough to invest money in promoting the beat, knowing that they have enough time to reap the benefit of that investment before they have to re-lease the beat.
2. Know What Can and Can’t Be Done to the Beat
You should make sure you understand what can be done with the beat and where it can be done. What an artist can do with the beat is called the “Scope” of the lease. The scope of most leases typically allows the artist to do whatever he or she wants with the beat, so long as additional elements—usually vocals—are added to it, in order to create a new track. In other words, the artist is often not allowed to release an instrumental version of the beat. The scope sometimes also prevents an artist from creating more than one new recording embodying the beat. That means that remixes or alternate versions may be off limits too.
Where the artist can exploit the beat is called the “Territory.” If the Beat Lease Agreement mentions territory at all, then as the artist you should make sure you have the worldwide or universe-wide right to exploit the beat for the duration of the lease term. In the digital world, and especially in the context of Beat Lease Agreements, limiting the territory to just one country doesn’t make a whole lot of sense.
3. Know What’s Up with the Publishing
Publishing is often the elephant in the room of Beat Lease Agreements, many of which don’t even explicitly address it. Some quick background: each recorded song has two copyrights. The first is the copyright for the musical work, also called the publishing, which is the lyrics plus the melody. The second is the sound recording, also called the master, which is the particular recorded version of the musical work. Each musical work can be recorded thousands of times, with each recording creating a new sound recording copyright, while the underlying musical work copyright remains the same each time.
When an artist releases a sound recording, he or she is obligated to pay something called mechanical royalties to the songwriters or publishers of the musical work that is embodied in the sound recording. That payment is for the right to embody the musical work in the sound recording being sold by the artist.
If you leased a beat from the producer, then unless the Beat Lease Agreement says otherwise, the producer owns the copyright in the musical work embodied in the beat, and you’re automatically obligated to pay him or her mechanical royalties. If the Beat Lease Agreement is silent on the producer’s ownership interest, then you should assume that it’s no less than 50% of the publishing to the track.
There are a few ways to deal with publishing in a Beat Lease Agreement. The first is to treat it like any legitimate record label treats it: set forth what the “split” is going to be and then just pay mechanical royalties to the producer at a negotiated rate (i.e., at either full or reduced statutory rate). However, you can also reach an agreement for the producer to waive mechanical royalties entirely, either in perpetuity or up to a certain number of exploitations. Sometimes a producer will agree to waive mechanicals up to a certain number of exploitations so long as the artist is self-releasing, but state that if the artist has or acquires a record label, then that record label will pay mechanical royalties directly to the producer.
You should never expect for a producer to waive mechanical royalties, although they sometimes will under certain conditions. What you want to avoid, however, is producers using the fact that their Beat Lease Agreements don’t address publishing as a sort of “gotcha” opportunity down the road if the artist’s track becomes a hit. As always, it is better to clearly settle all issues, all at once, at the time of the lease.
4. Know What Your Credit Obligations Are
Producers at every level want to make sure that they’re properly credited on every release. For emerging producers, the need for proper crediting might be even greater. Make sure you know where and when you’re supposed to credit the producer, and how that credit is supposed to read. When I’m representing producers, I always make sure that there’s an obligation to credit the producer in metadata where possible, in addition to the other standard crediting obligations (in liner notes, in advertisements, on the back of albums, etc.). On the artist side, you also want to make sure that any inadvertent, non-repetitive failure to properly credit the producer doesn’t give the producer the right to immediately sue you or terminate the Beat Lease Agreement. You should have a right to “cure” the failure before they can do that.
5. Know What Elements You’re Getting (or Giving)
If you’re the artist, then you should know what elements you’re getting, and if you’re the producer, then you should know what elements you’re obligated to give. Artists should always try to obligate the producer to deliver tracked-out stems to the beat. “Stems” are single instrumental (or vocal) tracks, e.g., the individual tracks containing the guitar, the piano, the kick drum, etc. You want the stems so that you can properly mix the track with your vocals on it. Of course, the producer may not have the stems, may not want to deliver them, or may charge more for them. Or you may not want the stems after all because all you want to do is put your vocal track right on top of the beat without mixing it into the beat properly.
Make sure you also know what type of files you’ll be receiving. It’s in everyone’s best interest to deliver the highest quality digital files possible so that the song that incorporates the beat doesn’t sound bad. Note that MP3s are not industry standard—ideally, the Beat Lease Agreement will contemplate delivery of at least a WAV file. Make sure that the beat has not been pre-mastered, which unfortunately means that you might not be able to properly master your track that incorporates the pre-mastered beat.
6. Know What Rights (If Any) Have Already Been Granted
You should know, and the Beat Lease Agreement should clearly state, whether you’re buying an exclusive or non-exclusive license to the beat. If your rights are exclusive, then you and only you can use the beat for the lease term. If your rights are non-exclusive, then the producer can lease or sell the beat to anyone else at any time, thus granting that person the right to release a song that incorporates the very same beat that you’re using, subject, of course, to your non-exclusive lease.
Unfortunately, it’s possible for you to lease or buy a beat from a producer only to find out later that the producer never owned the beat in the first place or had already leased or sold it to someone else. The Beat Lease Agreement may also state that although you have an exclusive license to the beat going forward, that license is subject to any prior non-exclusive licenses that the producer may have granted.
So, how do you protect yourself as an artist? First, ask the producer whether the beat has been exploited before. Take a moment to run a few Google searches on the producer to see what comes up. Use Shazam to see if it pops up as being connected to any other tracks. And, of course, always read the Beat Lease Agreement to see what it says, if anything, about past uses of the beat. If you’re represented by an attorney or have sufficient knowledge to do it yourself, then add representation and warranties, i.e., promises, into the agreement stating that the producer actually owns the beat and that he or she will indemnify you, i.e., reimburse you for damages, if someone sues you based on your use of the beat.
Special thanks to Mustafa Abubaker for editing services.