If you have licensed or are trying to license music for your business, film, or other project, you may have seen references to a “Most Favored Nation” or “MFN” clause.  An MFN clause is a term originating in international economics and is designed to prevent discriminatory practices among trade organizations.  When applied to music licensing, an MFN clause indicates that the licensor demanding MFN status wants the same license fee paid to the highest-paid licensor in the project.

For example, if you want to license two songs for a television commercial or streaming internet advertisement, a music publisher that demands MFN status will want to collect a license fee equal to the highest license fee paid to any record label or music publisher for your commercial or advertisement.  If a record label happens to demand more than the music publisher, and the music publisher has an MFN clause in its license agreement, you must pay the music publisher the same amount you pay the record label.

MFN clauses can quickly exhaust the music budget for any project.  Larger projects with multiple songs are hit especially hard when subjected to too many licensors demanding MFN status.  However, there are strategies for working with your licensors to reduce the impact MFN status requests have on your project.  If you are negotiating a music license and your licensors are requesting MFN status, you should attempt to remove the MFN clauses altogether or, barring that, restrict their scope to certain songs, or cap the fees at certain amounts.