Found this HowStuffWorks article from back in May, thought that maybe some folks on the forums would be interested in reading. Very little of it relates directly to video games, but they touch on a lot of different kinds of licensing that illustrate just how crazy the whole process can get.

Here is the article.

A few choice excerpts:

* It turns out, however, that music licensing is something that happens constantly, all around us. When you listen to music on the radio, that music is licensed. When you hear music in a restaurant, that music is licensed too. In this article, you will have the chance to learn about all the different forms that music licensing can take.

* There are several things that can be copyrighted in any sound recording for a song.

There are the actual sounds themselves -- the performance of the work.
There are the notes that the musicians play to create the song -- they could be embodied in sheet music.
There are the lyrics for the song -- they can be written down on a sheet of paper.

* In the case of a "real song", like something you would hear on a top-40 radio play-list, there are several different parties involved with the song:

The label owns the actual sound recording -- the performance of the song as recorded in the label's studio.

The publisher works on behalf of the song's composer (the person who arranged the music) and songwriter (the person who wrote the lyrics). The composer and songwriter probably own the actual copyrights for the song, and the publisher represents them in all business dealings.

If you want to use a song for any reason, you have to somehow obtain rights at least from the publisher, and possibly from the label as well (if you are planning to use a specific performance).

* Low-end TV usage (e.g. -- music is playing from a jukebox in a scene, but no one in the scene is paying any attention to the music) -- free (for exposure) to $2,000 for a 5-year license. In a film, the fee would be $10,000 in perpetuity.

A more popular song is worth more, perhaps $3,000 for TV and $25,000 for film.

A song used as the theme song for a film might get $50,000 to $75,000.

Commercials fetch even more money: "a song can command anywhere from $25,000 to $500,000 plus per year. The typical range for a well-known song is $75,000 to $200,000 for a one year national usage in the United States, on television and radio."