Neighboring Rights: Everything You Need to Know in 2020

Neighboring rights have long been a point of confusion for many musicians, but they’re really very simple! Neighboring rights are public performance royalties due for the use of a given sound recording. These royalties are due to the performers and master recording owners of a track, but too often this money is left unclaimed.

Royalties from neighboring rights add up to more than two billion dollars annually, topping $2.6 billion in 2019, so today it’s more important than ever for works to be properly registered so that entitled parties can collect on this essential income source.

The Basics

Neighboring rights, sometimes called “related rights”, get their name in reference to how the sound recording copyright “neighbors” the composition copyright. You may often hear this sound recording copyright referred to as the “master” or referenced as ℗, while composition copyrights are often referred to as the “song”, the “publishing”, or referenced as ©. 

These two pieces of intellectual property that exist in a track each have their own separate royalty streams. The PROs around the world pay out public performance royalties for the use of a composition, while neighboring rights societies pay out public performance royalties for the use of a sound recording. 

Payout Breakdown

Payments originate from the digital broadcasters and, in most countries besides the U.S. (more on that below), terrestrial broadcasts that are obligated to make a master-use statutory royalty payment of about $0.002 for every play. This money is paid directly to their country’s neighboring rights organization, who in turn pays out to the registered entitled parties for that track. 

The U.S. neighboring rights society, SoundExchange, has shared the following breakdown of how they distribute master-use royalties.

  • 45% gets paid to the featured artist or artists (the parties advertised as the artist for that track)
  • 5% gets paid to non-featured artists through organizations like the American Federation of Musicians (AFM) and SAG-AFTRA
  • 50% gets paid to the owner of the recording

This means that if you are an independent musician self-releasing your music, under US copyright law you are entitled to both the artist and the rights holder shares.  Even if you work with a label or distribution service, SoundExchange is obligated by law to pay the featured artists’ portion directly to the artist, so it’s critical that recording artists register themselves directly on SoundExchange to avoid leaving money on the table, even if they’re on a label.

Differing Policies Around the World

For reasons that have long been disputed, the U.S. has remained one of only a small handful of countries around the world that does not pay out royalties on traditional, terrestrial neighboring rights. It was only in 2003 with the foundation of SoundExchange that U.S. performers and master recording owners began to see any compensation for the use of their sound recordings as digital neighboring rights came into play.

Digital Neighboring Rights
· Internet radio (like Pandora)
· Satellite radio (like SiriusXM) 
· Other webcasters
· Audio-only digital music
programming via residential
televisions using cable or
satellite television providers
Terrestrial Neighboring Rights
· AM/FM radio (terrestrial radio)
· Other television usage
· Plays in live venues

In addition to the US not paying out on their domestic terrestrial plays, the reciprocal is also true: American performers and master recording owners are not entitled to master-use neighboring rights royalties when their tracks get terrestrial air-time in other countries. 

There have been efforts in the U.S. to instate statutory terrestrial master-use royalty payments such as the “Fair Play Fair Pay” act in 2017. The act made it all the way to U.S. congress, but to date no such legislation has been passed to put the U.S. among the many countries that do pay out master-use royalties on terrestrial uses.

Registration with your country’s neighboring rights organization is always free. Talk to your label to be sure you’re collecting all your entitled royalties, or get started registering your self-released material by
acquiring International Standard Recording Codes needed to identify your tracks for master-use royalty payments.

Friday, 6 November 2020