How to Avoid a Clearance Catastrophe: Building Options into Your Agreement 287 words · 2 minute read

While it’s important to determine your budget and your ad specs before you try to license a song, those components could change over time. Therefore, it can be a good idea to negotiate options into your licensing agreement at the outset.

The benefits:

So, you’ve decided on the song you want, but can only afford to license the song for use in North America for six weeks. Let’s say the ad’s a hit, the brand’s base sales skyrocket, and consumers rave about the song – how do you say goodbye to that successful spot after six short weeks? What if you want to extend your campaign and air your commercial internationally?

This is where building options into your contract upfront can be a smart strategy. If you decided to take your ad worldwide and had pre-negotiated a worldwide option into the license, all you would need to do is send the rights holders a check for that predetermined amount.

Although options may make expanding your rights sound like a piece of cake, remember: you can’t have your cake and eat it, too.

Options can’t usually be modified after the contract is signed, so you’re locked into a set of terms and prices before knowing what your future budget is going to look like. If after those first six weeks the song has garnered significant social traction, but the budget ran out quickly, you can’t likely return to the rights holder and renegotiate a lower price for an extended license. You probably would have to forego the option altogether.

Options can be helpful, but they might also be fruitless, so make sure you plan them carefully.

Next tip coming soon!

By: Bridget Perdomo & Alex Holder, Music Dealers