UPDATE: This is the most popular blog post on here. It's been re-posted and linked in a bunch of different places and I'm grateful for all the interest it has generated. As this was written in 2009, it's important to keep in mind what may have changed since then. While the technical information is still more or less accurate, there are probably a lot of legal and other changes to keep track of. As we all know, the entire industry has changed a lot even within the past few years, but I hope the overall game plan broken down here still serves a useful purpose for all the independent producers out there.
Like all good advice I give to others, I rarely follow my own advice. I still have not officially launched my own production business, and at the moment I don't have any plans to, however that may change in the future. The collective I mention in the article actually got back together and is now stronger than ever.
INTRODUCTIONThis article has been a long time coming. In an attempt to enlighten my fellow beatmakers, and also to solidify my own knowledge regarding the business of selling beats, I have decided to write this guide, which by no means will be exhaustive. In this guide I hope to shatter the language barriers, both technically as well as legally, that serve to confuse and frustrate producers who would rather not have anything to do with the legal and "official" aspects of selling beats. I will explain why these elements are important to know, and how the complexity that masks them in reality is really just a lot of smoke and mirrors. My goal in writing this is to be as blunt and honest as possible, to dispel as many myths as I can, and to provide a framework with which to help other beatmakers get an idea on how to handle their business affairs, in as straightforward a manner as i can.
A lot of what I plan to cover in this article I am personally not finding anywhere else on the web, or at least not all-together in a coherent step-by-step approach, so I hope to do away with much of the confusion that plagues this subject, especially for newer producers or producers who have been around the block for a minuet and now want to get into the business elements. I'm going to try to make this guide as succinct as possible (although I suspect it will be rather winded in some areas), while taking into account that "common knowledge" varies wildly. I have found that a mutual platform of communication remains especially difficult to reach between producers and emcees, and oftentimes even between producers and other producers. Part of the goal of the legal end of the business is to clarify mutually understood terms. Indeed, there is little room for error when properly negotiating business deals. Both parties of a transaction must have a shared common understanding of the terms of arrangement between them. But I digress.
Making money as a producer has a lot of benefits in that you are not obligated to deal with half of the responsibilities and tasks that artists and groups must make a priority of theirs. You don't have to deal with label politics, generally speaking you won't have to go through a manager or third-party publishing agent, etc. You can be a free agent yourself getting paid for providing an artistic service on your own terms, which is a beautiful thing. The business of beat-selling has experienced a tremendous growth in the past 6 years, and with more rappers and groups today than ever before, this trend is sure to continue within the foreseeable future. Finding your place within it begins by finding your place in general, right now..
FINDING A STARTING POINTOK, so you want to make beats and you want to get paid for doing so. Perhaps you want to carve out a reputation for yourself and maybe even supplement your living income by making tracks for respected and semi-well-known emcees. I cannot guarantee that you will become the next [INSERT HOT SHIT PRODUCER], but what I can guarantee is that if you have the drive, determination, dedication, and will to make things happen, you will reach some degree of success both financially and in reputation. The Internet of course is assumed in this guide to be the primary medium as a global marketplace for your services, which is not to discount the possibility of hooking up with local clientele, getting into vocal recording (if you haven't done so), and perfecting your understanding of mixing and mastering. These last two occupations IMHO are absolutely essential if you want to increase your chances of landing album placement and producing quality beats, let alone actually being able to work with artists in your local area should the opportunity arise.
Finding your starting point begins by recognizing who you are as a producer. What exactly is it that you do? How long have you been producing? What's your experience? What level do you see yourself at currently? Are you even ready to begin promoting your beats to the online marketplace? What is your work ethic like? How much time are you willing/able to devote to your craft? The very first thing you should do is take a deep hard look at yourself and ask these and other questions. Look at your situation and perform what in business is known as a S.W.O.T. Analysis. This is where you go through the process of asking yourself what your Strengths, Weaknesses, Opportunities, and Threats are. What are your overall objectives? Obviously, you want to make a name for yourself, get your music out there to be heard, and keep doing what you love, which is making beats. How are you going to make that happen?
Sometimes needlessly restating the obvious helps to clarify something you may have missed. If you have experience producing music, how much and of what kind? Have you ever worked with an artist or a group? Have you ever DJ-ed before? Do you come from a turntablism background or are you just now messing around with a downloaded copy of Reason because your homie said it's better than Fruity Loops? Do you understand song structure and how to set up a microphone, record, and mix vocals? It may seem like I'm beating around the bush here because, let's face it: you just want to make beats. However, I think it's very relevant and important as a producer to fully understand all aspects of how songs are made, not just beats. Your instrumental is the backbone for something great, and sometimes without the proper knowledge you may find yourself at a loss when sudden opportunity beckons. So, it's important to gain as much insight as you can for every aspect of your product. It's also cost-efficient.
I began making beats as part of a hip-hop collective that basically fell apart. It was after this group folded that I realized I wanted to continue making beats. It was through my own ingenuity that I was able to make this happen, and now with about 7 years of experience I feel I'm ready to begin a business with this craft. One of the things I learned early on in my Internet-record-label-living-in-mom's-basement years, was that the more you are able to accomplish yourself towards fulfilling your objectives, the less you find yourself having to rely on others. If you are putting out an album and you don't know anything about graphic design or Photoshop, guess what? You're going to have to go through someone else for your cover and artwork. If you are a rapper and you haven't been willing to spend that $150 you were gonna drop on a pair of Nikes you didn't even need on a microphone, and invest the time it takes to read a couple of Internet articles on how to do basic vocal recordings, guess what? You're going to have to go through an engineer who probably charges a minimum of $40/hour. This same lesson can be applied to producing tracks. If you want to drop a demo album or a mixtape to garner attention but you don't know how to mix properly, guess what? You're going to either have to go through a mix engineer, or you can teach yourself.
Traditionally, producers were the studio wizards and technical hands behind artists in a studio. They were the ones responsible for organizing songs from inception to completion, and facilitating the artistic process between the musicians, the recording engineers, and the mixing engineers. Very rarely were they the actual instrument players themselves. In hip-hop, the definition of a "producer" has somewhat changed quite dramatically. You will often come across discussions and arguments on Internet forums about how beatmakers and producers are different. A lot of this stems from the history of rap music itself, and how in early hip-hop culture the DJ was the proto-typical "producer" or "beatmaker." Today with DAWs, drum machines, samplers, sequencers, synthesizers, romplers, and so on, you will rarely come across the pure, traditional, hip-hop DJ & emcee anymore. The game has simply changed, and understanding your place in this rich history-in-the-making is vital to planning your future. This is part of the reason why I stress the importance of familiarizing yourself with all aspects of song-completion, even if the skills required for, say, recording an emcee, will rarely be needed, if even at all. You are making beats for rappers (or maybe perhaps R&B singers?), and someone who has either rapped him/herself or has spent time diligently working alongside rappers/vocal artists stands a far better chance at connecting with potential clients. You need to know what rappers, groups, and vocalists are looking for, because it's ultimately up to them if you sink or float. In the end, you might find yourself making tough decisions concerning what it is you actually really want to do with your skills. Maybe producing isn't for you, but engineering is? Maybe you might want to eventually get into post-production work for films, television commercials, or radio?
In any event, starting out as a beatmaker or beginning a career in it won't be easy, and it will take time away from all other aspects of your life outside of work/school/family responsibilities. Believe me, producing music and making beats has been the single greatest simultaneous curse and blessing I have had the privilege of enjoying in my short life. Common wisdom has it that it will take a certain amount of years to get anywhere in this business. Some cats get lucky and have such a wonderful natural talent or just really good connections that they are able to make 50k in a year within their first 36 months, the time it normally takes most people to wrap their minds around the ins and outs of recording and making electronic music in general. And of course, even a lot of well-known underground producers are still holding down "real jobs." The point is that no matter "where you are" right now, setting your sights realistically, employing small measurable steps, and aligning yourself with strategic partnerships will elevate you even further.
OK, I ALREADY KNEW THAT. NOW WHAT?The scams, quackery, charlatanism, and general misinformation out there on the web right now concerning beat-selling is atrocious. The information and services (meaning you give us $50-$200 to download our wack e-book/cd-rom/video library/website subscription only to find out there's no actual substance other than maybe a single paragraph of basic advice anybody could have told you) available online these days is similar to the new age/metaphysics section of your local bookstore: at least 90% of it is utter garbage. The truth is, most of these "sources of knowledge" will more or less simply tell you what you need to read up on. A lot of these services are comparatively "get rich quick" schemes and will more often than not totally waste the precious time you could be spending on making beats. Don't believe me, just picture yourself watching a few hours of this dude:
Now, I'm not trying to knock anybody's hustle here, but keep in mind that you are a producer trying to make money for yourself. Re-read that last sentence. No one is going to do it for you. Personally, I don't know if I would trust anyone who claims to "make $21,4988.60 selling beats online in one month!" Spotting these scams is easy. Facing the realization that you just wasted 4 hours sifting through them isn't. To inject some personal humility into this line of thinking, consider the fact that, so far, in about 7 years of producing beats, I have probably, honestly, and realistically only made somewhere in the range of $600. But then again, during this period I haven't been focused on making the business aspect of it a priority. If you're just starting to get to the point where you truly think you could be making some money off of your beats, the very first thing you should be considering is giving some beats out for free. This may sound very Tao and counter-intuitive. Allow me to explain..
It's 2009. There's more rappers today than there are FANS. With such an over-saturated marketplace, beatmakers are a dime-a-dozen. Good beatmakers are diamonds in the rough. The single most important thing you need to be focusing on is how to establish yourself as one of the latter. This is of course assuming that you make beats people are going to want to hear, and emcees are going to want to buy. Nobody but you can provide this. If you are just starting out scouting the marketplace and attempting to pick up interest/reputation, it makes perfect sense to look at free labor as a long-term investment. Producing promotional mixtapes for free download, collecting email addresses, turning fans into evangelicals, not marketing like an asshole, and doing random favors for random emcees should be high on your priority list. You want to give emcees incentive to even care about you. You want their fans to tell them about you. This cannot be done without hands-on promotional efforts. NEVER BURN BRIDGES. Hip-hop in 2009 is all about connections. The music business period is all about connections.
Now, there's a flip-side to this generosity: ALWAYS MAKE YOURSELF AVAILABLE, BUT DON'T TREAT EVERYONE EQUALLY. Justin at audible hype summed it up even better (paraphrased): "Be polite to everyone, but don't be nice to everyone." Learn the difference between who's out to take advantage of you and who you can form a positive symbiotic relationship with. You are limited by who you choose to work with. And this is true in many different respects. If you work exclusively with are cats who aren't serious about their own "careers" or just want free beats to rap over and bump in their cars to impress their friends with, you will find yourself running around in circles. There's a pecking order in the music business for a reason, and you are not doing anyone else, let alone yourself, a favor by not growing up to the next level when you have paid your proper dues. This is where professionalism comes in. Eventually after paying these dues and giving out free beats that quite possibly will never leave the hard drive of the person you gave them to, try to work with artists who work at least as hard as you do. This should be a firm goal of yours: connecting with artists who are as serious are you are. Find that one emcee who stands a good chance of making your beats actually matter in the "real world". Find an artist you can take a part in developing. Better yet, find a way to promote multiple artists of all stripes at the same time that you promote yourself as a producer. I myself am doing just that at the moment.
Again, to turn back around, this doesn't mean to be the jerk who only agrees with work with artists who have more than 8,000 Myspace views. When you can, go out of your way to help the new cat on the block who's just getting started with his/her career. Reach out. Make connections. Because down the road you may never know where that kind of selflessness and altruism may lead you.
MARKET, MARKET, PROMOTE, MARKETIt's difficult understate the importance of self-promotion. This alone truly deserves another article, but suffice it to say I cannot tell anyone else or you how to be fully creative when it comes to garnering demand for your services as a producer. You will need to see for yourself what works and what doesn't. You will need to do what everyone else is doing, and then go beyond that. Learn the rules enough so that you know how to properly break them. This is what true art is. Marketing and promotion are arts in themselves, and it's only through paying your dues, getting out there, learning new tricks, and being absolutely relentless that you will see any kind of positive change come from all your hard efforts. How you sell your beats should be seen as secondary to the idea that potential clients even know you exist. You will want to make a grand impression that forces people to remember you. The tactics to do that won't be covered in full here, only because it's not up to me to dictate other people's tastes, and goes well beyond the scope of this article. However, it's imperative as in any business to have a strong brand recognition associated with the impression you leave on others, which itself is associated with your services, skills, and abilities as a beat producer. Some excellent resources to help you get an idea of how to properly market yourself can be found at the end of this article. The obvious factors involved, of course, include setting up a strong Internet presence, whether you are trying to become a top producer on Rocbattle or choose not to peddle your wares through a third-party entity, developing your own website if possible, and finding your place within the social networking mishmash.
To take a left turn as an aside bit of wisdom, constantly experiment with your production. Take it to new levels (not just technically) and expand your style. Be willing to go out of your normal habits to try something new, even if it means producing a style of rap you may not particularly care for. You never know what may develop. Even though in this article my primary goal is to talk about how to sell beats, it makes sense to include this obvious area of growth potential. Sign up on some forums, talk with other producers, learn new techniques you may not have been aware of existing. Expand your capabilities. Join a beatmaker community. Try entering a battle. Contribute. While these things in themselves don't directly relate to lining your pockets, think of all these things and more as the small measurable steps that I mentioned at the outset of this article. Every small step you make should be recognized as a long term investment, especially when you (will) make mistakes. In any area of selling beats, from actually producing them to marketing to negotiating contracts and executing legal business deals (which I'm about to get to), it's important to realize that, as Howard Bloom would say, "No gene is an island." No machine works without inter-workings of inter-related and inter-connected parts. Continually replacing those parts with better quality ones to produce greater overall efficiency is key to making it somewhere.
TIME TO GET "PROFESSIONAL"OK, so is it time for you to start a legitimate business? How have you been selling your beats so far, if at all? If you have been selling some beats here and there, were they leased? Exclusive? Work-for-hire? Have you thought about potential royalties on semi-high-profile placement albums? Have you thought about landing your beats in commercials or film sound tracks to reap the benefits of synchronization income? Have you thought about getting your beats broadcast on the radio to reap the benefits of performance income? If you have sold beats in the past, who were they to? Who do you (realistically) see yourself producing for in the near-long term future? Are you selling 10 beats to 10 different emcees or are you doing an entire album for a single cat? If such an opportunity presented itself, would you be able to deal with the overflow? Have you considered how you would approach such a thing, not only from a business but also from a practical standpoint?
It might be a good idea to take stock of your potential clientele and to find ways in which you would be able to accommodate them based on their needs, as well as your abilities. If you were to go about producing an entire album for an artist or group, would mixing vocals and mastering completed songs be involved with your services? In general, do you have enough beats right now to begin selling? Will you be planning to produce more while selling what you have on hand? In the good fortune that demand actually exceeds supply, what kind of latency period are you looking at before you're able to get to other artists on your waiting list? Would they lose interest and say "forget it I'm going with producer B" before you would be able to get back to them? Have you thought about what you're charging for beats? Will you be offering multi-tracks with exclusive rights deals? Have you thought about offering bulk discounts? These are all important and annoying questions, and I'll be sure to ask some more:
If you have already sold a beat, lets say, to an emcee, what does that actually mean? How did you sell them the beat? Did you simply just toss them a "high quality mp3" of an unmixed instrumental or did you at least mix the beat properly and send them a wav file? Was it a high quality wav file or was it redbook? Do you know what redbook means? If it was redbook (44.1 kHz, 16 bit CD-quality standard format), did you remember to dither before downgrading? More important than any of the above questions, if you sold a beat as a single file, did you leave enough headroom for the vocals?. Did you send them a muli-track data dvd in the mail or by using a private delivery service, or did you just "email them the beat?" Did you include any sort of contract? Did you give them a receipt? Do you still "own" the beat you sold them?
There's very important reasons why I'm asking all these questions and trying to get you to ask yourself these questions. Mainly it has to do with quality and professionalism. First of all, if you aren't even aware of how to properly distribute a fully mixed instrumental to a paying customer, you should really take some time out to consider how it's done in pro studios/between well-known producers and their clientele. The reason I'm almost bitching here is because quality and professionalism will be very big determining factors in your business. It will be one of the main reasons why someone would even be willing to do business with you in the first place. Now, a lot of artists, rappers, and vocalists themselves are unaware of standard pro-audio etiquette. Some of them may be blessed with the good fortune of having their own recording and mix engineers. A lot of them will probably be doing that themselves. A large percentage of those doing it themselves don't know how to do it properly. This is all based on my experience and personal observations. Common sense would therefore dictate that if the rapper you sell an instrumental to is going to "eq the beat" or "compress dat shit," it only makes sense that what you send the artist is nothing less than the best possible quality. Put more bluntly, don't sell mp3s. It's tacky and unprofessional. You want to be taken seriously as a producer, and serious producers don't sell mp3s for artists to rap over. If you don't respect the quality of your own work, how can you possibly expect anyone else to? In my opinion, the mark of a good producer is being able to patiently sit through loading screens, knowing that the extra steps you take towards properly rendering your mixes will make the kind of difference that matters. If you still don't know what this means, I'll spell it out for you:
PROPERLY RENDERING TRACKSAssuming that you are bouncing your tracks from a DAW for multi-track mixing and rendering, let's say your mix/project file is originally recorded/set at 48 kHz and 32 bits. When you are satisfied that the mix is complete (make sure to leave ~ -3/-2.5dB headroom! Do not mix to unity gain!) , you will first need to perform a sample rate conversion down to 44.1 kHz. This will involve a filter on the last slot of your master fader. Your beat (or the all of the multi-tracks of your beat depending on what you're rendering (Keep in mind this might not even be necessary if you are selling your client the hq track(s)) at this point should be 32 bits, 44.1 kHz. Now what you need to do is dither your new track to 16 bits. This will require a dithering algorithm. This whole process should comprise two separate project files and two separate renders, one for the mix, and one for the "master," which would be the dithering stage in this case. At that point of the rendering process you could apply some very basic mastering techniques, such as multi-band compression, etc., but in general, you leave this up to the artist's mastering engineer who will be working with the completed song, including the vocal tracks. It's very important that you sample rate convert before dithering. At this point you should have a redbook format wav file, which you can then convert to an mp3, which you should always include (along with either the hq/redbook track(s)) with your distribution package. An mp3 serves the purpose of giving the emcee something to write to, put into their i-pod, etc. It should not be the track they record over. Oftentimes when producers sell beats they will include the entire Pro Tools/Cubase project file/folder for recording and mixing at a professional studio. You should make sure what the client needs are and what your contract with him/her states before figuring out which method of distribution will work the best.
Now, in terms of the correct way to sell a beat, you need to consider first of all how you're going to set up your contractual terms, your entity as a recognized business, and have a solid professional game plan ready. It's time to get boring and technical..
TIME TO OFFICIALIZEEven after studying licensing methods in depth, intellectual property rights, copyright, trademarks, royalties, registering with performing rights organizations, the difference between "sound recording" rights and "performing arts" rights, mechanical income, performance income, synchronization income, etc., it's still a really complicated subject for me to even approach. One of the main reasons I wanted to write this guide in the first place was to exorcise this confusion from my brain, and hopefully to help others do the same. I should state here, as a disclaimer, that I am not a lawyer, and that the pointers given here should in no way be construed as any kind of sound legal advice. There can be no good substitute for a qualified entertainment attorney, and sometimes a producers livelihood may even depend on one.
In preparing to write this article I reread Michael Aczon's The Professional Musician's Legal Companion, a superb introductory overview book for understanding the legal aspects involved with the music business. I had the good fortune of taking a class that Aczon taught, and as someone who had absolutely no clue about how it all worked, I was very lucky to learn from a professional who understands so much about the business and has a passion to match this understanding. At the time I took the class, the expectations I had set out for myself were somewhat more ambitious than merely selling beats. This was during the tail-end of my "wanting to start a record label and take over the world" phase, so I approached the lessons of this course from the perspective of a "band manager" more-so than from the point of view of a "songwriter." Once I had the basics of intellectual property rights and licensing down, it was actually very easy to see how the business of selling music and getting paid is structured. In the end, it really is a very simple process (just like a lot of things), masked by a whole lot of (sometimes needless) complexity (just like a lot of things). Much of the justifiable frustration felt by producers when confronted by this seemingly impenetrable wall of business and legal implications and third-parties and corporate bureaucracy can be aptly demonstrated in the story below:
"The other day, I had to go see an Entertainment Attorney about getting my paperwork together. The app was at 9am. I walk through the doors and see all these uppity niggums in tailored suites walking with their chests out and noses 90 degrees in the air. I'm dressed in Jeans, Adidas top tens, and a t-shirt that I slept in the night before. (I did wash-up real quick and chewed a stick of gum before I got there though.. so I was presentable! haha). This Attorney represented Dilla back in the day, really pretty lady, spoke in a really soft tone, and charged me $55 for 30 minutes of conversation. Basically, it went like this; "Wheres' your logo, copyrights, paperwork, contract agreements..ohh, you don't have this in order? What you want me to do for you? Come back when your ready, and ohh, don't forget my cheese negroid..I wants my doe!"
So I left there with my tail tucked between my legs, and I started to think, "Damn, this music schyt is completely out of control!" I make beats.. this is Hip-Hop music..Why does Two turntables and a microphone require legal representation?? ASCAP/BMI is nothing more than a way for the government to monitor THEIR money. Bar Codes is nothing more than a system for the government to get THEIR money. Legal representation is just a way for Attorneys and lawers to get their bread to "protect" us. Who makes up these copyright laws?? It's not the musicians.. I don't know anyone that plays drums that knows people in congress. laws claim to protect the people, but who really benefits? Is it all really necessary, or should we just be like "funk-it" to the system and just do our own thing? No ones buying music anyways nowadays, so if someone samples my music, and no one buys theirs, WTF do we need protection from? I can understand Registering it, this way, if someone sells a couple million, you can sue, but all this other stuff is ridiculous. Basically, to get into the business system of this music game, you have to buy your way into it. This attorney, knows this person, and he knows someone else, and they know someone else, but guess what, they each require a fee for their services. It's some bullschyt, but they make it necessary bullschyt. The system is a mothafunker. Don't want to get involved? then you'll forever be in the basement/bedroom making hotness to post on myspace."
Indeed. Posting hotness of Myspace forever probably won't get you anywhere, which is why it's important (although initially frustrating and oftentimes discouraging) to learn as much as you can about the legal end of the music business before you get burned, which is an unfortunate but very real possibility of selling beats. In a lot of ways, selling beats amounts to being somewhat of a greed game, just like the music business in general. I don't feel this is due necessarily to the business itself, per se, but definitely many artists have had to go through living hell either through an accidental fault of their own or from someone else jacking them or even just having the same business entity name as them. When I first conceived of selling beats based on some minor demand from local affiliates and personal acquaintances, it seemed simple enough: they send the money to my Paypal account, I send them the beat. Actually, this is more or less how it's done. Where it gets tricky is when you get into the concepts of ownership and intellectual property rights. I come from a non-business perspective. I don't believe in "licensing" art, and it took me quite some time to understand why things are the way they are, and why it's important to both "protect" your work and benefit from it. For example (to explain my initial confusion), it makes no sense at all to paint a portrait, sell it for an agreed upon price, and then fret over where and how it's being used, who is seeing it, and whether or not money is being made off of it (for example, charging admission to an art gallery). After all, you sacrificed your "ownership" when selling that painting. The difference is that in the digital world, where everything is infinitely replicable, and money from different sources flows in and out of hands than aren't yours, you could find yourself undercutting your own resources (namely labor, reputation, etc.) if you aren't aware of your rights as the original creator. You could also be missing out on some serious dough. It gets even stranger when you include the fact that your work of art by be sampled from someone else's work of art. Should they get a cut of the profit made by you or someone using your beat? How would you feel if you made an original composition that barely saw the light of day and then, years later, you hear some rapper spitting vocals over an edited version of your work? Would you expect to see some money from that? These are some of the questions and reasons why learning the legal aspects of the beat trade is vital to officially establishing yourself.
LET'S BEGINAny creative endeavor that starts in your brain and ends up established/fixed within/on a tangible medium is copyrighted to you, automatically. This is one of the most frequently misunderstood concepts of modern intellectual property right laws. I often hear beatmakers saying "you gotta copyright your beat, dawg." What they actually mean is that you should consider registering your work through the Copyright Office. Your work is already, automatically, prima facie, copyrighted to you and to you alone, assuming it's an original work, for 70+ years past your death, at which point it becomes "public domain." For example, if you are writing a poem on a notepad, the moment your pen leaves the paper, your poem is copyrighted to you. Congratulations. As the owner of this copyright, you and you alone have the sole, legal ability to exercise the rights that are entitled to this ownership. These rights include the exclusive ability to sell, to make copies, to make changes (known as derivative works), to perform, display, to publish, to make recordings, and to digitally transmit. You also have the right to transfer this ownership.
In the music business, there are two copyrights that you will be concerned with: Sound Recording (SR) copyrights and Performing Arts (PA) copyrights. Sound Recording copyrights, as the name implies, deals with the record business, whereas Performing Arts copyrights deal with the music publishing business (for example the rights attributed to original lyrics, and, as you will see, the rights associated with public and commercial performance of your works). Both copyrights help to protect original songs, works, and lyrics associated with the recording and publishing industries, which make up a large part of the "music business." Music copyrights generate income ("royalities") from various sources, but chief among them are mechanical (CDs, tapes, etc.), performance (live performance, music used for a commercial venture, broadcast radio, etc.) synchronization (for use in combination with audiovisual projects), and print (sheet music, song book publishing). Each of these four sources of revenue all have something to do with the technologies of distribution. For example, mechanical royalties, originally derived from player piano rolls, are designed to compensate artists from the profits attained by CD sales. Anything that requires moving parts (or is mechanical in nature) to play back copyrighted music (ringtones, tape recordings, dvd's, digital downloads, etc.) is eligible for mechanical royalties (although so-called "digital royalties" are beginning to take on some of these aspects). The way in which these royalties are paid is through an established royalty rate which is normally divided half and half between the songwriter (creator) and publisher (rights owner) amounting to about 10-20% of the suggested retail price of a CD/album. The compulsory rates change semi-annually but it's generally (these days) somewhere around 8 cents per song of recorded audio for a song of five minutes or less, and up to $1.75 per song exceeding 5 minutes. For CDs/albums sold, record companies will pay the songwriter/recording artist up to 75% of this rate for a maximum of 10 songs. In the United States (foreign mechanical rates and conventions are normally agreed upon somewhat differently), the Harry Fox Agency is the dominant entity responsible for distributing these mechanical licenses on behalf of copyright owners. Basically, unless you, yourself, are planning on putting out CDs/albums/ringtones for a song/etc., mechanical royalties will be considered after the fact of selling a beat to a client. Put more simply, these are issues that you won't have to deal with immediately/directly if you are prescient enough include these provisions into your contract with an artist/group you produce for. This is very important and I'll get back to it a bit later..
Performance royalties, on the other hand, you will want to be concerned with from the get-go, especially if an artist you sell a beat to stands a good chance of making it to the radio. More specifically, you will want to be concerned with small performance rights, which includes radio, television, music playing in retail stores, clubs, and live events. Essentially, if your music is somehow or other performed in public (live performance) or used within the context of a commercial endeavor, you can make royalties from that. These kinds of royalties in the United States are paid out by one of the three major Performing Rights Organizations (PROs), which are ASCAP (American Society of Composers, Authors, and Publishers), BMI (Broadcast Music Inc.), and SESAC (Society of European Stage Authors & Composers). You will want to affiliate yourself with one (it can only be one), and in my opinion you will want to register as both a writer and as a publisher, since you are (presumably) self-managing both responsibilities (self-publishing) connected with the commercial dissemination of your copyrights. Currently, ASCAP charges around $25/membership registration and does not require a business entity for publishing, while BMI charges nothing to register as a songwriter, but $250 to register as an established business entity for publishing. SESAC I wouldn't even bother with because they're a more inclusive-based entity that operates like a secret club. To sign up all you need to have ready is your social security #, business entity name ("So-and-so Beats") for publishing, taxpayer ID #, and basic personal information like that. At this point you can build a database of your collected works and have them listed as such, free of any further charges. I should reiterate that Performing Rights Organizations do not pay out on behalf of the amount of albums a particular rapper using your beat(s) sells. This is important to understand, because you may be asking yourself why you should even bother with a PRO in the first place, especially if you're not planning on making it past the guarded gates to the citadels of Viacom and Clear Channel. Two reasons, I believe, can answer this question. First of all, think of it as a form of protection. Just as registering your works (which I'm about to get to) through the Copyright Office or similar agency can provide indisputable proof of original creation information and ownership of exclusive rights, so too can registering your works through a PRO. The two compliment each other and usually hold up in court better than either would on its own. To put it another way, it serves the purpose of reiterating your copyright should someone jack one of your beats and try to pass it off as theirs. At the same time, having your works registered through a PRO can result in financial compensation should any of your works be picked up for use in some of the above examples. The other reason why it's a good thing to affiliate yourself with a PRO is that it adds a helpful "aura of professionalism" to your operation. I don't know why, but "the music business" will flat out just take you that much more seriously. It's a "save face" type of thing. Independent labels, other artists, and potential clients in general who are actually selling records and dealing with the types of entities that are concerned with supporting artists through performance and other forms of licensing will also tend to take you more seriously. It allows you become part of an unofficially unacknowledged "professional network."
REGISTERING YOUR WORKSASCAP and BMI basically do the exact same thing, but there are significant differences between the contract commitments associated with them. I'm personally choosing to affiliate myself with ASCAP, but that certainly does not mean that ASCAP is better than BMI. You should definitely check both out and decide for yourself which one seems better to you. As far as registering your works through the Copyright Office goes (which you will want to consider doing first), it's actually more simple (albeit more expensive) than signing up to be a PRO affiliate. It also guarantees basic protection of your works. Remember, you already own the copyright for your work. Think of the Copyright Office as a public notary. They are there to prove this ownership should it need to be challenged at some future point in time. The cost as of August 1st, 2009 for electronically (cheapest way to go) registering a PA or SR basic claim copyright is $35 (http://www.copyright.gov/register), with the option of being able to file for multiple published works under the same publication #, date, and author. Although you can file for multiple works at the same time (referred to as a "collection"), having a separate copyright for every beat you intend to sale is oftentimes recommended as being the safest way to go. Confusion can arise when different beats belonging to the same copyright claim conflict with other factors.
There is, however, a cheaper alternative known as the poor man's copyright. I should make very clear that, by itself, a poor man's copyright is essentially useless to prove ownership of a beat. However, when combined with a PRO registration of the same work, the cumulative effect should be strong enough to hold up in court. To me this seems like a cost-efficient way to go, especially if you are intending to sell a large volume of beats to many different clients. It should go without saying that you are going to want to keep track of where your beats are going and if, in the future, it is possible to claim due royalties from a record company or from your performing rights organization. Basically, the way poor man's copyright works is that you send yourself (through the postal service) a copy of the work(s), specifically multi-tracks/original project file(s), and keep this copy with your records should you need to present it as evidence of a prior date of creation/establishment in a legal dispute. There is also another (free) service that can be utilized to protect your copyrights: http://myfreecopyright.com. In my case, I am choosing to go with a combination of the free copyright service and ASCAP. Basically, the overall idea is that, should you be in the unfortunate and difficult position of having to claim your original creation in the event that someone steals a beat/uses it without your permission and makes a lot of money off of it, or a client reneges on a contract, you are standing on firm ground and are able to prove beyond a shadow of a doubt that you made the beat on such-and-such a date and sold it to so-and-so within the guidelines of a specific legal agreement (contract).
SYNCHRONIZATION INCOMEAny time there is sound accompanying a motion picture or other audiovisual work (dvd, commercial, television show, soundtrack, etc.), royalties are paid to the songwriters/publishers for the synchronization rights to use that audio. The terms for this are based on industry conventions and can include such configurations as a flat-fee, per-instance basis, etc. There are even libraries which you can license your music to, who pay you for submitting tracks that film makers and post-production people pay the services to have access to for use in their projects. Synchronization income is a much slept on form of royalty payments, because having a beat you made used for a commercial or television spot automatically includes performing rights income as well.
SAMPLINGAt this point I am guessing that you are wondering what the deal is with sampling, and how to get away with it. It's no secret. A lot of well-known producers sample. Sometimes they take more than just merely a 4 bar loop here, a riff there, and it still seems as if they get away with it. Technically, it's illegal to copyright someone else's work, meaning that the original rights holder(s) to a song you sample from stands a definite chance of seeking legal motions against you, if you are found out about. Basically, in order to be technically guilty of copyright infringement, the alleged infringing work must sound substantially similar to the original work, and the alleged infringing party must have been able to have had access to the original work. Hilariously, this last requirement is the main reason why record companies, labels, and rap star managers make it a policy of theirs to disregard unsolicited demos. In order to successfully (though not my any means a guarantee) get away with it, you either need to be well under the radar, or as the logic goes, learn how to make your sampled works non-obvious. A lot of beatmakers assume that if you go for a record who's artist(s) died years ago, and who's record label has ceased to exist since 1979, there's nothing to worry about. Not true. The rights holder(s) to that very record (including both sound recording and publishing rights), or the record company itself sometimes, could very well be currently handled by a major corporation (usually through subsidiaries), such as Universal, Sony BMG, EMI, or Warner Music Group. There are people at these corporations who are actually paid to sift through stacks of hip-hop CD's all day looking for a potential lawsuit that might make some money for the company. It goes without saying that we live in a litigious society, and mega-corporations under the rule of capitalism are seeking to maximize their profits ("protect their interests") in whatever ways possible. And in a sense you can't blame them.
Sampling has become a huge industry unto itself, which is why most high-profile artists today, via their managers, lawyers, publishers, etc., go through the process of clearing samples, which simply means negotiating with the rights holder(s). If you were to go about clearing a sample, you would need to go through both channels of music business copyrights: sound recording and performance arts. Remember, these are two separate forms of copyrighting the same song. Whoever has the sound recording rights of the song you are sampling from might not necessarily be (and most often isn't) the same person/entity who has the performing rights. As far as "being under the radar" goes, it should be comforting to know that, while it is possible to get sued over a project you're not even selling, the way in which these cases are structured are such that the record companies intend to make money from them. This means that, in general, the tendency is to pay the most attention to those making the most money. Again, I will not pretend to argue for or against sampling, in whatever form it takes. the point is that if you do decide to sample and are blatantly obvious about it in your derivative works, you should be well-aware of the risks that go along with it, and adjust your business practices accordingly.
BUSINESS FORMATIONBefore I get into the wonderful world of business contracts, I should take some time out to explain why forming a business "officially" might be a good move for you to consider taking. First of all, you will want to trademark your name if you plan on making money; Especially if you plan to reach the kind of success that puts your name on the back of CDs that are actually sold in stores and available through "officially recognized" sources. Say you want to call yourself "ILL STYLE PRODUCTIONS." Word. You neglect to do a simple myspace search, let alone an actual TESS database search to see if someone else is already using that name, and making money doing it. What will happen if you start making some noise? Chances are, actually, nothing. No joke. But what do you think Babygrande would do if all of a sudden you decided to start a rap group called "Jedi Mind Tricks," and within a couple of years you're up on I-tunes, doing shows, and making money? Chances are, you will receive a nasty (but not unjustified) cease and desist letter demanding you to stop selling and performing under that name. Now, you just wasted two years confusing your fans when all of a sudden you have to change your name and probably spend a good amount of money in the process of doing so. Obviously that's an exaggerated example that probably wouldn't happen in real life but I think you get the basic idea. The reasons for trade-marking your name/business entity are simple. Modern-day trademarks have their origins in cattle branding. You've got 3 or more cattle rustlers occupying the same basic area. How do you know who's are who's? In the music world, trademarks serve the purposes of identifying intellectual property rights, identifying the source they originate from, and distinguishing between entities offering the same service or type of product. I should mention really quickly that when you do go to register a trademark (click to start burning your retinas), it will actually be considered a service mark in your case, since (I'm assuming), your main commodity will be performing a service, rather than selling physical objects. Now, registering through the United States Patent and Trademark Office is expensive and a downright bureaucratic nightmare compared with state-level registrations, but it's also an unfortunate necessity, since you are inevitably involved with inter-state commerce. The fee runs about $325 + renewable fees every 10 years. It should take you about 5 days to read all the fine print and to make sure your registration is impeccable, which it must be, before sending. Again, this headache ultimately serves as a form of protection. Having to re-arrange your hard-earned SEO configuration would seem like a nightmare scenario, but if you like to send threatening litigious letters to 17 year old kids, you could look at this as a form of demented pleasure.
Setting up a business requires figuring out what kinds of legal protection you want to establish for yourself. Is your house and your car and all your musical gear going to be considered "company property" should you be involved in a lawsuit you don't have the money to pay for? If this was to be the case, do you have adequate insurance coverage? Aside from this bumming scenario being a distinct possibility, you need to ponder in general where you see yourself going in terms of making money and expanding. Obviously, you are technically a "home business" freelancer, and making money as a freelancer doesn't require much more than what you've already got going on or plan to do, which is selling beats at a somewhat small-scale level. The most basic (and actually, probably your current "default state") type of business formation in this case then is referred to as a sole-proprietorship. You reap all the benefits, you deal with all the risks. Your personal assets are your business assets. If this is the case and you're good with it, no legal formalities need apply. If, however, you want to be listed as a business and have your fictitious business name printed on your checks (as well as achieve the "official credibility status"), you need to go through your county clerk, fill out a DBA ("doing business as") form, perhaps pay a nominal fee, and boom. You're now "officially" a "legitimate" business and you need to report profits and losses under Section C of your income tax returns lest the IRS finds you. The next step up from a sole proprietorship is a limited liability company (LLC), generally deemed the "best" way to go for most small businesses. LLC's effectively put up a wall between your private and business assets, and for this reason, your entire livelihood (real property, personal property, etc.) would not be at stake if you were to defend yourself against legal action. Basically, forming an LLC requires you to go through your state secretary and fill out the proper forms, most notably an "articles of organization" form, as well as an "operating agreement," etc. Most of it is a fairly straight-forward homework assignment and will set you back between $100-$800 in filing fees depending on your state (but usually under $500). There are also a number of state-by-state legal services available to help you for a nominal fee as well. Once you have set up a formation you can open a business account at your bank to have checks payable to "NAME PRODUCTIONS, LLC." It looks professional, even if you're not making money. People will also tend to "take you more seriously" if your fictitious business name is "registered." Fortunately for rap producers, city business licenses, as far as I can tell, are not necessary to obtain. However, you might still want to visit the websites of your local city as well as state level governments to make sure you're set. Once you do start making money, you will be required to declare profits and losses under Section C of your 1040 income tax return (same as with a sole proprietorship, using your social security number instead of an employee identification number since you have no employees). Anyway, once you get this out of the way you're ready to start sellin' some beats, but first it's good to have your contracts ready..
DRAFTING CONTRACTSA solid contractual agreement with a client is perhaps the most important legal and business necessity there is to selling beats. What recording and publishing rights ownership remains for you as the producer, how the beat is to be used for profit, whether production credits on an album released in stores should be included, etc., are all things that contracts specify. Before you sell a beat, it's important to understand how you're selling a beat. Are you giving up ownership of all copyrights? Does the purchaser have the right to re-sell the beat or claim it as theirs? If the beat is made into a song and the album sold in stores, would you wax pissed if "SO AND SO PRODUCTIONS" took the credit for the beat you made and stole your thunder? Are you going to be sued if you sell a sampled beat to an artist who then goes onto making it into a hit? Again, as with sound recording rights, publishing rights, trademark rights, and legal rights under an LLC, etc., you want to make sure that you are protecting yourself. Even more important than milking potential long-term streams of revenue is to ensure that you are protected legally from outside threats. As I mentioned before, the hip-hop production world in a lot of ways can be a very greedy place, and snakes abound. This isn't about ego masturbation and going on the offensive against someone who took a beat you released for free on a mixtape and used it to record a song to put up on Myspace without your permission; This is about counter-acting very real threats that could lead to massive losses in revenue at the best, and horrendous court fees and debt at the worst. Always reach an agreement beforehand.
Contracts are legal documents and as such need to be drafted in the most non-ambiguous language possible. They need to be absolutely clear, straight-forward, to the point, and most importantly, not open to interpretation. As I mentioned before, I was originally against the idea of leasing beats. I have since come full circle, and, upon learning the business a little bit more (which is something you should always be doing), realized the benefits for both producers and emcees in the whole leasing schematic. Put simply, for the producer it can be the difference between making some money and barely making any. If you're lucky, it's the difference between making money here and there, spread out, and only making a few hundred (or a few thousand, depending on your level) every few months. You see how on practically every single producer's hustle there's the line "HOT $20 BEATS! KAYNYE WOULD RIP EM! ONLY $20 WE COMIN HARD ROUN HERE RUFF RUFF HOLLA CHA BOI $20 BUCKS BANGIN SLAPS GRAB SHAWTY! BEATS!!! BEATS!!! BEATS!!! RATED NUMBA 1 MYSPACE 14 MILLION HITZ WASZ GUDD?? KEEP DOIN THANGZ BIG DOUGH $20 AIGHT MCS HOLLA! NUFF APPRECHIATION NEW LAYOUT COMMENT BACK $20 BANGAZ AIGHT!! N SUM REAL TALK DONT LET DA HATAZ HOLD ME BACK SON I BE DOIN THANGZ. BANGIN AZZ BEATZ IZ U ON YO GRINE? WHATS GOIN ON WITCHU??? TAKE THE TIME AND VOTE FOR ME THIS YA BOI NEW MIXTAPE COMIN U NEED HITZ?!?!?!?!" Well, more than likely they are charging $20 to lease the beat. And what does that mean? By leasing a beat, you still technically "own" the beat. The purchaser is sort of "renting it." You still hold the rights of ownership, meaning you are free to resell the beat to further clients until someone buys exclusive rights to it. Simple enough. And there are many variations to the terms in which the beat can be used (whether for profit or not, etc.), and many variations off this basic deal in general. The main catch is that once someone buys exclusive rights to a beat, you must stop selling it (leasing rights to previous clients notwithstanding). Originally, leasing was intended for rappers who wanted to make demo albums or non-profit promotional works, because it provides cheap beats for a project that may lack adequate funding for massive distribution. Currently, the major change you will find in most leasing deals allows the purchaser (artist) the right to make one commercial (profitable) recording (called the "master recording") with the beat (either broadcast, released on a CD or digitally, or performed live, etc.), and to sell a limited amount of copies of the master recording until a new lease license must be purchased. Business-wise, this gives the artist incentive, if the beat turns out to be a major project, to purchase exclusive rights (which I will get to). It also allows artists on a budget to pick hot beats for a project that isn't planned to sell more than a certain number of copies. Some producers have time limits on leased beats, which I don't personally find all that satisfying for the customer, so I choose not to include a time provision in my contract terms. So at this point, you have multiple clients leasing the same beat. Some of them may be using the beat for a demo/mixtape, some of them simply to freestyle over and throw up on Myspace, and some of them are making some money by selling the master recording (99 cent digital download, for example). Either way, with leasing you're able to reach a wide audience and you stand a far better chance of landing a client who will turn your beat into a hit song.
Leasing beats from a marketing perspective allows you to get your beats heard by as many people as possible, which is a good thing. For example, if you make a dope beat, like one of the 5 best you've ever made, what's the point in selling it outright to an artist who then goes on to do nothing with it? One of the great things about this business is that simply selling a beat automatically guarantees publicity and promotion for your work based on who hears the master recording, so as a producer you're naturally going to want to work with artists who are capable of reaching a large number of music fans. From the client's perspective, knowing exactly what they're getting by having you produce a track for them and by being up-front about your terms of arrangement will solidify their decision to either choose leasing a beat they want to use or to buy the exclusive rights if they're planning to use the beat for a major project. Again, a contract needs to be specific and precise as it relates to the producer-artist relationship. In writing up terms and conditions for your contract, try to imagine how a snake might circumvent it, but at the same time make it fair for an honest client to feel comfortable and satisfied with. This is the hallmark of good business: Don't get screwed, and don't screw the customer. You want your client to feel that they made a good decision to go with your professionalism and quality of work versus someone else's. Exclusive rights transfer full ownership of the beat (as well as the multi-tracks), pending contractual provisions (e.g. you keep a percentage of publishing rights and have a stake in mechanical royalties, etc.), and as such are more expensive than leasing deals (in which normally you give them a single track). In other words, the extreme "exclusive track" example is one in which you transfer full ownership (no strings attached) to the client, which is known as the "work for hire" arrangement. The producer cannot resell or reuse the beat, and the artist is free to distribute as many profitable copies of the master recording as s/he wishes. Normally, or at least in my case, the standard artist-producer contract doesn't apply as much to leased beats as it does to the exclusive deals. The reasons for this become obvious when you go about drafting your contract and figuring out what kinds of royalties you want to retain. A good way to begin doing this is to break down the basics in a "terms of service," which should be displayed in print wherever you sale your beats so potential clients can get an idea of what the terms are right off the bat. Basically, this gives the potential client an overall view of how the purchasing process happens, what format you're sending them the beat in, and what you ask for in your contracts. Here is a sample that I drafted and am planning to use:
When interested in a beat, let me know if you want to purchase leasing or exclusive rights. I accept money through Paypal and upon payment will send you a digital contract for you to sign (via snapcontract). Once that is received I will give you a download URL for the beat (or send a data DVD through a delivery service for exclusive rights option) and a signed copy of the contract for your records. You will also receive a Paypal receipt for the transaction, as well as pertinent beat information such as track BPM, sample information, etc. I ask for production credit in any commercial and/or non-profit recording(s) of the beat (master recording), and potential sample clearance issues are the sole responsibility of the purchaser. Malakai Beats reserves the right to display, stream, or broadcast purchased beats for self-promotion (non-profit) use. By doing business with Malakai Beats you accept these general terms, terms for leasing and exclusive rights, and leasing/exclusive rights contract terms. All terms subject to negotiation.
Guarantees a CD-quality redbook format PCM (*.wav) file (44.1 kHz, 16 bit dithered) w/ ~ -3db of headroom for vocal track(s), as well as a low-fidelity MP3 file. The untagged beat will be available digitally upon payment and contract signature. Leasing rights allow the use of the beat for ONE commercial recording, which can then be distributed for up to 3,000 copies. Selling more than 3,000 copies will require a new lease or the purchase of exclusive rights. Purchaser may also use the beat for any non-profit or promotional use, including broadcast, streaming, and live performance, with full rights to record, alter, or mix the beat in any shape, way, or form. The beat (notwithstanding a master recording accompanied by vocal performance) may not be resold to a third party, and full credit ("Malakai Beats") must be given when displayed, streamed, broadcast, or released, in print, or through vocal acknowledgment ("shout-out"). In the event that exclusive rights are purchased by another entity, your rights will stand, and, predating the exclusive sale, you may continue to purchase a lease renewal should you sell more than 3,000 copies of a commercial recording of the beat (master recording).
Guarantees a data DVD containing a CD-quality redbook format PCM (*.wav) file (44.1 kHz, 16 bit dithered) w/ ~ -3db of headroom for vocal track(s), as well as a low-fidelity MP3 file, and a folder containing the separated multi-tracks in high quality (48 kHz, 32 bit). The untagged beat and multi-track files will be shipped upon payment and contract signature. Exclusive rights allow the use of the beat for any and all commercial or non-profit distribution. The original seller may no longer lease or sell the beat, except for prior leasing rights holders. Full credit ("Malakai Beats") must be given when displayed, streamed, broadcast, or released, in print, or through a vocal acknowledgement ("shout-out").
Contractual Royalties/Co-publishing Arrangement/Producer Points
In the Artist-Producer Contract, I ask to retain 35% songwriter publishing rights (including synchronization) of the master recording and 2% producer points (mechanical royalties)/master recording/unit, based on suggested retail price of commercial release for a master recording that sells more than 3,000 copies. I also ask for a 3% record label/company artist advance (of greater than $60,000) for master recordings that are commercially released.
As you can see, the main ingredient is summarizing the artist-producer contract, as well as the basic leasing/exclusive provisions. The actual way in which you accept money, send the product, and have the contracts signed is best left to what you personally find the easiest for yourself to manage. I should mention that exclusive packages normally (or at least should) include: an MP3, a redbook format, a folder with the multi-tracks in high quality, a notepad file with sample information (if applicable) as well as the bpm, etc. These multi-tracks should include all post-processing and should be ready to load up into Pro Tools or other mixing DAW. Leasing packages should include the basic CD-quality .wav file (remember about headroom) and an MP3. I've seen lots of producers who do their clients no good by only giving them an MP3 file for leasing rights or in general just being sloppy lazy with it. At this point a good thing to mention is the difference between a work for hire and the retainment of publishing rights. A work for hire deal simply guarantees a flat fee, with no potential future royalties attached, which is why I have decided to opt for a co-publishing deal. By and large, most of the producers selling beats on Rocbattle and Soundclick are unknowingly transferring their publishing rights and royalty points to the purchaser of a beat, which may include such revenue streams as synchronization income, possible mechanical royalties, and due money from performing rights organizations. In ideal situations the split of publishing rights is 50/50, which actually seems fair when you consider that beat and lyrics is just about half and half of a rap song, but when you factor in that the artist (or the artists' company, manager, etc.) is spending a lot money on all those other aspects of being an artist or group that I mentioned at the very beginning of this article, it's easier to see why producers (usually) simply can't demand as much. The business-end of rap music being the numbers game that it is, it goes without saying that a lot of bargaining is based on "status" and "priority placement." You would need to be in a high position to be able to negotiate a higher percentage of publishing rights, mechanical royalties ("producer points"), record label advance, etc., which is why you need to see what others at your level are generally asking for. The market has a strange way of stabilizing itself, and standard bargaining rights (what you can realistically ask for) usually become evident.
Assuming that you're keeping it in mind to make sure to copyright register and register via your publishing company before selling your beats, the rest of the process is straight-forward. As I've outlined in my own terms of service, it's a good idea to ask for production credits on releases, and to make sure the purchaser of the beat cannot simply resell the beat, etc. When you have your online shop ready, it's a good idea to protect your beats. A basic vocal tag should do it. Not a whole lot of thought needs to be put into it either. Just a basic, "You're listenin' to a **** Beat." for the ultra paranoid, I recommend looking into audio watermarking. By and large, it's no secret that anything online is up for grabs. If you haven't figured it out yet, you're still able to download a streaming track even if that option in the web browser is disabled. And even though NO-BITING is a universally acknowledged rule of hip-hop culture, not everyone feels that way. The actual contract you send to your clients doesn't need to be written by a lawyer, although I would definitely recommend forking down the $50-$100 at some point to at least have one look over your operation to make sure you're doing things the right way. Plenty of contracts can be found online, so I won't pretend to copy/paste the one true contract that you should use. You are free to copy and paste from different contracts and edit the fields to suit your personal needs. If you've ever watched Judge Judy before, you know that a contract can be something as simple as two signatures on a napkin with a brief description of what's being agreed upon. However, you will want to dress your contract up formally with plenty of legal jargon and terms like "in consideration of the mutual covenants set forth herein," and "in good faith with respect thereto in pursuant to this agreement," etc. Most important, as I mentioned, is the fact that your contract is specific and precise with what you're asking for in the transaction.
IN CONCLUSIONDon't listen to the doom-sayers. Almost every single forum thread I visited in researching for this guide was full of negative comments about "living in your mom's basement," and "you'll never get anywhere only the big dawgs sell beats," and "hip-hop is dead homie producers were only making money from 2000-2005." Don't listen to any of that. Be yourself and do your own thing. And don't get discouraged if at first the ride is rocky. I've been producing long enough to see both the down sides and the upsides in putting these skills towards a possible career path. Be open, communicative with your clients and other producers, and don't ever think you've learned all there is to know. As much time and thought as I've put into writing this guide, I'm sure there will probably be some revisions needed. A few years from now a lot of this guide may even be obsolete. Whatever the case may be, I hope this guide serves you well on your path. Thanks for reading and good luck!