How to License Content from Entertainment and Media Companies for Technology Start-ups

Unless you’ve been living in a cave, it’s hard to miss the fact that everything media and entertainment is going digital. Fueling this evolution are many start-ups aiming to build game changing applications and services to experience, sell, promote, distribute, interact and monetize this content. In order to make their dreams come true, each company needs to have the rights to use the content. But getting a digital media license deal done nowadays is increasingly difficult. Here are some suggestions and tips for making the right moves.

1. Rights? What Rights?

Determining if your use requires a license is pretty simple – aside from an editorial endeavor like a music or film magazine or blog, if you don’t own the content you are using in your application or service, then you need a license from the owner of the content.

The media and entertainment business is a maze of rights – Many media assets are jointly ‘owned’ or ‘controlled’ my multiple parties. In other cases certain rights are represented by central clearing agencies like ASCAP or SoundExchange.

In most cases however, getting licenses for specific technology based uses is a tedious one at a time process. For example, to use music, clearing just one song could require a minimum of three of more agreements to be negotiated and agreed to.

2. Use and Business Model

It’s incredibly important to be clear what the use of the content will be. Each proposed usage needs to be explained in detail and the associated rights negotiated and agreed upon by each rights holder.

For instance, is the content the primary offering of the service, like Rhapsody (online radio, music downloads) or Amazon Unbox (film and TV show downloads)? Or is it a usage that enhances the product or service like adding music to online scrapbooks or slide shows? Or is the proposed use for a product that has never existed before (like ringtones just 5 years ago).

The business model is also key to the rights being negotiated. Does the consumer pay by the single download, the bundle or by subscription? In the subscription model does the consumer get credits that expire during a certain period, do they roll over or is the subscription for unlimited access during a time period? Each business model choice has implications to the media company with respect to their rights, internal operations and accounting processes and could have an impact on the deal structure or costs.

3. Licensing Strategy

In getting licenses there are multiple avenues to take. For example, in licensing music you can approach the music artist’s manager, agent, lawyer or recording label. For rights to an actor’s voice and likeness, you can talk to the actor’s agent, manager or lawyer. The avenue to take depends on the proposed usage, the rights owned and relationships.

The entertainment business has always been one of insular relationships. It is important to have someone on your team that has prior experience approaching media and entertainment companies and cutting deals. If you can’t find someone with the skills to join you full time, it pays to bring in a consultant who can help position the company and make introductions to the right people. It can take months to get people to return your calls and emails if they don’t know you.

4. Making the Pitch

Having a focused face to face meeting with the ability to solicit specific feedback beats sending a presentation any day. The second choice is web based demo where you can control the delivery of information through a web presentation. If an in person or online meeting is not possible, when sending a presentation, pare it down to the absolute essential information in order to get the point across. Request a follow-up call or in person meeting to discuss further.

Be patient and accommodating regarding response times. At any one time at each major media company there can be 100s of digital media deals in process, being renegotiated or reviewed. So the process of getting a deal closed can take anywhere from a minimum of three months to 6+ months. You must have patience.

The ranks of the business development and legal groups for these media companies have grown through the years but are still not equipped to handle the volume of requests. For start-ups, unless you are offering a substantial advance/guarantee for the license, the media company will slow the process down as it wants to make sure you will be around to complete the terms of the deal.

5. Closing the Deal

It seems to me in the past few years, that a lot of what gets handled on a daily basis in a major media company’s business development office is the case of the tail wagging the dog. Urgency drives priority and gets resources. As much as you may have your schedule for releasing your application, software or service, its priority pales in comparison to those of the media company. Again patience is the key - maintaining a respectful tone and dogged determination will get your deal through eventually.

Be prepared to have an attorney well versed in entertainment and technology review the agreement for you. Many of the requested obligations may have broader legal implications resulting in changes to end user agreements or terms and conditions. The media companies check up on these elements of the deal and it’s better to be prepared than have to respond to a breach of agreement letter.

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Hopefully, now you have a better understanding of the challenges, pitfalls and tactics that can help you achieve your content relationship goals. Making the right decisions in the process of launching the next great tech driven entertainment product, service, application is very important and there are a lot of things to look out for and be aware of so you can manage your and your investor’s expectations. Move with patience and a healthy respect for the process and you’ll fare much better.