Neighboring Rights & Global Royalty Arbitrage
Master sound recording performance royalties globally, navigate terrestrial AM/FM radio exemptions, and submit direct foreign CMO claims.
Unit 10 / Neighboring Rights
Neighboring Rights & Global Royalty Arbitrage
Understanding public performance and communication-to-the-public rights for sound recordings, the U.S. digital statutory landscape, and international collective management.
When an independent artist's music gains traction internationally, relying solely on domestic Performance Rights Organization (PRO) registrations may overlook significant performance royalty streams. While PROs (such as ASCAP, BMI, or SESAC in the United States) maintain reciprocal agreements to collect and distribute public performance royalties for songwriting and underlying musical works (compositions), they do not manage performance or related rights for master recordings—commonly referred to as neighboring rights or related rights in many jurisdictions.
In international copyright frameworks, neighboring rights generally refer to the public performance and certain communication-to-the-public rights associated with sound recordings and performances, distinct from the copyright in the underlying musical work. These rights ensure that performers (featured artists and non-featured musicians) and sound recording copyright owners (typically record labels or self-releasing independent artists) receive equitable remuneration when their recorded performances are broadcast or played in public.
10.1 The U.S. Terrestrial Radio Gap & SoundExchange Mandate
Under current U.S. federal copyright law, a major policy distinction exists: terrestrial AM/FM broadcasters generally do not pay a public performance royalty for sound recordings, while they do pay public performance royalties for the underlying musical work (collected by PROs). This terrestrial broadcast exemption has historically separated U.S. practice from many other international markets where broadcasters pay licensing fees for both the composition and the sound recording.
To collect public performance royalties for sound recordings in the United States, the industry relies on statutory licenses under Section 114 of the Copyright Act. SoundExchange is the sole collective management organization (CMO) designated by the government to administer these U.S. statutory digital performance royalties for eligible non-interactive digital transmissions (such as satellite radio, webcasting, and digital cable music services).
Importantly, interactive on-demand streaming services (such as Spotify, Apple Music, and Amazon Music) do not operate under these SoundExchange-administered statutory licenses; instead, they operate under separate, privately negotiated direct or collective licensing arrangements with sound recording copyright owners or their distributors.
SoundExchange & International Collections
For U.S. performers and sound recording copyright owners, a standard domestic registration with SoundExchange collects digital performance royalties generated within the United States. To collect neighboring rights royalties internationally—where terrestrial radio, television broadcasts, and public venues pay master performance royalties—rightsholders must consider how their international rights are managed:
- The SoundExchange International Services Mandate: Registrants can actively opt into SoundExchange's International Services Mandate. This authorizes SoundExchange to collect neighboring rights royalties through its network of reciprocal agreements with foreign collective management organizations (CMOs). However, the scope of these collections is not automatic or universal; it depends on reciprocal agreements, local laws, participating foreign CMOs, available repertoire data, and specific eligibility requirements in each country.
- Direct Foreign CMO Registration: For artists with significant activity in specific territories (e.g., Europe, the UK, or Japan), direct membership with certain foreign CMOs (such as PPL in the UK or GVL in Germany) may provide operational advantages depending on eligibility rules, repertoire, administrative practices, and collection agreements. Rather than being universally superior, direct registration is an administrative strategy that some rightsholders use to manage complex metadata, track claims directly, or interface with localized distribution cycles.
10.2 Selected European CMO Practices: PPL UK and GVL Germany
The UK and Germany represent two major neighboring rights markets. Their registration rules and distribution policies illustrate the administrative complexity of international rights management, emphasizing why practices must be treated as current published policies subject to change rather than permanent rules.
PPL (United Kingdom)
PPL licenses and collects master performance royalties for television, radio, and public performance in the UK, distributing revenue to both performers and recording rightsholders.
- Eligible performers and recording rightsholders can register directly.
- PPL does not charge a signup fee; instead, administrative costs are deducted from collected royalties prior to distribution, according to current published administrative rates.
- Under current published practices, unclaimed or unmatched funds are held for a designated claim window (historically six years) before being subject to redistribution to the general membership under PPL's governing rules.
GVL (Germany)
GVL collects master performance royalties across German television, radio, and public performance, representing performers and sound recording copyright owners.
- Rightsholders and performers register and submit claims directly. While Label Codes (LC) can facilitate tracking in German broadcasts, a Label Code is not universally required to maximize or receive track-by-track royalty payouts under GVL's modern distribution guidelines.
- GVL operates with strict, multi-year claim periods (typically three calendar years following the usage year) for registering works and reporting performances.
- Under current published guidelines, after the close of a claim window, remaining unallocated reserves for that distribution year are dissolved and redistributed to active registered members on an accrual basis according to GVL's distribution plan.
- Administrative costs are deducted from overall GVL budgets prior to distribution based on annual operational costs.
10.3 Neighboring Rights Administrative Matrix
| Collecting Entity | Primary Jurisdiction | Terrestrial AM/FM Coverage (Sound Recordings) | Retroactive Lookback Window | Cost / Commission Structure |
|---|---|---|---|---|
| SoundExchange (with Mandate) | USA (and foreign reciprocal partners) | No (U.S. law covers Digital Non-Interactive Only) | Subject to foreign reciprocal partner limitations | Free direct registration; administrative fees or deductions apply based on current published rates and foreign partner policies. |
| PPL | United Kingdom | Yes (UK Radio, TV & Venues) | See current PPL distribution rules (historically 6 years) | Free direct registration; administrative costs are deducted from collected royalties prior to distribution based on actual annual costs. |
| GVL | Germany | Yes (German Radio, TV & Venues) | See GVL published guidelines (typically 3-year claim window) | Administrative costs are deducted from overall GVL budgets prior to distribution. |
Administrative Disclaimer: Neighboring rights administration varies significantly among jurisdictions. Collection rules, eligibility requirements, claim periods, reciprocal agreements, administrative deductions, and redistribution policies are determined by each country's laws and collecting organizations and may change over time.
10.4 International Legal Frameworks & The 2020 CJEU Ruling
Neighboring rights laws differ significantly among countries. Under international treaties such as the Rome Convention and the WIPO Performances and Phonograms Treaty (WPPT), eligibility for equitable remuneration is often determined by nationality, place of first publication, or reciprocal arrangements.
Historically, some European CMOs applied policies of material reciprocity, withholding performance royalties from U.S. performers. Because the United States does not pay a general analog terrestrial public performance royalty for sound recordings under its domestic laws, these CMOs argued they were not legally required to distribute royalties to U.S. performers for play in their respective European territories.
In September 2020, the Court of Justice of the European Union (CJEU) issued a landmark decision in the RAAP (Recorded Artists Actors Performers) v PPI (Phonographic Performance Ireland) case. The CJEU addressed the treatment of performers from third countries under EU law and international treaty obligations. The Court ruled that under the EU Copyright Directive, the right to equitable remuneration for broadcasting or communication to the public must be applied without nationality-based discrimination within the EU, meaning that exclusions of third-country nationals (such as U.S. performers) based on a lack of reciprocity are generally incompatible with EU law.
However, this ruling did not automatically result in immediate, uniform payouts across the entire continent. The practical implementation of the CJEU decision remains gradual and complex:
- Legislative and CMO Adjustments: The transition depends heavily on national legislation, individual collecting societies, and localized legal frameworks. Several countries are updating their national copyright acts and CMO distribution policies to comply with the ruling.
- Retroactive Claim Procedures: Some CMOs (such as Gramex in Sweden or others in selected European territories) have adjusted their policies and established timelines to process or distribute retroactive performance royalties to eligible U.S. performers. However, the exact timelines, claim rules, and documentation requirements are not identical across Europe.
- Impact on Black Box Reserves: Unmatched or historically withheld royalties for non-domestic performers may eventually be redistributed according to each collecting society's governing rules and local regulations if they remain unclaimed after the close of applicable claim windows.
- Strategic Administration: U.S. artists who register their catalogs (either by activating the SoundExchange international mandate or establishing direct registrations where eligible) have a clearer legal framework to claim royalties. However, eligibility and actual payments remain subject to active metadata matching, CMO verification, and local treaty-based definitions of qualified sound recordings and performances.
Module Knowledge Check
Why do traditional AM/FM broadcast radio stations in the US pay $0 in performance royalties to master owners and featured artists?
ID: neighboring-rights-global-arbitrage