Neighboring Rights: From Beginning to End

Posted on 09/29/2020 at 12:00am

Neighboring Rights: From Beginning to End

By Autumn Marie Buysse, Consultant at Exactuals

Neighboring rights can be a complicated, confusing sector of the music industry, which is why it’s so important that organizations like IAFAR have made it their mission to help record labels and artists collect the neighboring rights royalties they’ve earned. Neighboring rights refer to the royalties that sound recording owners (typically labels) and performers earn every time a sound recording is publicly played.

At Exactuals, we work with neighboring rights companies regularly to make sure they’re receiving all the income they’re owed and that they’re distributing that income correctly. Based on our experience, here’s a step-by-step guide on how to make sure you’re collecting all the neighboring rights royalties that are out there waiting for you.

1. Make sure your song catalog metadata is accurate and up-to-date, and that you’re aware of every single recording of your songs out there. 

Before you begin this process, it’s important you have your metadata in one place. It is important to realize that Neighboring Rights are totally separate and apart from rights you may have as a songwriter or publisher. Neighboring Rights are the royalties associated with sound recordings themselves and have nothing to do with songwriter or publishing rights.  You will only be able to collect neighboring rights royalties on the master recordings you own, or on recordings that have been registered by the owners of those recording on which you have performed (either as a Featured Artist or a Non-Featured Artist (e.g. background vocalist or session musician).  –  This includes any cover of recordings of which you own the master sound recording or performed on even if you do not own any publishing or writers share of the songs on the recording. The only exception is that in the U.S. performers can make claims for royalties to SoundExchange even if the Rightsholder has not yet registered the work. If you need assistance taking inventory of your catalog, Exactuals has developed a music metadata technology called RAI that can help clean it up. It’s highly recommended you clean your music metadata first, as any inconsistencies will lead to lost royalties. It’s much more difficult to fix your metadata once your recordings are already out in the world.

For example, there are 29 distinct ISRCs (recordings) associated with Sara Bareilles’ “Love Song.”  associated with those 29 recordings, which means Sara Bareilles’ renditions of “Love Song” appear on 140 different albums. Each of those albums generates neighboring rights royalties for the sound recording owners and performers on those recordings if publicly performed. If you’re not aware of even one recording you performed on, you’re missing out on income. If   you’d like to try out some songs yourself, you can do so for free at https://royalties.ai/resolution

2. Make sure your songs are copyright protected. 

If you live in the UK, your work is automatically copyrighted upon creation, so you don’t need to file any paperwork. That said, it’s always advisable to have evidence of creation, so make sure to protect yourself as much as possible.

If you live in the U.S. or Canada, your song is also technically copyrighted as soon as it’s in a fixed and tangible state. However, if you anticipate needing to sue infringers or seek legal fees in a case of copyright infringement, your song must be registered federally. In these countries, you can register for copyright protection via the US Copyright Office or the Canadian Intellectual Property Office. There is a small fee for each song, but especially for bigger songs, it’s well worth it to protect your intellectual property.

All this is great but remember – Neighboring Rights are all about the sound recording – NOT the composition (music and lyrics) or the publishing! Consequently, it is equally important that owners of the sound recording copyright the sound recordings themselves.  This can be done in much the same manner as composition copyrights are obtained.

3. Make sure your songs are registered with a Performance Rights Organization. 

Performance Rights Organizations (PROs) are national collection societies that collect and distribute performance royalties whenever songs are played in public places like restaurants or bars, whether it’s live or over the speakers. It’s essential to register with a PRO in your country to collect these royalties.

Performance Rights Organizations (PROs) are national collection societies that collect and distribute performance royalties whenever songs are played in public places like restaurants or bars, whether it’s live or over the speakers. It’s essential to register with a PRO in your country to collect these royalties. The main PROs in the U.S. are  ASCAP, BMI, SESAC, and GMR. ASCAP and BMI are open to everyone, but SESAC and GMR are invitation only. 

Internationally, Canada’s PRO is SOCAN, the UK’s is PRS, Germany’s is GEMA, and France’s is SACEM

Once again this protects the composition and publishing rights….BUT none of those collect Neighboring Rights. To collect those, Rightsholders (with exception of in the US as mentioned above) must register their recordings with all applicable Collective Management Organizations (CMOs). Every territory that recognizes neighboring rights has a CMO (PPL in the UK, GVL in Germany, AIE in Spain, SENA in the Netherlands, SoundExchange in the U.S., etc.). Performers must also register, and if you are a Rightsholder and a performer you must register as each. Remember, performers may only make claims for sound recordings that are already registered.

It is important to note that the U.S. is unique in that it does not pay neighboring rights royalties for terrestrial radio. Since the U.S. doesn’t pay neighboring rights royalties to other countries, many countries have returned the favor by not paying US performers or on songs recorded in the U.S. However, in the U.S. there is statutory protection for Subscription Services (e.g. SiriusXM), webcasting, and Private Copy. These rights do afford U.S. performers some degree of reciprocity.

4. Make a list of all the outlets your song is being played on, so you can identify all the possible revenue streams for your songs. 

Here’s some examples of common revenue streams for neighboring rights: 

5. Register with a Representative that collects neighboring rights royalties. 

These administration companies oversee royalties on your behalf and use their pre-existing relationships with foreign CMOs to collect worldwide income for you. There are several excellent IAFAR members  who handle neighboring rights, as well as a couple great ones who are Exactuals clients that we would be happy to recommend.

6. Go through your PRO statements, and cross reference them with statements from your Representative or CMO  to make sure that you’re collecting income from all the revenue streams you should be. 

You can do this by cross checking your PRO statements with the list you generated in step four. If there’s a revenue stream missing, contact your neighboring rights administrator from step five.

7. Use royalty calculation software to efficiently and effectively figure out how much to pay out to each rightsholder.

At Exactuals, we recently acquired a system called SR1 that facilitates royalty calculation. This way, you don’t need to manually calculate artists’ earnings. 

8.) Develop a system to process payments and send royalty statements to your rightsholders. 

If your payments originate in USD, Exactuals can process them on your behalf to over 200 countries and territories via PaymentHub.

If you’re paying out to a lot of different artists and companies, PaymentHub is able to process all of those outbound payments and house the royalty statements associated with them in individualized online portals.

9.) Give yourself a pat on the back, you’re done. 

For the time being, at least!

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