BUSINESS
Adrian Barnardo is a lawyer at the entertainment law firm Taylor Oballa Murray Leyland LLP . The firm represents Academy and Grammy Award winners , production companies , artists , and new media pioneers . For more information , please visit : www . tomllawyers . com .
By Adrian Barnardo
Know Thy Neighbouring Rights
Many musicians are likely familiar with organizations such as Re : Sound and SoundExchange and the royalties associated with them ; however , the purpose of these royalties and who is entitled to them is a subject that is much less commonly understood .
With this article , I hope to shed some light on this somewhat confusing topic and illustrate why it has become an increasingly important revenue stream .
A Primer In so far as it pertains to recording artists , the term “ neighbouring rights ” refers to the rights that performers on recordings have in their performances . A similar right exists for the maker of a sound recording .
The Canadian Copyright Act grants a right to equitable remuneration for makers and performers on sound recordings when they are performed in public . As a result , bars , restaurants , retailers , radio stations , online webcasters , and other music users must all pay a fee in order to use recorded music . It is important to note , however , that the Act does not include a right to equitable remuneration for on-demand or interactive streaming services such as Spotify or Apple Music .
Neighbouring rights gained recognition in Canada in 1997 as a result of Canada ’ s obligations under the Rome Convention for the Protection of Performers , Producers of Phonograms and Broadcasting Organizations .
According to the World Intellectual Property Organization , 93 countries are currently signatories to the Rome Convention . Notably , though , the United States in not among them . As such , remuneration is not paid for public performances of sound recordings in the U . S . via terrestrial radio ( although remuneration is now paid for public performances of sound recordings via digital satellite broadcasts and webcasting ).
Administration Neighbouring rights royalties are generally administered by collective rights organizations around the globe . Users of recorded music ( businesses and broadcasters ) typically pay fees to the relevant organization in the territory concerned , and that organization will then distribute those fees to the appropriate parties .
In Canada , the relevant organization is Re : Sound . Canadian copyright law mandates that these fees be divided equally between the maker of the sound recording ( in many cases , a record company ) and the performers on the sound recording . According to Re : Sound , performers can collect their royalties ( sometimes known as the “ performer ’ s share ”) by registering with one of three member organizations : ACTRA RACS , Artisti , or MROC .
A portion of the performer ’ s share is allocated to “ featured performers ” ( i . e . the principal performers on a recording ) and the remainder to “ non-featured performers ” ( i . e . the background musicians ). According to ACTRA RACS , 80 per cent of the royalties are distributed to the featured performer ( s ) on a recording and 20 per cent to the non-featured performer ( s ).
In the U . S ., remuneration for digital satellite broadcasts and webcasting is administered by SoundExchange . According to SoundExchange , 45 per cent of performance royalties are paid directly to the featured artists on a recording and 5 per cent are paid to a fund for non-featured artists . The other 50 per cent of the performance royalties are paid to the owner of the sound recording .
SoundExchange regularly honours “ letters of direction ” from artists who wish to redirect a share of their royalties from the organization to creative service providers ( e . g . producers and mixers ) who were a part of the creative process but would not otherwise receive such royalties directly . This administrative function can be of value to artists who are obligated to pay a portion of their royalties to such creative collaborators as part of the contractual arrangements made for the services of those parties . SoundExchange will not , however , direct payments to persons not directly involved in the creative process .
Get Registered Monies generated by performance rights represent an increasingly important revenue stream . According to IFPI ’ s “ Global Music Report 2017 : State of the Industry ,” performance revenues grew by 7 per cent to $ 2.2 billion USD in 2016 . This figure accounts for 14 per cent of all recorded music industry revenues . Growth in this area is likely to continue as global music consumption trends away from an ownership model driven by purchases of physical and downloaded product , and towards an access model driven by subscription and advertising revenue .
For those artists under contract with a record company , there is an added benefit to the current neighbouring rights regime . Generally , the company ’ s share and the performer ’ s share are paid to each party directly . As a result , the performer ’ s share does not have to flow through the record company before reaching the artist , meaning such revenue will not be subject to any applicable recoupment and / or royalty provisions in the artist ’ s deal with the record company that might otherwise serve to reduce amounts payable to the artist .
It is incumbent upon today ’ s musicians to have an understanding of neighbouring rights and how to collect the related royalties . Failure to do so could result in unclaimed royalties never reaching their rightful owner . To avoid missing out on potentially significant monies , musicians should ensure that they and their recordings are properly registered with one or more collective rights organizations .
The views and opinions expressed in this article are not meant to substitute for legal advice , which should be sought in each particular instance .
62 • CANADIAN MUSICIAN