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What Are Neighbouring Rights, and Why Should Creators Care?

In the world of royalty collections, neighbouring rights are an important part of maximizing revenue for a creator. As income sources in the music industry shift in some areas and decline in others, there has been increasing focus on new income streams. That’s where neighbouring rights comes in. But what exactly are they and, more importantly, who is entitled to this income?

What is it and who gets paid?
Neighbouring rights are a form of copyright linked to commercially released recordings. When a record is played on radio, TV or performed in public (for instance in bars, restaurants and shops) a royalty, or remuneration as it is called in the neighbouring rights world, is due both to the owner of the master recording (typically a record label) and the performing artist. Performing artists includes singers, instrumentalists and, if they play on the track, studio producers.

What’s the legal structure behind neighbouring rights?
The Rome Convention was the first legislation to deal with neighbouring rights. It was signed in 1961 and has been implemented at different times in different countries. There is also the 1996 WIPO Performance And Phonograms Treaty (WPPT), which deals with digital transmission.

There is an important distinction between the two, because although the United States never signed the Rome Convention, it did sign the WPPT. This means that there is no neighbouring rights income generated in the US when music is played in restaurants, bars, and shops. However, when digital radio stations such as Pandora and SiriusXM play music, income is generated for artists and labels.

This system in the United States is currently under review by the US Copyright Office, who have suggested that a public performance right for sound recordings should be established.  This would be a very significant step forward, as there are countries that signed the Rome Convention that only pay neighbouring rights remuneration based on reciprocity; meaning “we pay your performers if you pay ours”. There are currently a lot of countries who do not pay neighbouring rights income to US performers as the US does not have a public performance right in place for sound recordings.

How is this income collected?

In order to streamline the process, the rights holder needs to provide the collection societies with detailed information about participating musicians on a recording, including which instruments each person played. 

This is where Kobalt comes in. Through extensive research and a thorough understanding of each individual client’s repertoire and recording circumstances, Kobalt Neighbouring Rights ensures that all eligible contributions for each client are uniquely tailored to each society’s local distribution policy, which can vary enormously from territory to territory. 

The societies then calculate what remuneration is due to each performer based on the amount of airplay that has been reported to them by the broadcasters and others who play recorded music in public. Creators can then check these payments on the Kobalt App & Portal.

How these royalties are calculated varies from country to country, and it is important to understand these differences in order to maximize income. One important thing that creators can do to ensure they get the most out of their music is to provide Kobalt (and by extension, the collection societies) all of the correct information regarding the tracks that the artist participates on.

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How do creators know what’s eligible for neighbouring rights collections?
The criteria for payment is different throughout the world, which can cause confusion when handling different markets. Some countries pay based on nationality, others on where the record label is based, and others pay based on where the recording of the particular track took place. That means that one track might not qualify for neighbouring rights in every territory around the world; that’s what Kobalt is here to help with and decipher for creators.

How is the income split?
Generally speaking, 50% is allocated to the rights holder and 50% to the performer. The performer’s share is then split between a featured artist share and a non-featured artist share. Each of these shares are further split based on the particular local rules applied by each of the collection societies.

Exactly how much money is there in neighbouring rights?
According to the latest figures from IFPI, revenue generated through the use of recorded music by broadcasters and public venues increased 4.4% to US$2.1 billion, and remains one of the most consistent growing revenue sources. This stream now accounts for 14% of the industry’s overall global revenue, up from 10% in 2011. In 2015 alone, Soundexchange paid a record $803 million (up 4% from $773.4 million the prior year).

Even though the world of Neighbouring Rights can be confusing, the Kobalt Neighbouring Rights team makes it simple. Creators make more with Kobalt’s Neighbouring Rights service, thanks to our expert team, relationships with international societies, and technology that increases efficiency and transparency. As an alternative source of music income, neighbouring rights can be invaluable for musicians who have some level of international success.

Learn more about our unique solution to Neighbouring Rights.

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