BEAT LEASING | ROYALTY COLLECTION (Simplified for Recording Artists)

Updated: Jul 25


TABLE OF CONTENTS

  1. What does it mean to “Lease a beat”?

  2. What are the specific terms of a lease agreement?

  3. Which Lease is right for you?

  4. What are “Track-Out Stems” and why do you need them?

  5. What if you lease a beat and the song blows up/goes viral?

  6. What happens to other Artists who lease the same beat, after you purchase the Exclusive Rights?

  7. What is YouTube Content ID and why is it important?

  8. Exclusive “Rights” vs. Exclusive “Ownership”. What's the difference?

  9. Royalties: Writer's Share, Publishing and Master

  10. How to collect your royalties and prevent the "BLACK BOX"

  11. CONCLUSION



1. What does it mean to “lease a beat”?

When you are interested in professionally using a beat you hear from a producer online, you would purchase a Lease Agreement that gives you the right to commercially exploit that beat for your single or album.

This means that you can write and record your own lyrics, get your New Song mixed and mastered, and release it worldwide on all streaming services (Spotify, Tidal, Napster etc.).

With a Lease Agreement, you CAN generate revenue and profit from any streams and sales that the New Song accumulates.

To clarify – you are buying the non-exclusive permission to use the beat, not the beat itself.

(Think of it as similar to leasing a car. You are paying for the right to use and drive the car for a finite amount of time, but you are not buying ownership of the car.)

When you buy a lease from a producer, you are agreeing that the producer can resell a lease for that same beat to as many other Artists as he/she wishes.


Don't worry, beat sharing is very common in Hip Hop culture and always has been since its inception in the late 1970s. If you want the beat for yourself, just ask the producer for Exclusive Rights!

You can buy these agreements instantly, straight outta the producer's online beat store.

You will come across beats that are labeled as “FREE”, especially on YouTube. Be careful with these. In most cases they are only free for demo recording and non-profit use. You do not have the right to release them or monetize them in any way unless explicitly stated otherwise by the producer.


Basically you can download the beat for free, write to it and record a draft. Then when you are happy with your vision of the song, you would buy a lease before you release it for sale and streaming.

2. What are the specific terms of a Lease Agreement?

While there is a “loose” industry standard for Lease Agreements, each producer has the ability to set and write their own terms in their contracts.

There are usually several different tiers or options to choose from that might look something like this:

*Basic *Pro *Premium *Unlimited

Each option generally includes some types of limitation on how many streams, video views or sales your New Song could legally accumulate, collectively across all platforms.

For example, the Basic Lease would have a sales limit of 5,000 units (1 single = 1 unit) and a streaming cap set to 50,000. There would also be a time limit on the lease. (Again, similar to leasing a car.) A Basic Lease might remain in effect for 3 – 5 years, or sometimes less depending on the producer you purchase from.

Each upgrade option would have a higher cap on sales/streams/views and longer time limits.

When the time runs out or you reach your sales/stream limit (whichever comes first) you would either upgrade to a higher tier or purchase the same lease again. Or, depending on how well your New Song is performing, you could always reach out to the producer directly to negotiate something else entirely.

Also, each option could come with varying file formats, with the higher tiers offering the Tracked-Out Stem files of the beat (more info on stems later) and higher quality audio. See examples below:

Basic: Sell 5,000 units – 50,000 Streams/Views – 3 years – MP3

Pro: 20,000 units - 200,000 Streams/Views – 5 years – MP3 & WAV

Premium: 80,000 units – 500,000 Streams/Views – 7 years – MP3, WAV, Stems

Unlimited: Unlimited units – Unlimited Streams/Views – 10 years – MP3, WAV, Stems

Keep in mind, those are just examples but you can expect to see very similar terms when you go to buy. Some producers like myself give their leases unique names other than “Basic”, “Pro” or “Premium”, but the concept remains the same.

You might find yourself looking at all these different options and contracts from all different producers wondering "Why are these so complicated?!?"

Believe me, I feel you.

Put simply, you are purchasing real LEGAL DOCUMENTS that will hold up in a court of law. They all contain the type of convoluted jargon that only lawyers can fully understand.

(To see an example of a contract, add a beat to your cart on my HOME PAGE and tap the Magnifying Glass icon on mobile, or the “Review” button on desktop.)

As you will see, it's... a lot. All of it is necessary though to protect all interested parties in all aspects of the transaction.

If you value your music and long term career, you should take every contract you purchase from producers very seriously.

With that said... if you have any legal questions concerning the documents you purchase, it is highly recommended that you consult with an entertainment lawyer.

3. Which Lease is right for you?


The type of lease you purchase depends on where you are in your career and what your professional goals are as a Recording Artist.

Non-Exclusive leasing is generally meant for Artists who are just starting out but established Artists (even major names) take advantage of leasing every day. Leasing is a way for Artists to have access to professional quality production without paying hundreds or thousands of dollars for exclusive rights.

I've seen prices as low as $5 for a Basic Lease, all the way to $300 for the full package (MP3, WAV and Tracked-Out Stems with Unlimited Rights). Pricing is entirely up to the producer you're buying from.

If you are just starting out and have a small or no fanbase yet, a basic license is your best bet. You can always upgrade later if needed.

Once you get yourself relatively established and have a few hundred loyal fans who stream and buy your music consistently, a higher tier or an Unlimited Lease would suit your situation better.

4. What are Tracked-Out Stems and why do you need them?

Stem files are each individual instrument of the beat, exported from the recording session one by one, and generally compressed in a ZIP file (or archive).

These files are exported at incredibly high audio quality for a pristine, professional sound.

Stems are necessary for placing your vocal tracks into the right "pocket" within the mix. Instead of just slapping your recorded vocals “on top” of the beat, the engineer can slip your vocals “inside” the beat so that it sounds more cohesive.

They are also good to have if you want to customize or rearrange the beat to suit your vocal/song vision as a whole, which most contracts that include stems will allow, to an extent.

It's still possible to get a good vocal mix without the stems, so long as you have a good mixing engineer. Still... if you are serious about your music career, have a loyal fanbase ready to listen and you want your song to stand out and compete with major label Artists and the veritable fountain of talent coming up everyday, you should definitely invest the extra dollars into the Stem Lease option. Or even go as far as negotiating Exclusive Rights which always come with stems.

5. What if I lease a beat and the Song blows up/goes viral?

The answer to this is actually quite simple:

YOU BUY THE EXCLUSIVE RIGHTS TO THE BEAT!

Or at the very least, get in touch with the producer to negotiate new terms on an exclusive basis. This industry has a foundation in good communication and relationships so stay on top of it.

Otherwise, the exploitation of the New Song is limited to the user-rights you get when you lease a beat. You will need the full exclusive rights to prevent the producer from reselling the beat, no matter how much your New Song has blown up.

*Fact - The beat for "Old Town Road" was leased by Lil Nas X for $30 from a Producer named Young Kio, who sampled the banjo from a 12 year old Nine Inch Nails song. Once the song went viral, they reconnected and renegotiated the terms so all of them would win.

If you're using beats I produced, I will more than likely be following up with you about your New Song on a fairly regular basis. Doing this allows me to see the songs potential for growth before it happens. In these cases, I will reach out to you so we can discuss the options.

Not all producers will follow up with customers so again, STAY ON TOP OF IT and contact the beat maker on a relatively frequent basis to develop a relationship and make a good offer on the exclusive rights.

6. What happens to other Artists who lease the same beat, after you purchase the exclusive rights?

Nothing!

Their leases will still be valid up until they reach they're sales/stream limits or until the contract expires. If you encounter problems after their expiration, contact your lawyer.



Buying an exclusive license to a beat that was previously up for lease just means that only you now have the “exclusive right” to use the beat, effective from the date and time of your purchase of that exclusive contract agreement. The beat would then be either marked as “SOLD” on the beat store or removed entirely, and nobody will ever be able to buy a lease for that beat again.

I'll say it again... any Artist who previously purchased a lease can still exploit their song until the terms of their contract expire. Purchasing exclusive rights does not change that.

Here is an example to further clarify:


You buy a lease TODAY that has a 5 year term limit. Someone else comes along and buys the exclusive rights TOMORROW. You are still legally able to continue using the beat in the manner that your lease agreement outlines for the next 5 years, or until the stream limit is reached (whichever comes first). The buyer of the exclusive rights is well aware that you and many others hold a lease, and they cannot legally strike your song down or take you to court. If they try, they are acting a fool and don't understand how this works.


7. What is YouTube Content ID and why is it important?

To date, Content ID is unique and specific to YouTube, and has been somewhat a source of confusion among both the producer and Artist communities... for good reason. I'll try to clear it up for you here before you get yourself into legal trouble.

In many (if not all) Lease Agreements you purchase, you will find a clause that looks something like this:

  1. Registration of the New Song for YouTube CONTENT ID is strictly prohibited. When using a distributor (i.e. TuneCore, Cdbaby, Distrokid, etc.) Licensee SHALL NOT register the New Song for Content ID. If Licensee wishes to register the New Song for Content ID, they are required to purchase full exclusive rights to the beat. ***

The above clause is taken straight from my own contracts. I'll explain why this is in the agreement in a moment, but first take a look at the description of Content ID below in YouTube's own words...

From YouTube's support page:

Content ID is YouTube's automated, scalable system that enables copyright owners to identify YouTube videos that include content they own. As the copyright owner, you provide YouTube with a reference copy of your eligible content. YouTube uses the reference to scan uploaded videos for matching content. When a match is found, YouTube applies your preferred policy: to monetize, track, or block the video in question.”

In the cases of Content ID and beat leasing, the producer is the copyright owner. As such, the beat is already registered with YouTube by the producer so that he/she can protect ALL lease holders.

For example:

You buy a lease, and then 10 other people buy a lease for the same beat. All of you then register your new song to Content ID. If all 11 of you registered with Content ID, you would all start getting copyright infringement notices from each other. I think you can see why that would become a very big and very messy problem, very quickly.

Since the producer is the only one registering the beat with Content ID, all claims are flowing through a single channel, where only one person or entity keeps track and knows exactly what is going on.

However, in the event that someone owns the exclusive rights to a beat, they are also able to register the New Song. Still, the exclusive rights holder knows and agrees that previous lease holders are still able to carry out the terms of their lease without fear of infringement.

When you upload your New Song to YouTube on your personal channel after buying a lease, you will most likely receive a “copyright claim”. DON'T PANIC. This is just the Content ID system notifying the copyright holder (producer) that someone has uploaded a video containing the beat you leased. Once the producer confirms that you did, indeed, purchase a lease and you are legally using the beat as outlined in your agreement, he/she will release the claim and most likely monetize or track it.

At this point you might be asking “Well how would I register my song with Content ID anyway??

When you go to independently release your song for streaming and sale through your digital distributor such as Distrokid, TuneCore, Cdbaby or others, you will be presented with the option to opt-in for YouTube at some point in the submission process. As per your lease agreements, make sure you DO NOT opt-in. Uncheck all boxes that offer you YouTube and Content ID registration. You can upload your New Song onto your personal channel after the fact.

Uploading your New Song to your personal channel does not mean it is registered. Content ID is a separate process. If your channel meets certain performance criteria and you're able to register on your own directly with YouTube without a distributor, your lease agreement prohibits you from doing so. Buy exclusive rights if you want to register your song with Content ID!

8. Exclusive Rights vs. Exclusive Ownership. What's the difference?

These two might sound and look similar, but they both carry very different meanings.

  • With Exclusive Rights, the producer remains the original author and copyright holder of the music. They are still able to collect the writer's share and publisher's share of profits. (more on shares in the next section)

  • With Exclusive Ownership, the producer sells the beat and all authorship, interest and copyright, etc. These types of deals are also known as “works-made-for-hire”, according to Copyright Law. In other words, the Artist would be considered the legal owner and author of the beat.

In the beat leasing community you might find some producers selling exclusive ownership... but it is largely considered wrong, unethical and in most cases does not comply with Copyright Law.

(see this document for more info - https://www.copyright.gov/circs/circ09.pdf)


9. Royalties: Writer's Share, Publishing and Master

This is the part of the music industry that you REALLY need to know. It goes a lot deeper into a rabbit hole than I can explain to you here, so if you have any other questions (which you undoubtedly will), just hit up your lawyer and have a conversation.

The rest of the music industry varies in terms of royalty collection so I am going to break this down only as it pertains to internet beat leasing.

To start, I am going to clear something up that a lot of Artists tend to misunderstand.

In the official eyes of Copyright Law and royalty collection:

  • The producer is considered a “songwriter”.

  • The Artist is considered a “songwriter”.

Notice they are the same.

There are too many artists out here who think that the producer doesn't qualify as a songwriter because they didn't write or perform any lyrics, or in other words they only made the beat so that means they aren't a songwriter. This is wrong.

Every song has two copyrights: The underlying composition, and the master sound recording.

The underlying composition is the original 'idea' of the song or beat, manifested in some kind of tangible form. That could be the melodies and/or lyrics written out on paper, or a simple recorded draft or demo you did with your phone.

The master sound recording is any recorded “mastered” version of the composition. In other words, it refers to a specific recording of an underlying composition for commercial release.

There is only ever ONE underlying composition for a song, but there can be MULTIPLE master sound recordings. (For example: live performances, alternate takes, covers by other artists/bands)

When you lease a beat online, write your lyrics and record them... you and the producer are BOTH considered songwriters of that New Song. You are a songwriter because you wrote the lyrics, and the producer is a songwriter because they wrote the music.

The lyrics you write and the music (the beat) are both part of the underlying composition. The final high quality, professionally mastered stereo audio file of the New Song that is ready to be released, is the master sound recording.

**You still with me?? I know it's confusing. It's about to get more complicated though. Over time I promise you will come to understand it more effectively. Let's continue!**

There are two types of royalties you can collect from the underlying composition and the master recording – Mechanicals and Performance

Mechanical royalties are generated by the physical and digital reproduction or distribution of the music. This applies to hard copy sales of CDs, cassettes, vinyl etc., digital sales from iTunes, Amazon, or other online music retailers, and finally small portion from on-demand digital streaming. In terms of sales, whenever you sell your song for download on iTunes or other retailers, you earn a mechanical royalty in addition to the retail sales price.

Performance royalties are generated when the music is performed publicly. A public performance of the music can be anything from radio broadcast, tv/film, live concert performances, to on-demand and non-interactive digital streaming.


***Note:

Non-interactive streaming – The user does not actively choose the song. (Pandora, Terrestrial AM/FM radio etc.)

On-demand streaming – The user has full control over which song they w