If you are a music composer/beat-maker ("Producer," in the Hip-Hop world), you've no doubt been approached by an artist, wanting to use your compositions/beats with their vocal performances.
Some will ask, "How much to buy your beat?" Others may ask, "How much for an EXCLUSIVE of that beat?" And still others, "Let's collab on that beat.... we'll just split points, 50/50..."
What does this all mean, and which is the BEST option?
Well, the BEST answer is, it depends...
In my opinion, you must first qualify the artist, as to who they are... as an ARTIST. Let's look at these different scenarios:
1. An artist that is just starting out.... no social media presence, no songs available for digital download/streaming, doesn't perform out.
2. An artist that is still RELATIVELY new, small/some social media presence, performs out once or twice a month for promotion, but is not paid. Has their first project available for download/streaming, but the numbers are low (less than 1K downloads/streams). 1 or 2 (VERY basic) music videos available to watch.
3. An artist that has some experience in "the game." You've seen them out performing around your city (here in Austin, they get EXTRA points if they've performed as a FEATURED/SHOWCASED artist at SXSW, ACL, or AUSTIN URBAN MUSIC FESTIVAL). They have a moderate social media presence, and a couple song/projects available for download or streaming, and have some (5+ mid level quality) music videos available to watch.
4. A VERY well established artist in your city, state, region, or country. Has performed on BIG stages, and/or was an "Opening Act" for a MAJOR artist that toured through your city. Has a VERY strong social media presence, and has sold MANY records/single (25K+) and HUGE steaming numbers (100K+). Has 10+ WELL produced, professionally directed/edited music videos available.
So what do you do, and how do you determine which artist is best suited for:
Leasing, Exclusives, or points? How much should you charge, or how many points?
There is NO one way to do this, but in my experience, this is how I determine the best case scenario for me...
First off I NEVER sell beats.... I LEASE them forever...lol! Why would ANYONE sell something that is an APPRECIATING asset, that can make you money for years to come?
To me, leasing is the best option. But even within leasing, there are at 3 options (that I'll discuss for this piece) to consider.
1. Non-Exclusive Lease of an mp3:
This lease (or license) is sold relatively cheap ($25-$50) to as many artists that are willing to buy it. The artist can do whatever they want with the track for the term (usually 1-2 years) of the contract. Some producers will stipulate how many downloads they will allow, or singles sold, before they will ask for money for the lease.... In my opinion, that is an accounting NIGHTMARE, so I don't do that. But some do. The producer, or composer still OWNS 100% of the beat, and can do whatever they want with it.
2. Non-Exclusive Stem or Trackout (mp3 or wav)
This license is a little more expensive ($75-$125), as a "stem" or "trackout" is each individual part, sound, or instrument (kick, snare, hi-hat, bass, 808, etc.) is separated, and can be placed on an individual track of any DAW (Digital Audio Workstation) so the artist and their recording engineer/producer, has COMPLETE control of the tracks and can rearrange parts, drop different instruments in/out of the song, change volume levels, or process each part individually.
The "Non-Exclusive Lease of an mp3" is an mp3 that is just the beat, as the producer arranged it. You have NO control of taking out/adding parts, or changing volumes of separate parts in the song.
3. Exclusive Stem or Trackout (wav, as it is a higher quality sound than the mp3)
This license is THE most expensive, as you can only sell ONE (license) of these, which is why it is called EXCLUSIVE. But because you could only sell one, it will be more expensive ($500-$1000, or more). Think about it for a minute, if you sold 10 N-E licenses at $50 apiece, that is $500. Well you will NOT have that opportunity with and EXCLUSIVE lease, again.... you can only sell one, so get the most money you can for it.... You, obviously, STILL own the beat, but u can NOT lease it to anyone else for the duration of the term.
(At the end of the term for the Exclusive license, you may/may not offer the Exclusive term to the artist again, for the same price, or more expensive, depending on how well the song sold. Or you may tell them that you are getting A LOT of offers for the beat and want to make it Non Exclusive, which will put you in a MUCH better position if you do decide to negotiate a NEW Exclusive Lease with the FORMER Exclusive License holder....)
Now doing songs for "POINTS" as "COLLABS," are an ENTIRELY different arrangement, all together...
When writing or doing a "collab" (collaborating) on a song, "points" usually mean percentage of "ownership" of said song. This is VERY important if you wish to get into the "song placement" or publishing game (or "IP," Intellectual Property, in general. I'll do a separate Blog on this subject in a subsequent post...).
Keep in mind, a song consists of music and lyrics/melody, each 50% of the total song, or 100% (the TOTAL song). If I provide the beat (music), 50%, and they provide the vocal performance (lyrics/melody), the other 50%, we would each own 50% of the total song.
If they mean "points" from sales, it is a percentage of "royalty" (or monies) paid out from sales, of the record, single, etc. I think you can see why you probably wouldn't do this type of "arrangement" with Artist #1 (or maybe even Artist #2...) from our list.
So what kind of agreement would you do with Artist #1, or #2? Exclusive, Non-Exclusive, Points? Again, probably NOT points, as they have such little potential to sell enough records to recoup a "ROI" (return on investment). I probably would NOT do an Exclusive with them either (unless I needed the money...lol), as I wouldn't want my GREAT beat to be on a record that NOBODY is gonna hear...
Now doing a "COLLAB" with Artist #4 is a GREAT investment. Especially if y'all agree to do a "50/50" split (meaning 50% ownership, and a 50% royalty from future sales). So no "up-front" money is exchanged, as this will be an ALL "back end" deal (paid from records sales).
But they know that if they sell 20K records, with your beat on the song, it is gonna cost them $9,900 (based on a 50% gross payout, of 20K singles sold at $.99/each), using the 50/50 split.
I'll admit, most "established" artists would NOT typically do this type of collab, with a (unknown) producer, as it would not be VERY cost-effective for them. Unless they are working with a VERY Well Established producer, at the level of Timbaland, Pharrell, Dr. Dre, etc. Sometimes, using a HIGH profile producer on a project, helps to promote the record BEFORE it is even released. But most at that level would want AT LEAST 50%, with an ADVANCE ($50K-$100K) paid upfront, against the future royalties paid. But if a Well Established artist can find a track, call it a "diamond in the rough," on soundcloud, YouTube, Spotify, etc, from a virtual unknown producer, they would MUCH rather just purchase the beat (along with 100% of the publishing/ownership of that beat), even for a PREMIUM upfront purchase price (to an UNKNOWN producer) of $10,000 or more!!
Now you may be thinking, "$10,000 to sell ONE beat to a WELL ESTABLISHED artist? Where do I sign up?" Well, before u sign on the dotted line, I've heard some HORROR stories of young, local, "green" producers, SELLING beats (and 100% of the ownership of the beats) to artists at Jay-Z's level, for like $10,000.... Most are "tickled pink" and brag to their friends that the VERY WELL ESTABLISHED RAPPER" (VWER) recorded his/her verses, hooks, and "flows" on their beat.... But just think about this for a minute. If that "local" producer were to say, "VWER, I REALLY appreciate your $10K offer. But instead of you BUYING my beat for $10,000, which is a VERY generous offer, by the way, why don't we just do an EXCLUSIVE LEASE agreement for my beat for say... $3,000, and I'll take 10 points on the back end from sales...?" Not only would the VWER "FREAK THE F#CK out," but he/she would probably have to re-schedule another meeting with you, with their IP attorneys present... Lol!
But before we get ahead of ourselves, let's take a CLOSER look at the "potential" numbers of selling the VWER the beat vs. an EXCLUSIVE LEASING agreement, with points.
Maybe the VWER sells 500K downloads of the single using your beat, which is a GROSS (pre-tax) of $495K... you would be owed a royalty of $49.5K, 10% of the gross, (plus the $3K for the leasing fee... Total is $52.5K) and that same 10%, in perpetuity (for as long as he sells that single). Or you could have just taken the $10,000 up-front, losing all ownership, and any additional chance to make FUTURE royalties off that beat.
And the VWER goes on to sell a total of 1.1 millions units with your beat...
But u got $10K.
That is all.
No more money from that beat.
EVER!
But hey, you may have gotten the opportunity to get a pic with the VWER to post to ALL your social media sites...
This is why Artists like #4 (or those even more successful) would rather just buy a beat from an unknown producer, and own it outright, than negotiate a lease.... SO BE VERY CAREFUL!!!
So a few "Rules of Thumbs" I live by:
1. NEVER, EVER, EVER SELL A BEAT.... lease it forever!!
2. Don't do a "POINT" or "Exclusive" agreement with an UN-established artist.
3. Only do "Exclusives" with Well-Established artists, and try to get as much money up-front, if they are not open to a discussion about points. But NEVER sell them the beat and its ownership.
4. 90% of your "Lease Agreements" should be Non-Exclusive mp3's. The other 10% will be a combination of "Stem/Trackouts" and Exclusives.
I sure hope this blog entry has helped alleviate some of the confusion about leasing beats for cash, versus points, exclusives, non-exclusives, and doing collabs.
If you still have more questions, feel free to contact me through our "Contact" tab with your question, and I will try to answer it as soon as I can.
Thanks for reading, and please subscribe to this Blog, below.
Jake B Nimble
