Explainer: What is Neighbouring Rights in the Music Business?

Editor’s Note: Guys, we have our first guest explainer!! Unique Oliver, after serving two installments of Interesting Talking Points in Music Licensing, demystifies the concept of Neighbouring Rights. Oliver is an entertainment businessman with core competencies in Music Licensing and Publishing (Film, TV, Video Games and New Media) | Music Supervision(African Content). Unique is also Mavin Records’ Music Licensing & Publishing Cordinator.

According to the IFPI Global Music Report in 2019, the Neighbouring Rights industry is worth $2.6bn. This accounts for revenue generated from exploitation sources which include but not limited to Radio Station, Public Performance, Secondary Sales of program, non-interactive digital performance source which includes non-interactive streaming service and Satellite Radio.

In layman terms, Neighbouring Rights is the right to publicly perform a sound recording. It is the royalties earned from the performance of songs at concert venues, shops, radio, offices, restaurants, pubs, clubs etc. It is to Artists/performers/masters owner what PERFORMANCE RIGHT is to songwriters.

Allen Bargfrede in his book “Music Law in the Digital Age” describes it “as the full performance in sound recording”. It’s called Neighbouring rights because it is akin to performance rights, it sits next to the royalties songwriters collect.

Everyone who made an audible contribution to the sound recording is qualified to receive royalties for Neighbouring Rights exploitation. They include the featured performers, non-featured performers, session musicians and Master owners.

Performers cannot claim Neighbouring rights performance from Terrestrial sources like Radio, Concert venues, shops etc. in the United States. US broadcasters are exempt from paying Neighbouring rights when sound recording is played on TV or radio because the broadcast industry successfully lobbied and argued that their playing music promotes the artist, hence they shouldn’t have to pay royalty. However, it is important to note that US performers only receive payment for digital performance on non-interactive platforms like Digital Satellite Radio, Pandora etc.

The fact that performers do not collect Neighbouring royalties from terrestrial sources in the US has made other countries not pay Neighbouring royalties to US performers. This is based on the grounds of National Treatment and Reciprocity. “Reciprocity” means that because the United States does not pay neighboring rights royalties to non-U.S. citizens, those countries refuse to pay neighboring rights royalties to U.S. citizens. However, countries like Portugal, Romania, Hungary, Russia, Spain etc. pay every performer irrespective of the doctrine of reciprocity.

Music is a form of entertainment and according to MRC Data, 79% of people listen to the music being played in a business location. Imagine entering a restaurant and you hear your music, what do you do? Fight the owner of the restaurant to pay? No, you simply ensure your song has been registered first and leave it for the collecting societies to track and ensure such users of music pay a blanket license fee. Hence it is extremely important you register with a Neighbouring right collecting society.

According to Music Business Worldwide, NEIGHBOURING RIGHTS account for 14% of the recorded music industry’s global revenue. There has never been a great export of Music from Nigeria like now; many thanks to digital technology which makes a great catalogue of music readily available for consumption without haste. As a general rule, whenever the music is being played someone gets paid. Whenever the song is being performed on the radio, at the Airport, Streaming devices, on television, in bars and nightclubs, at Cinemas, at concert venues, and other public places; the songwriters and Composers are entitled to Performance Royalties. These performance royalties are collected by Performing Rights Organizations and remitted to the Publishers or the composers and songwriters directly if they are self-published but the Neighbouring rights are paid to Sound Recording (Master) owners and performers. The Neighbouring Rights is arguably one of the fastest growing revenue streams in music.

Some of the Collecting societies responsible for Neighboring Rights include:

• Phonographic Performance Limited (PPL) United Kingdom

• Sound Exchange, United States

• Copyright Society Nigeria (COSON) Nigeria.

• Phonographic Performance Company of Australia Limited

Since collection societies vary in different countries, every performer and master owner must have the work ingested with a collecting society that has reciprocal relationship with other collecting societies to ensure the neighbouring rights royalties are claimed in every territory where they receive airplay. Neighboring Rights are untapped revenue streams for many featured musicians and master sound recording owners. Unfortunately, most of this revenue is left unclaimed due to a lack of reciprocity between signatory and non-signatory countries.