What Are Neighboring Rights?

Short answer--they pay recording artists for public performances. Long answer... it's complicated.
February 2, 2017

“Neighboring Rights” is one of those terms that can cause an awful lot of confusion due to the background of the name itself. It’s often confused with relating to payments from neighboring countries, when in fact the explanation is far more basic.

Simply put, neighboring rights are public performance royalties due to the sound recording copyright holder. Remember, every song has two basic types of copyrights attached to it… one for the composition of the song, and one for the recording of the song. The composition copyright pays the songwriter and publisher, while the sound recording copyright pays the artist  that recorded the song and record label.

[Read our MUSIC ROYALTIES GUIDE for a deeper dive into these rights]

While “performance rights” refer to the right to publicly broadcast the music composition associated with a given song, the “neighboring right” is the payment due to the owner of the sound recording (typically the recording artist and/or the label) for that same public performance. Payments for neighboring rights are collected by large international collection agencies, just like performance rights are.

[Find out more about WHO COLLECTS WHAT FOR WHO]  

“Neighboring rights” for performers essentially “sit next to” the performance right for songwriters in the eyes of the law, hence the rather strange legal term. They’re also sometimes called “related rights” because the right “is related to” the performance right. So any time a song is broadcast on the radio or TV, or played live in a bar or a concert, the recording artist/label is due “neighboring rights.”

It’s important to distinguish between terrestrial broadcast platforms (like radio, TV, and venues) and digital platforms (like Internet and satellite radio) when discussing performance royalties for sound recordings. That’s because not every country recognizes or pays terrestrial neighboring rights. The most notable is the U.S.

In this country, radio broadcasters and public venues need only pay public performance royalties on the composition (which pays songwriters and publishers), but not the performing artist or the label behind the sound copyright. On digital platforms like Pandora or SiriusXM, however, the U.S. does pay performers through an entity called SoundExchange.

To understand why, there’s a little bit of history involved. In 1961, there was a big convention in Rome where various countries got together to agree on how to compensate performers for use of their work that they did not directly agree to, such broadcasting music over public airways. This was before the establishment of the World Intellectual Property Organization was founded, and obviously well before digital networks.

Since the U.S. did not attend that conference, and did not sign the agreement, it therefore does not make neighboring rights payments.

However many other countries do, and they pay significant royalties to artists and labels for the public performance of their recordings. In fact, neighboring rights are currently one of the music industry’s fastest-growing revenue streams. According to IFPI's Global Music Report, worldwide artist and label income from public performances grew from $1.4 billion in 2010 to $2.09 billion in 2015.

But, because the U.S. does not pay neighboring rights to performers from other countries any more than it does U.S.-based artists, those countries that do participate in neighboring rights payments don’t pay them to U.S.-based acts. That’s one of the reasons why the “neighboring rights” moniker causes so much confusion, given the different regions that come into play.

Now there are efforts to change this. A bill called the “Fair Play, Fair Pay” Act currently languishing in Congress proposes to change that. But it’s yet to get out of committee.

Interested in learning more about how royalties work? Download our free Ultimate Guide to Buying Music Royalties. Or, create a free account to view all of the music royalty assets we have up for auction on the site.

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