If you’ve read O is for Option, you’ll know that the licence Term (also see T is for Term) can be extended for an agreed fee PROVIDED THAT this is pre-agreed in the licence and that the option is exercised in writing by a given date.
A typical sync licence might be for a 1-year term. At the time the licence starts, the brand doesn’t know how successful the campaign might be, so they don’t know if it will continue beyond the first year. However, if they don’t want to be exposed to massive fee in a on in year 2, they should build an option into the deal to extend the term.
What Is Uplift?
Most UK music rights will agree to build options for a 2nd & 3rd Term (provided all details of Context, Media & Territory remain consistent) for the fee of the previous term plus 10%. This is called a 10% uplift.
So, if Year 1 costs £10,000, Year 2 costs £11,000 and Year 3 costs £12,100
Some US rights owners will push for 15% or even 20% uplifts, but via negotation this will usually fall to 10%.
Generally, the option to extend the Term has to be served in writing before the expiry of the Term, though sometimes rights owners will insist that it’s served 30, 45, 60 or even 90 days in advance of the expiry. They do this to force brands to commit sooner than they might want to and/or because they hope the brand will miss the option date.
The lesson for brands and agencies is this:
Always build options to extend the term into your deal, even if you think you won’t need them. Options cost you nothing until they’re exercised but they allow you to future-proof costs. However, if you miss the option date, expect no mercy. You’ll be penalised on fees and pay far more that a 10% uplift.