Are you a recording artist wondering why you do not get paid when your hit song plays on a local AM/FM radio station in the U.S., but you do get paid when it plays on Pandora or when you tour in Europe? The answer lies in the complex global concept of Neighboring Rights.

Disclaimer: This Article is for general informational purposes only and does not replace legal advice for specific situations.

TL;DR

Neighboring rights generate royalties for performers and record labels when a Sound Recording is publicly broadcasted. A common mistake among American artists is assuming the U.S. system works exactly like the rest of the world. Failing to understand the massive legal divide between global Neighboring Rights and the U.S. "digital-only" exceptions can cause you to leave millions of dollars in international royalties uncollected, effectively abandoning your money to a foreign "Black Box".

The plain definition: Neighboring Rights

In simple terms, Neighboring Rights (often called "related rights" outside the U.S.) refer to the right to publicly perform or broadcast a Sound Recording (the master track), as distinct from the performance right in the underlying Musical Composition.

While traditional Public Performance Rights compensate songwriters and music publishers for the use of the Musical Composition, Neighboring Rights ensure that the master rights holders (record labels) and performers (featured artists and session musicians) are compensated when that recorded track is broadcast on radio, television, or in public spaces.

In most countries, these rights are administered through collective management systems, where broadcasters and venues pay statutory royalties that are then distributed to performers and record labels. However, the United States takes a fundamentally different approach. Under U.S. law, there is no Neighboring Rights remuneration for terrestrial broadcasts (e.g., AM/FM radio or public venues). Only songwriters and publishers are paid for these uses, while performers and record labels receive nothing.

Instead, the U.S. recognizes a limited, digital-only regime, where royalties for Sound Recordings are paid only for non-interactive digital transmissions (e.g., satellite and internet radio), collected and distributed by SoundExchange. See more: "Collective Management — What CMOs Do?"

Why does this concept exist?

Historically, international copyright agreements like the 1886 Berne Convention primarily protected the authors of the underlying composition (the songwriters and composers). However, bringing a song to life requires immense creative input from singers and musicians, as well as heavy financial investment from record labels.

To address the rapid evolution of sound reproduction technologies, the multinational Rome Convention of 1961 was established. It recognized that performers and Sound Recording makers "neighbor" the author's copyright. Therefore, they also deserve equitable remuneration (via Neighboring Rights) whenever their recorded performances are broadcasted or communicated to the public.

How it works: The global standard vs. The U.S. quirk

To understand Neighboring Rights and Licensing, you must understand how the United States drastically differs from the rest of the world. In fact, The U.S. is one of only four developed countries in the world that don't mandate traditional performance royalties for sound recordings, the other three being North Korea, Iran, and China.

The global standard (The Rome Convention): In countries that signed the Rome Convention (like the UK, France, and Canada), any entity that publicly broadcasts recorded music, such as terrestrial AM/FM radio, restaurants, gyms, and TV stations, must secure a Neighboring Rights License. They pay these royalties to their local collection societies (e.g., PPL in the UK), which distribute the money to the performers and labels.
The U.S. exception (No terrestrial radio royalties): The United States did not sign the 1961 Rome Convention. Under U.S. Copyright Law, terrestrial radio, restaurants, and bars are not required to pay neighboring rights for Sound Recordings. When a song plays on a traditional U.S. radio station, only the songwriter and publisher get paid (via PROs like ASCAP or BMI). The recording artist and the record label receive zero compensation for that terrestrial broadcast.

If the U.S. doesn't pay Neighboring Rights for traditional radio, how do American artists make money from broadcasts?

The answer came during the digital era.

The U.S. Congress passed laws requiring that Public Performance royalties be paid to Sound Recording owners strictly for non-interactive digital audio transmissions (such as satellite radio like SiriusXM, or internet radio like Pandora). In the U.S., these specific digital neighboring rights royalties are primarily collected and distributed by SoundExchange. While collective management organizations (CMOs) like SoundExchange (U.S.) or PPL (UK) are the standard mechanisms for collecting Neighboring Rights via statutory blanket licenses, they are not the only legal avenue. Record labels and master rights owners also have the option to negotiate direct licenses with digital radio service.

The reciprocity trap & "Black Box" money

Because the U.S. does not pay foreign recording artists when their music plays on U.S. terrestrial radio, many countries do not distribute these royalties to U.S. rightsholders when their music plays on foreign terrestrial radio. This concept is known as reciprocity.

So, what happens to the money? When a U.S.-based artist's song is played on a public broadcaster in London or Paris, that broadcaster still legally has to pay the neighboring rights royalty. However, since the collection society cannot pay the U.S. artist due to the lack of reciprocity, those funds are placed into a collective reserve known as the "Black Box".

If Black Box Neighboring Rights royalties remain unclaimed for three years, the foreign collection societies will distribute that money to their own affiliated domestic companies (foreign labels and performers) based on market share.

Conclusion

Neighboring Rights are critical but fragmented revenue streams in the global music industry. While most jurisdictions utilizes the Rome Convention to pay performers and labels for almost every public broadcast of a Sound Recording, the United States strictly limits this statutory protection to non-interactive digital audio transmissions.

Understanding this U.S. legal quirk, actively negotiating direct licenses for interactive and foreign uses, and ensuring you are properly registered with organizations like SoundExchange is absolutely vital for modern recording artists and labels to capture the full financial value of their recorded performances.