Sunday, August 4, 2013

Love Thy Neighboring (Music) Rights

(By Bruce Lampcov, Billboard, 20 July 2013)

The U.S. music business and its artists are leaving millions of dollars on the table in neighboring rights.  That must change The music industry has faced many well-covered challenges during the two decades where the business has shrunk some 50%, so it’s surprising that many U.S. artists are either unaware or indifferent to a steady stream of revenue from global neighboring rights.  In 1961, the Rome Convention established an internationally acknowledged performer’s right to “equitable remuneration,” thus creating a new royalty stream for artists known today as neighboring rights. When a recording is broadcast, played in public or streamed, it generates income, or neighboring rights, for the artist, session musicians and the label. This differs from the song copyright that generates royalties for composers. For example, when the Beatles version of “Yesterday” is played on the radio, John Lennon, Paul McCartney and publisher Sony/ ATV receive publishing royalties.  However, neighboring rights royalties are also paid to Lennon, McCartney, George Harrison and Ringo Starr as the featured artists and EMI Records as the owner of the recording.

These royalties can be substantial, and are distributed by local rights societies in the territory of exploitation, such as PPL (United Kingdom), SENA  Netherlands), GVL (Germany) and ACTRA (Canada). These societies are separate from song copyright societies like ASCAP, BMI and their international affiliates. Session musicians are also eligible to collect neighboring rights royalties. For instance, Eric Clapton collects such royalties, along with the Beatles, for “While My Guitar Gently Weeps” for his contribution as the lead guitarist. Harrison collects the music copyright royalties as the composer.  Fintage House estimates that there is potential neighboring rights income of some hundreds of millions of dollars for U.S. artists.  The Rome Convention provided that artists, band members and session musicians would be paid a royalty when the songs they performed on were played on the radio, whether or not they were composer. Had the United States been a signatory of the Rome Convention, artists like Frank Sinatra, Ella Fitzgerald, Bing Crosby and Tony Bennett would have been able to collect a royalty when their recordings aired on the radio.

However, the United States didn’t sign the treaty as it was against granting (unwaivable) rights to individual performers with respect to their artistic contributions at the time, thus excluding its citizens from the benefits of this substantial royalty stream when their records aired on European and Canadian radio stations. It’s estimated that about half of the income available is still uncollected by U.S. artists.  Fast-forward to the ’90s. When the societies that were set up to license these rights to radio stations and collect the fees began paying  performers directly, it became apparent that in some cases U.S. performers could qualify for neighboring rights income for performances outside the country.  In addition, in 2000, the United States established a performance right similar to neighboring rights, but only for digital transmissions like satellite broadcasters (SiriusXM) and webcasters (Pandora). 

Unfortunately, each territory had its own set of rules that made the process seem incomprehensible to most artists. In fact, most U.S. artists and their representatives weren’t aware until recently of this royalty stream’s earning potential.  Worldwide radio hits could generate many hundreds of thousands of dollars if the qualification criteria is met, and catalog artists could have significant payments that have accumulated through the years.  With the help of neighboring rights agencies, as well as informed managers and lawyers, many U.S. artists are now benefiting from this income source.  There are many aspects that artists should consider in order to secure maximum income for their royalties, but below are the most important ones:

1 Performances should be recorded in a “qualifying country.” Most countries outside of the United States qualify, including Canada and Mexico.

2 Own your masters. Masters owners can collect in many cases, even if the owner is a U.S. company.

3 Sign to a foreign label. Some territories will pay U.S. performers if the label is based in a qualifying country.

4 Some territories now pay U.S. artists. Countries like Spain, Brazil, Russia and Hungary all pay such artists regardless of the country of recording.

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