So, I've been meaning to write more about this year's "Epic Music on a Not So Epic Budget" panel at South by Southwest, which was absolutely great. The room was filled to capacity with a truly savvy audience and my wonderful co-panelists Caroline Suh and Erika Frankel of Frontrunners shared a wealth of information about the music licensing process, including how they managed to craft their soundtrack (Of Montreal, Album Leaf, Mogwai et al) on totally reasonable budget as well as some valuable, seldom discussed insight on how most favored nation status affected their approach to soundtrack. I thought I'd write a bit about that, since it might come up in your licensing adventures.
"Most favored nation"—or MFN—is a special status that you, the filmmaker, grants the rights holder— usually the label—and it means that they want you to pay them the highest price negotiated by any other rights holder in the soundtrack. For example, if RCA asks $4,000 for a Kasabian track with an MFN clause in place and then you end up licensing a CocoRosie track from Touch and Go at $4,800, you'd have to bring RCA's fee up to $4,800
as well. The higher profile the artist/track,
the more likely it is that a label will ask for and expect the MFN treatment,
although according
to one music supervisor I know, everyone asks for it. She also
recommended that you never, ever try to fudge things and pay different amounts
to different MFN'ed parties when you have such a clause in place, because "somehow
they'll find
out." Logistically speaking, MFN status manifests as a clause in the licensing agreement between you and the label or publisher.
(Not sure what all these rights are that I'm talking about? Check out the free music licensing guide.)
It should be noted that sometimes when a publisher wants MFN status, it can mean that they want the same amount that the label gets for the track. So, say a filmmaker wants to use Social Distortion's cover of "Ring of FIre." First, of course, they have to go to June Carter Cash's estate to secure the publishing rights, then to Epic Records for the master use rights. The Cash estate may negotiate for an MFN clause, meaning they want to make sure they get as much as Epic gets. So if Epic negotiates a higher fee for the recording, the Cash estate gets that same amount. (This generally only happens when the recording already exists. If you're having a band record an existing song specifically for the film, MFN generally doesn't need to some into play.)
Many filmmakers take the approach of granting MFN status only to those labels and publishers that have the really high profile tracks they need, which is a totally valid approach. Other times, you'll hear filmmakers use MFN to talk about a blanket approach to music licensing, where the they simply offer the same price for publishing and master use rights to every single rights holder, based a simple, mathematical divvying up of the music budget.
One filmmaker I know simply crafted a letter saying to labels and publishers alike, look, this is our budget and this is how much we can afford to pay for each track. We'd like to "MFN" all of you and pay you each the following rates for both publishing and master use. That film had a $100k budget, and since about 20 percent of that was reserved for music, they were offering $1200 for both publishing and master use on each track for cable rights, $500 each for DVD rights. They sent that letter to the smaller labels first, so that they could then go to the larger labels and say that several other labels had already agreed to the deal. I don't necessarily recommend this approach; it's usually better to grant MFN status only on a per request basis, but it's one way of doing it and it worked for these filmmakers.
How common is the MFN arrangement on soundtracks? Very common, although not always 100 percent effective because with their usual cunning filmmakers have figured out a way around these clauses when it suits their needs. One audience member at our panel revealed that when filmmakers want to avoid having to pay all the MFN'ed parties, they will sometimes work out an arrangement with a band where they pay them the normal fee same as everyone else, then attach a side letter offering an additional sum for something innocuous, such as attending the premier or something else that they "would have done anyway." In this way they can avoid paying the higher rate to every other label on the soundtrack that they granted MFN status. Last year's film adaptation Tranformers apparently struck this deal with Linkin Park; the band got $25k each for publishing and master rights on one song, but a side letter gave them an additional $150k for some light marketing duties. Now bear in mind that Linkin Park is as blockbuster an artist as they come, and that they were writing a song specifically for the film, so those licensing fees represent the outer limits of the ol' ballpark.
MFN sometimes represents a particular bugaboo for documentaries, because the filmmaker can't necessarily just use another track when the price gets too high. It often happens that a key scene will include a random snippet of music--like someone's cellphone ring tone, or a snippet of someone singing along to the radio--and in some cases the rights holder may decide that they're going to make the documentarian license it in order to keep it in the film (boo! hiss!). In that case if it's a larger entity that's able to ask for MFN status for themselves (and many demand it), they can really put the screws to the documentary's budget (boo! hiss! again). Documentarian Jeffrey Tuchman was quoted as saying “It’s like going to go the grocery store and pinching your pennies and using your coupons and then the last thing you buy is a steak for twenty dollars and then every soda and bag of M&Ms suddenly costs twenty dollars.” MFN clauses can make budgeting really challenging in this way. The Center for Social Media has tried to make things easier for documentarians by establishing best practices for including copyrighted material in their films in a fair use kind of way, but it's still a very case-by-case basis whenever you choose to do this, so be careful.
The MFN clause was just one rather specialized topic we covered in the panel; others included the basic steps of
licensing music, strategies for getting good price quotes, reasons to
use emerging versus established artists, why "public domain" music is
basically a myth, and the huge benefits—both logistic and artistic—of
starting the music licensing process sooner versus later. My hope is
that this panel help people to understand that process as well as it
can be understood in a single hour. For everything we didn't get into,
I recommended that participants download the free guide, which I plan on expanding thanks to the many intelligent questions we got that day.
My sincere compliments and thanks go out to Jarod Neece, the person
who does all the film panel programming at SXSW. I think a part of what
makes this festival so great is how unusually open to feedback people
like Jarod are. Every year, both on a personal and an institutional
level, they actively solicit feedback on ways to improve and adapt the
event, when many others would be content to sit back and stick with
what they've already done. As a result, the festival is always evolving
and growing, and for a filmmaker still learning their craft, I think
it's the one that is most worth the expense of a badge. Often you learn
as much from the audience members themselves as from the filmmakers and
other panelists. It's fantastic.
And like I said, I got asked a lot of other great questions during the panel, and I'll expand those into future posts as well, with some new sections in the free licensing guide too. If you have any comments or questions, as always, you can email me at shannon [at] boomboxserenade.com. I'd particularly love to get feedback from filmmakers about their own experiences with "most favored nation" clauses for soundtrack and how they feel about them.
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