Neighbouring rights is the term used to describe the performance right of a sound recording in public. The term Neighbouring Right was established as this master recording right is an adjacent right (or a neighbour) to the previously established Performance Right for songs and compositions (referred to, by the master rights holder, as the underlying copyright of the sound recording). So every time you hear a song played on the radio, or in the background at a restaurant, it is considered a performance of both the song and of the sound recording, and generates a royalty for each.
Let’s have a quick history lesson: in terms of copyright, neighbouring rights have not been around for very long. It wasn’t until 1961 that a treaty was signed by many countries around the globe to establish and recognise the rights of performers. This treaty known as The Rome Convention, in the words of WIPO (the World Intellectual Property Organization), “secures protection in performances for performers, in phonograms for producers of phonograms and in broadcasts for broadcasting organisations”. In other words, you cannot perform a sound recording in public without permission, and this performance is subject to an attached royalty. Of all the major territorial players in the music industry, to this day, the USA has not signed the Rome Convention treaty and does not recognise terrestrial radio as an eligible royalty bearing medium. The reason for this was due to broadcasters arguing that if a song is played on the radio, it is free publicity for the artist, therefore they shouldn’t have to pay a royalty on top of this. However, in 1996, around the dawn of the digital music era, a new treaty was approved, coming into effect in 2002, known as the WPPT (WIPO Performances and Phonograms Treaty), which the USA did sign. This new treaty expanded neighbouring rights to include digital broadcasts and non-interactive streaming (think SiriusXM, Pandora and iHeart etc) as royalty bearing performances of sound recordings.
Neighbouring rights royalties are payable to master rights holders (record labels or makers, in neighbouring rights language) and performers (artists, producers and even session musicians). The tricky thing about neighbouring rights is that the rules pertaining to eligibility can differ from territory to territory, and this is where the Rome Convention most notably comes into play.
For performers and record labels to be deemed eligible to receive neighbouring rights royalties, they must be a resident of a Rome Convention country or the recording must have been created in a Rome Convention country (this is why we had our little history lesson earlier). So if an American artist’s song, recorded in the United States, is played on traditional UK radio, they will not receive a royalty for that performance, even though terrestrial radio in the UK is subject to neighbouring rights tariffs. Hardly fair, is it? That being said, with the USA signing the WPPT, when an American artist’s song is played on digital radio in the UK, they will be paid a neighbouring rights royalty through the reciprocal agreement in place between the USA and the UK (more on reciprocal agreements shortly). It is also worth mentioning that the USA collective management organisation, SoundExchange, is leading the charge to try and change this, with its launch of the Fair Trade Of Music campaign, in 2020. So keep your eyes and ears peeled!
Neighbouring rights are paid by traditional broadcasters, digital radio providers, and any establishment that uses background music such as restaurants, gyms and live venues (stadiums and theatres etc). These royalties are calculated based on tariff rates for different types of usage, which are set by local copyright boards in each territory. Any business who plays recorded music for public consumption must secure a neighbouring rights licence via their local CMO (Collective Management Organisation).
Neighbouring rights royalties are collected by a global network of Collective Management Organisations (CMOs) and distributed to master rights holders and artists/performers. At the time of this writing, there are 96 parties who have signed the Rome Convention treaty, meaning that there are 96 countries around the world, with their own individual CMOs. Each CMO collects neighbouring rights royalties based on the sound recording usage within their own territory, and also through a network of international reciprocal agreements with other CMOs around the globe. These international agreements are in place between various CMOs to allow them to collect and distribute royalties on behalf of one another’s society members (the master rights holders and artists), as long as they reside within WPPT and/or Rome Convention jurisdiction.
As we explained earlier, CMOs represent the rights of master rights holders (record labels) and performers (artists, producers etc). The way these neighbouring rights royalties are divided between all the interested parties, again, depends on the individual CMO. But the one common factor is that they always pay master rights owners and artists/performers separately. So even if you are an artist who owns your master recordings, you must register as both the “Maker” (record label) and the “Performer” (artist) to get both pieces of the pie. However, if you are a record label, you will have absolutely no right to collect the performers’ share, and will only ever be granted the right to collect the Maker’s share.
So how is this money split between the master rights holders and the artists? Some CMOs distribute all the royalties equally, 50/50, between master rights holders and the artists, with the artists’ share being broken out further between band members, producers and session musicians (everyone who “performed” on the track). Others (SoundExchange, for example) set aside a certain percentage of the royalty pool to distribute to producers and session musicians. And there even are some CMOs who calculate the royalties owed to the interested parties based on an internally created point system, depending on how they were involved with the recording (featured artist, backing singer, hand clapper etc).
The royalty distribution timelines also vary greatly between territories and CMOs, ranging from monthly, to quarterly, semi-annual and annually. So you must be patient, but also be vigilant! Check your royalty statements to make sure that massive hit you had on the radio, 18 months ago in another country, is paid out!
Since the CMOs automatically distribute neighbouring rights royalties to the performers, it is worth noting that the record label does not have any further liability in reporting the royalties it collects from the CMOs, unless their agreement with the artist specifically states that part of the label’s share of the neighbouring rights is to be reported to the artist.
Without a doubt, the best place to start when registering your sound recordings with a CMO is in your local territory. When you sign up with your local CMO to register your sound recordings, you will have the option to grant them permission to collect international neighbouring rights royalties for you, via their international network where they have reciprocal agreements in place. Once you have registered your sound recording, the CMO will then share that registration data with their international network, meaning that you only have to do one registration per sound recording to collect your global neighbouring rights royalties (as you read on, you will see why this might be the more appealing option). But while this alleviates the administrative work on the front end, the downside to this is that you will have to wait longer to receive your international neighbouring rights royalty payments, as the royalties are technically processed and paid twice (once through the originating territory, and then again through your local CMO when they receive the payment on your behalf).
You can also choose to sign up with multiple CMOs in various territories, to collect your neighbouring rights royalties directly from each of them. If you do this, you must be very careful to specify which territory you would like each CMO to collect your royalties in. If you specify worldwide collection with your local CMO (to collect your royalties via their international network), and also register directly with another CMO in another territory, your sound recording registration could be flagged as a double claim in this second territory, with conflicting rights, in which case all royalties for that recording will be put on hold until the conflict has been resolved. And we don’t want your neighbouring rights royalties to be delayed any further than they already are (some CMOs only pay out neighbouring rights royalties once per year!).
So we have (somewhat) covered the “Where”. Now let us look at the “How”. Registering your sound recordings with CMOs can be quite laborious and confusing as there are no set global data standards at this time of writing (unlike the world of music publishing which has CWR), and every CMO tends to have varying formats and parameters in place with regards to which pieces of information they deem to be mandatory. So to be safe, and to have the best chance possible to collect all the royalties you have earned, always fill out every single field of information that you possibly can (yes, even the ones that don’t have a little asterisk/star next to them!) to the absolute best of your knowledge. This includes listing all session musicians who performed on the recording, producers, and even the location of the recording studio, as this is all information that may be required by some CMOs. Here are some of the more common “mandatory” fields of information required to make each sound recording registration:
As for the actual registration process, again, this varies by CMO. Some ask that you log into your account and import your registrations data directly into their database. Others may ask you to send your registrations data via email. And there are some where you are required to enter every sound recording, one by one, into their database manually. We’re not going to lie: this can be tedious! But the good news is that there are also agencies around the world who focus purely on neighbouring rights administration. So there is an opportunity to outsource this painstaking process all together.