Neighboring Rights

In-Depth Explanation

What Are Neighboring Rights?

Neighboring Rights (also known as Related Rights) are a specific type of public performance royalty. While traditional Performance Royalties are paid to the songwriters and publishers for the broadcast of the underlying composition, Neighboring Rights are paid to the performing artists and the owners of the Master Recording (usually the record label).

The term "neighboring" is used because these rights sit "next to" the primary copyright of the musical composition. They exist because the people who perform and pay for the physical recording of a song also deserve to be compensated when that specific recording is broadcast to the public.

When Are Neighboring Rights Generated?

Neighboring rights are generated whenever a sound recording is played in public or broadcast on non-interactive media. Common sources include:

• Terrestrial Radio (AM/FM) (Note: The United States is a major exception to this, see below)
• Satellite Radio (e.g., SiriusXM)
• Internet Radio (e.g., Pandora)
• Television broadcasts (when a music video or show playing the track airs)
• Public venues (nightclubs, bars, restaurants, retail stores, gyms)
• New media (webcasts, certain types of background music services)

Note: Interactive streaming (like choosing a song on Spotify or Apple Music) does not generate neighboring rights. Those services pay the label/artist directly through a different mechanism.

The United States Terrestrial Radio Loophole

The United States has a very unique and controversial stance on neighboring rights.

In almost every other developed country in the world (the UK, Canada, France, Japan, etc.), terrestrial AM/FM radio stations must pay neighboring rights royalties to the record labels and recording artists when they broadcast a song.

In the United States, terrestrial radio does NOT pay neighboring rights. American radio stations only pay performance royalties to the songwriters/publishers (via PROs like ASCAP and BMI). The logic historically pushed by the U.S. radio lobby is that playing a song on the radio provides "free promotional value" to the artist, driving record sales, so the radio station shouldn't have to pay the artist.

However, the U.S. does recognize neighboring rights for digital broadcasts. When a song is played on SiriusXM or Pandora in the US, neighboring rights are generated and collected by SoundExchange.

How Neighboring Rights Are Divided

When a neighboring rights royalty is collected, it is typically split into two halves (though the exact percentages vary slightly by country):

1. The Master Owner's Share (50%): Paid to the entity that owns the copyright to the sound recording. This is usually the record label, or the independent artist if they are self-released.
2. The Performer's Share (50%): Paid directly to the artists who performed on the track.
   • This is usually split further: the "Featured Artist" (the main singer or band) takes the lion's share (e.g., 45%), while "Non-Featured Artists" (session musicians, backup singers) split the remaining portion (e.g., 5%).

Crucial Point: The performer's share is paid directly to the artist by the collection society, bypassing the record label entirely. It cannot be used by the label to recoup an Advance.

How to Collect Neighboring Rights

To collect these royalties, artists and labels must register their master recordings with a Neighboring Rights Organization (NRO) or Collective Management Organization (CMO).

• In the United States: You must register with SoundExchange.
• In the UK: You must register with PPL.
• In Canada: You must register with Re:Sound.

If you are an independent artist whose music is played globally, tracking down neighboring rights in every single country is incredibly difficult. Many artists use specialized Neighboring Rights Administrators (like Soundrop or specialized divisions of their distributor) to register their tracks globally and collect the money for a percentage fee (usually 15-20%).