Friday, 28 Feb 2020

Tips of the Trade: what are neighbouring rights?

Do you know your neighbouring rights? Do you know what neighbouring rights are? Don't fret if you don't, or are kind of unsure, or are completely clueless.

It’s one of the more, shall we say, complex areas of the music business. But with the help of our colleagues at Recorded Music NZ we’ve pulled together this explainer on the topic.

It’s crucial for NZ recording artists and managers to realise just how important this income stream actually is, so it’s important to get this message out to our industry.

“Neighbouring rights” relate to the use of a sound recording

A song has two forms of copyright:

1. Underlying musical work or composition – i.e., the music and the lyric elements (publishing); and

2. The sound recording of a song or composition (master)

The term ‘neighbouring rights’ is used in some countries to refer to the public performance, broadcast, communication and reproduction rights in sound recordings. Literally, neighbouring rights sit besides, or ‘neighbour’ the composition copyright of a work.

Public performance rights – similar to broadcast, communication or reproduction rights – are controlled by the entity that owns copyright in the master recording.  Under New Zealand law, the default position is that the owner of copyright in a sound recording is the person who made the “arrangements necessary for the making of the recording”, usually the person who paid for the studio time and other costs associated with making the recording.  This could be a record company or a self-releasing artist.  The default position can be changed by written agreement, for example two artists in a band might agree in writing that they jointly own copyright in the recording even if only one of them paid the studio costs. Recorded Music NZ refers to this copyright owner as the Master Rights Holder.

Income sources for neighbouring rights include the public performance of music used at or broadcast/communication via:

  • retail
  • restaurants and nightclubs
  • broadcast media
  • online radio and terrestrial radio e.g. AM/FM radio (excluding in the US, more on that below)

In NZ there is no right for individual performers to receive remuneration as such (unless they are also master rights holders – see above).  However, Recorded Music NZ operates a scheme (the Direct to Recording Artist Scheme) under which featured artists based in NZ may have a claim to receive some of this income directly (more on featured artists below).

Neighbouring Rights in New Zealand

Neighbouring rights are not uniform throughout the world. Neighbouring rights tend to vary much more widely in scope between different countries than songwriters' and composers' rights.

In New Zealand, these royalties are collected by Recorded Music NZ, or the relevant rights holder directly. Recorded Music NZ distributes funds collected from:

  • Public performance via OneMusic New Zealand
    With OneMusic New Zealand, the licensing process for businesses using music has gone from two licences for the two rights from two organisations (APRA AMCOS and Recorded Music NZ) to one licence from OneMusic New Zealand.

  • Broadcast licences with TV and radio (free to air, public, community and subscription)
  • Certain communication licences with digital services (e.g., free to air TV catch up, commercial radio simulcasts, or other online radio services)

After the deduction of administration and operational costs, all fees collected are distributed through to Recorded Music NZ Master Rights Holders and featured NZ recording artists registered with Recorded Music NZ via its Direct-to-Recording Artist Distribution Scheme. 

How to get paid by the Recorded Music NZ for your sound recordings being played

If you are a New Zealand recording artist and/or if you control the rights to your sound recordings, make sure you register with Recorded Music NZ now.

If you own the copyright in your recordings (see above), you would sign up to Recorded Music NZ as a Master Rights Holder.  If you are a NZ citizen or resident, and a featured performer on a track which is registered with Recorded Music NZ, you may register with Recorded Music NZ under its Direct to Recording Artist Scheme.  Under that scheme, by default Recorded Music NZ will pay you 50% of the revenues collected for that track, with the remaining 50% going to the copyright owner (this default position can be changed by agreement – for more information see [URL on our website]).

Recorded Music NZ distributions are made annually and you need to have your tracks registered with them by the 30th April cut-off date each year in order to receive a direct payment. If you don’t register for particular tracks, any earnings attributed to those tracks will be passed to the rights owner (often the record label/distributor) to be distributed as per details of your recording contract. You only need register each track once but make sure you let Recorded Music NZ know if there are any changes.

Neighbouring rights royalties beyond New Zealand

If a song is publicly used in territories outside of New Zealand – your song is getting radio airplay in Australia, pumped into fitness classes in the UK, used in a TV program in the US or performed in a club in Europe – will you be paid for the neighbouring right?

The answer varies to that question, because neighbouring rights legislation differs in each territory. Currently about 80 countries are paying for neighbouring rights uses. The sector is currently worth approx. US$2.7 billion.

So, if you know your sound recordings are getting played beyond New Zealand, it’s important to review your options to collect potential royalties in other jurisdictions. This might be either through Recorded Music NZ where applicable, a label or a neighbouring rights agent, or by authorising another collecting society to collect from their respective territories on your behalf.

Recorded Music NZ currently has bilateral agreements in place with PPCA (Australia), PPL (United Kingdom) and Sound Exchange (United States).

Neighbouring rights in the USA are a little more complex:

  • The USA does not recognise the terrestrial broadcast right for sound recordings, meaning traditional radio and TV broadcasters do not need a licence (and so do not pay a licence fee), when sound recordings are played on air, although they still require licences to broadcast the underlying musical work.
  • The USA does pay for internet broadcast (communication) of sound recordings, so companies like iHeart, Pandora and Sirius do have to pay.

Differing legislation in various territories results in a number of factors that may determine whether or not particular artists and/or particular recordings are eligible for payment. These factors can include:

  • Citizenship of featured artists
  • Residency at time of recording
  • Where the recording took place (if you recorded in a country that recognises the right)

Depending on the territory where the performance took place, individual performers (other than those that own copyright in the master recording) may be entitled to receive a share of the revenues directly from the relevant collection body.  However, Recorded Music NZ does not collect revenues on behalf of individual performers for music use outside New Zealand.  Recorded Music can provide advice but performers would need to approach overseas bodies directly.

Further info on managing your neighbouring rights

If you would like to know more or speak directly to Recorded Music NZ about registration both here in New Zealand and your options for offshore collection, please contact Recorded Music NZ’s member services team at memberservices@recordedmusic.co.nz or check out the music makers section of the Recorded Music NZ website.


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