Mastering the Business Side of Composing: Contracts, Rates and Negotiations
For those looking to make a living as a composer or songwriter, talent and creative vision are only part of the equation. Understanding the business and legal aspects of the music industry is equally important for achieving success and getting properly compensated for your work. This includes familiarizing yourself with common music industry contracts, knowing how to set fair rates, and learning effective negotiation tactics when dealing with potential clients and employers. Mastering these business practices takes time and diligence, but will pay off in the long run through more job opportunities, higher incomes, and fewer legal disputes.
The Importance of Music Contracts
One of the most crucial business practices for composers, songwriters and lyricists is having well-crafted contracts for all your creative work. While verbal agreements may seem sufficient when you’re just starting out, they provide no legal protection if there is ever a dispute over ownership of intellectual property, proper payment or other contractual terms. That’s why it’s essential to document all agreements in writing, whether you’re commissioned to write a piece of music or partnering with another songwriter.
There are several common types of music industry contracts that composers should familiarize themselves with:
Work for Hire Agreements
A work for hire agreement stipulates that the music or lyrics you are commissioned to write will be owned outright by the hiring party. This means you are essentially selling all rights to the work in exchange for a flat fee payment. Work for hire contracts are commonly used when composers and songwriters are hired to create music for TV shows, commercial jingles, video games or other media projects.
A sync license allows an existing composition to be used in some type of audiovisual work, like a film, commercial or YouTube video. The license will specify the scope of use, length of term, payment amount and other conditions. Sync licenses do not transfer ownership, only usage rights.
With a co-publishing deal, songwriters partner with a publishing company who helps pitch their songs to recording artists, film/TV music supervisors and other potential users. The publishing company and songwriter typically split ownership of copyright as well as any revenues generated.
For co-writers splitting ownership of a song, a split sheet documents the percentage share that each will receive from royalties and other income. This prevents disputes over who wrote what or who deserves more credit and compensation.
The key is using the proper contracts for each unique business relationship and project. Trying to get by without clear written agreements is a recipe for misunderstandings, infringements of your rights and loss of potential revenue down the road.
Key Contract Provisions
To best protect your rights and interests, there are certain provisions that your music contracts should contain, such as:
- Clearly defined scope of work
- Detailed ownership/rights information
- Payment terms/rates
- Advance payment schedule
- Royalty conditions
- Term/termination parameters
- Exclusivity clauses
Having an experienced entertainment lawyer review any contracts can help identify areas that need strengthening or further negotiation. Never sign a music contract before thoroughly understanding its contents and potential consequences. Educating yourself on industry standards will also help you evaluate if an agreement presents a fair deal or not.
Establishing Your Rates
One of the trickiest parts of managing the business side of your music is determining appropriate rates to charge clients for your work. There are several factors to consider in establishing fair pricing:
Research typical fee ranges for the type of music composition, audio recording, performance or other services you’re offering. Industry unions like the American Federation of Musicians (AFM) provide rate charts that can give you baseline figures to work from.
Your rates should grow in line with your experience and professional credits. Charge on the lower end when first starting out, then increase as you gain expertise.
Take into account the size and resources of the client or project. Budget-constrained indie films or small businesses can’t pay as much as major studios and brands.
Scope & Scale
Consider the length of compositions, number of revisions, size of ensemble, length of performance and other details that impact time and effort.
The more expansive the rights or longer the usage term, the higher fees should be. Synchronization licenses for film/TV tend to pay more than non-exclusive web licenses.
Ownership & Royalties
If partly or fully retaining rights and royalties, you may accept lower upfront fees. Just ensure you have the proper contract.
Finding that sweet spot between charging too little versus pricing yourself out of opportunities takes trial and error. As a rule of thumb, don’t undervalue your time and talent, but stay flexible enough to get your foot in the door. Once you build experience and a satisfied client roster, you’ll be in a better position to command higher rates.
When opportunities arise to get your music in film, TV, ads or other media, there is usually an element of back-and-forth negotiation involved in finalizing the deal. Here are some strategies to help you negotiate effectively:
Know Your Worth
Having confidence in the value you provide will help you negotiate from a position of strength (rather than desperation). Refer back to industry rate charts and your past projects to benchmark your skills.
Do Your Research
Learn as much as you can about the potential client and their budget constraints so you can tailor deal terms accordingly. Also understand the typical contract terms for the type of project.
Be a Good Listener
Let the other party explain their needs and limitations before responding with your own perspective. Finding common ground is key.
Keep negotiations thoughtful, respectful and solution-oriented. Avoid ultimatums or heated exchanges.
Be Flexible Within Limits
Consider adjusting your typical rates or contract terms modestly to secure projects, but don’t compromise so far that you’re undervalued.
Know Your Walking Away Point
Determine ahead of time the lowest acceptable terms you can agree to while still protecting your interests. Respectfully decline if key conditions aren’t met.
Start With Your Best Offer
Begin negotiations with your ideal terms, but don’t leave yourself no room to concede. Maintain perspective on must-haves versus nice-to-haves.
Using Agents and Managers
Composers who start getting more serious paid opportunities may consider teaming up with a talent agent or manager. They can help with:
- Finding promising leads and audition opportunities
- Negotiating better deals and rates
- Reviewing and improving contracts
- Managing correspondence and paperwork
- Building your reputation and network
Typically agents take a 10-20% commission on deals they broker on your behalf, while managers charge a monthly retainer fee. Weigh the costs versus potential value added to determine if representation makes sense once your career gains momentum.
Joining Performing Rights Organizations
One of the prime ways composers earn royalties from their work is through Performing Rights Organizations (PROs) like ASCAP, BMI and SESAC. These organizations license and collect public performance royalties whenever your songs are played on radio, television, streaming services or live performances.
As a member, you register all your new compositions which then enter the PRO’s royalty distribution system. By tracking public performances, they can identify which writers and publishers should be paid. This passive income stream is vital for music creatives, especially those just establishing their careers.
Forming a Publishing Company
Many commercial composers and songwriters form their own publishing company, usually a Limited Liability Company (LLC), to manage the business side of their craft. The publishing entity can provide services like:
- Registering copyrights
- Administering co-publishing deals
- Collecting royalties
- Handling licensing and sync placements
- Taking care of accounting
- Distributing shares to co-writers
This separates creative work from business administration for greater organization and transparency in managing your catalog of compositions. Plus, the costs involved in setting up an LLC are relatively low.
Using Accounting & Legal Support
Managing the financial, tax and legal aspects of your composing business can quickly become complex, especially when co-writers and publishers are involved. Consider teaming up with:
For help with:
- Royalty statements & payments
- Tax documentation and filing
- Filing annual reports for your business entity
- Managing expenses, deductions and estimated quarterly taxes
A Music Lawyer
For services like:
- Drafting original contracts and agreements
- Negotiating deal terms
- Registering copyrights
- Navigating disputes or terminations
- Ensuring legal compliance
Their expertise will save you money in the long run and help avoid potentially costly mistakes.
Promoting Your Music
Great music alone won’t get you paid composing gigs. You have to proactively market your talents and compositions as well. Useful self-promotion tactics include:
Creating an Online Portfolio
Curate audio clips, sheet music, reviews, credits and other assets to showcase the breadth of your work. Make it easy for potential clients to preview and license your music.
Pitching Music Libraries and Supervisors
Research libraries and supervisors placing music in film, TV, advertising and other media. Reach out to share your work and availability for custom scoring projects.
Building Your Social Media Presence
Engage fans and industry contacts through artist profiles on key platforms like Facebook, Instagram, Twitter and YouTube. Share new works, behind-the-scenes content and announcements.
Performing at local venues builds your reputation and fanbase. Record and professionally edit footage to share online.
Pursuing Press Opportunities
Engage music journalists to get reviews and interviews in industry publications and blogs. Offer unique angles that make your work stand out.
Attending industry events, conferences and awards shows broadens your connections with publishers, supervisors and other influencers.
Tracking Expenses & Deductions
As a self-employed musician, you can deduct many business-related expenses to reduce your taxable income. Be sure to track any costs associated with:
- Equipment like instruments, computers, recording gear
- Music production software and services
- Lessons, coaches, education
- Travel and transportation
- Home studio space and supplies
- Administrative fees
- Promotional activities like websites, branding, mailers, events
Using accounting software helps classify and document these expenses. You should also save corresponding receipts and invoices.
Income Sources to Leverage
Successful composers and songwriters piece together income from diverse sources. Aside from upfront flat fees, you can earn additional revenue through:
Performance, mechanical, synchronization and print royalties paid out through PROs, publishers and other entities when your work gets used. These passive payments really add up.
Retaining Partial Copyright
When possible, retain a share of copyright and publishing rather than doing pure work for hire. This allows you to earn royalties.
For TV show theme songs and scores, residuals are royalties paid whenever episodes re-air.
Advances from Publishers
Pitch your original songs to publishing companies for upfront advances, which they recoup from your future royalties.
Licensing Existing Works
Generate licensing income by getting your catalog songs placed in TV, film, ads, video games and other media.
Earn income from ticket sales and merch when playing shows. Also pursue residencies and speaking engagements.
Diversifying income results in greater financial stability, while leveraging royalties creates valuable passive revenue.
Choosing the Right Business Structure
When establishing your composition business, you need to determine the right legal structure. Common options include:
Simple and inexpensive, but you’re personally liable for debts and lawsuits.
Shares control and liability with partners. Need a very clear partnership agreement.
Limited Liability Company (LLC)
Provides personal liability protection while still getting taxed at personal rates. Added state filing/maintenance fees.
Another option for liability protection where company income/losses flow through to your personal tax return. Requires meeting certain IRS criteria.
Your business becomes its own tax entity which must pay corporate taxes. Most complex and expensive to establish and maintain.
Many independent composers opt for a simple LLC, which provides helpful liability protection without too much complexity. Just be sure to follow state requirements, like filing an operating agreement. As your career progresses, you may consider S corps or C corps for their business financing and operational benefits.
Maintaining Ownership of Your Intellectual Property
In the music business, your intellectual property – the underlying rights to compositions and recordings – is your most valuable asset. Yet newer composers often forfeit their IP rights too freely through work for hire deals or get locked into short-sighted publishing and distribution agreements.
While you may sometimes have to compromise aspects of ownership/rights to get opportunities early on, avoid giving up more than absolutely necessary. Retaining copyright, income shares and creative control over your work helps build long-term wealth.
- Licensing usage rights rather than assigning full ownership
- Limiting exclusivity periods
- Restricting publishing rights regions or formats
- Retaining synchronization or print rights
- Negotiating time-limited deals
Can help balance business interests while establishing your career. As you gain leverage, aim to release works through your own imprint and retain all rights/royalties possible. The income will keep generating for years to come.
Insuring Your Music Gear
Given the hefty investments that composers make in instruments, recording equipment, computers and other gear, having adequate insurance is essential in case your equipment gets stolen, damaged or destroyed. Common options include:
This covers limited amounts of music equipment when stolen from your residence, but not if damaged during use/transport.
Separate Inland Marine Policy
Better for working musicians, this provides expansive coverage of equipment at home, in transit and at performances.
Music Pro Insurance
Specialized policies designed for touring bands. Covers theft, damage and legal liabilities.
Take inventory of all your gear and add up current value when researching options. Paying a little more in premiums upfront can prevent huge losses later on.
Joining PROs, Unions & Associations
While often overlooked by up-and-coming creatives, joining key professional organizations provides valuable benefits:
PROs like ASCAP, BMI and SESAC ensure you get radio/TV royalties
Health & Retirement Benefits
Musicians unions like AFM provide access to group health/dental insurance and pension plans.
Community & Opportunities
Industry associations facilitate networking, education and career development.
Some groups offer free contract reviews and discounted legal support.
These organizations lobby lawmakers nationally and locally on music and arts issues.
While membership fees apply, the potential returns easily justify the costs. Don’t miss out on income streams and support systems available to you.
Adopting a Business Mindset
Tuning up the business side of your composing career involves shifting perspective as much as learning new skills. Adopting a business mindset helps you:
Treat Music as a Profession
Getting paid fairly means upholding standards, deadlines and agreements like any business would.
Balance Artistic and Commercial Considerations
Understand how to advance your creative vision while operating in commercial environments.
Manage Finances Diligently
Treat income sources as diverse revenue streams to grow, and monitor expenses/deductions closely.
Consistently market your talents and put yourself in front of potential clients.
Provide outstanding service and communication to generate repeat and referral business opportunities.
Stay educated on the latest industry trends, standards and best practices.
By integrating these perspectives into your work habits and processes, you can build a sustainable career doing what you love.
Mastering the business side of composing involves learning many new concepts and approaches. But makers musicianship alone does not guarantee career success. Establishing a rewarding and lucrative composing career requires just as much diligent practice of money management, marketing, negotiation and relationship building as it does sharpening your creative abilities. Use this guide as a roadmap to start implementing the legal, financial and promotional practices that turn your musical talents into a prosperous and lasting vocation.
- 1 Mastering the Business Side of Composing: Contracts, Rates and Negotiations
- 1.1 Introduction
- 1.2 The Importance of Music Contracts
- 1.3 Establishing Your Rates
- 1.4 Negotiation Strategies
- 1.5 Using Agents and Managers
- 1.6 Joining Performing Rights Organizations
- 1.7 Forming a Publishing Company
- 1.8 Using Accounting & Legal Support
- 1.9 Promoting Your Music
- 1.10 Tracking Expenses & Deductions
- 1.11 Income Sources to Leverage
- 1.12 Choosing the Right Business Structure
- 1.13 Maintaining Ownership of Your Intellectual Property
- 1.14 Insuring Your Music Gear
- 1.15 Joining PROs, Unions & Associations
- 1.16 Adopting a Business Mindset
- 1.17 Conclusion