What Are Neighboring Rights?

In countries outside the U.S., where public performances compensate the songwriter or music publisher when their song is broadcasted publicly, neighboring rights compensate the recording artist or record label associated with the sound recording of the song.

Neighboring rights do not currently exist within the U.S.—that is, sound recording copyright owners do not receive any royalties from the broadcast of sound recordings in the United States. 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.

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In this newsletter:

The Mechanical Licensing Collective (MLC) has distributed nearly $2.5 billion in royalties since it started operations three and a half years ago. That’s a $1 billion increase in the past year alone.

With the TikTok-Merlin deal nearing expiration, indie labels are concerned about TikTok’s allegedly reduced payout offers. Leaks suggest that TikTok is sending standardized contracts with lower terms than those under Merlin’s current deal, putting labels in a tight spot.

Recent reports of a sharp decline in U.S. vinyl sales for 2024 have sparked debate. Billboard initially claimed a 33.3% drop in vinyl sales compared to 2023. But according to the Vinyl Alliance, vinyl sales are actually up 6.2%.

Now, the details...

Exploration Weekly - October 18, 2024
Compiled by Ana Berberana

The MLC Nears $2.5BN in Royalties Distributions to Songwriters and Publishers Since 2021

The Mechanical Licensing Collective (The MLC), the entity that collects mechanical royalties in the US, has announced it has distributed nearly $2.5 billion in royalties since it began operations three-and-a-half years ago. That’s up by roughly $1 billion in just the past year (The MLC reported in October 2023 that it had distributed $1.5bn in royalties) and up by almost $500 million since March, when the org confirmed that it had exceeded $2 billion in royalties distributed to publishers and songwriters. The MLC was established under the Music Modernization Act (MMA) of 2018, which mandated the creation of an agency that would administer the blanket compulsory mechanical licenses issued to eligible streaming services operating in the US. The MLC says that, since its first monthly royalty distribution in April 2021, it has enrolled some 47,000 members, including 11,000 so far in 2024. Its publicly accessible database of music now includes 42 million works, including 7 million added this year. That database of music ownership has a match rate of over 90%, and The MLC has received and approved nearly 2 million proposed matches submitted by members through its Matching Tool. The MLC’s payouts include $150 million in historical royalties, the collective said in a statement issued on Friday (October 11). “We’re incredibly grateful for the support we have received from our members and industry partners,” The MLC’s CEO, Kris Ahrend, said in a statement. “It is because of their support and partnership that we have been able to fulfill our mission so effectively and achieve these milestones.”

WIN Calls Out TikTok Indie Label ‘Negotiations,’ Warns of ‘Risks to Cultural Diversity, Market Access, and Fair Payment’

Last week, ahead of the TikTok-Merlin deal’s expiration, leaks shed light on the app’s alleged hardball offers to individual indie labels. Now, the Worldwide Independent Network (WIN) and several member organizations are speaking out against the possible attempt “to pay less for music.” WIN as well as the American Association of Independent Music (A2IM) and others weighed in on the matter today, following the mentioned contract-detail leaks. Multiple indie-label sources have described receiving standardized contracts (not being engaged directly) proposing far lower payout terms than under the Merlin union. And with just 17 days until that Merlin-TikTok pact’s expiration the clock is ticking for labels to choose between accepting allegedly reduced terms and exiting the ultra-popular app. Bearing in mind this far-from-ideal backdrop, WIN CEO Noemí Planas is voicing the belief that “TikTok’s decision poses risks to cultural diversity, market access, and fair payment for independents.” Policymakers, the WIN head of nearly two years proceeded, should “regulate the tech sector to ensure a truly competitive market where creators’ rights are protected from abusive and monopolistic behavior.” Meanwhile, Richard Burgess, CEO of the A2IM, is also speaking out against TikTok’s unwillingness to renew its Merlin tie-up and doubling down on calls for legislative action. “TikTok’s unwillingness to negotiate a licensing deal with Merlin is just the latest example of the platform doing whatever it can to avoid compensating artists fairly,” communicated Burgess. “Now, more than ever, we need Congress to enact the Protect Working Musicians Act and give musicians, songwriters, independent labels, and publishers the ability to negotiate collectively in the marketplace.” Additionally, the Independent Music Companies Association (IMPALA), the Record Label Industry Association of Korea (LIAK), the Associação Brasileira da Música Independente (ABMI), and Independent Music New Zealand (IMNZ) likewise provided statements criticizing TikTok’s strategy and calling in more words for a renewed Merlin agreement.

Vinyl Alliance Criticizes Claims of a Drop in US Vinyl Sales

Concerns are emerging in the US around recent figures suggesting that vinyl sales there have seen a sharp decline in 2024. Vinyl Alliance is a global organization representing the various elements in the vinyl ecosystem, from labels and distributors to pressing plants and packaging suppliers – and it begs to differ. The original figure was published as part of Billboard’s national music consumption report in early October. It claimed that there had been 23.3m vinyl units sold in 2024 so far, 33.3% down on the 34.9m units sold in the corresponding period last year. The stats came from research firm Luminate, which provides Billboard with its charts data. “Beginning in 2024, Luminate (Billboard’s data source) made a major change to the way it reports data on physical media sales—a change which makes accurate YoY comparisons not possible using its changed model,” claimed the Vinyl Alliance, adding that follow-on reports of a vinyl-sales decline are a “false narrative”. “The bottom line? US vinyl sales through the first three quarters of 2024 are actually UP 6.2% — as reported by Luminate’s readjusted model which accounts for the previously mentioned changes”. There’s a third source to call upon in this discussion, and that’s US labels body the RIAA’s mid-year figures, which were published in August. It reported that in the first half of 2024, vinyl sales grew 10.7% year-on-year in unit terms to 24.3m, while revenue from those sales was up 17% to $739.9m.

John Lennon Estate Appoints the UK’s PPL to Collect Neighboring Rights Royalties

The estate of John Lennon has appointed the UK’s PPL to collect neighboring rights royalties on all sound recordings where John Lennon or Yoko Ono are listed as a performer. This means PPL will collect broadcast and public performance royalties in markets where such rights exist for the estate’s interests in John Lennon, Yoko Ono and The Beatles. Global revenues for neighboring rights (NR) reached a record $2.7 billion in 2023, up 9.5% YoY, according to the IFPI. PPL has 111 agreements in place with other collective management organizations (CMOs) around the world. In total, Lennon released 11 solo albums and 23 singles and as a performer, writer or co-writer secured 25 No.1 singles on the Billboard Hot 100. He accumulated 23 million record sales as a solo artist and three Billboard No.1 albums. The John Lennon Estate said: “PPL has shown they are the leaders in advocating for neighboring rights globally. We have the utmost respect for the team and look forward to working with them.” Peter Leathem OBE, CEO of PPL, added: “It is an honor to be appointed by the John Lennon Estate for neighboring rights collections. Our team works hard to ensure no stone is left unturned in the collection of neighboring rights royalties around the world. “It is a privilege to advocate for and collect public performance and broadcast rights globally for such a revered catalog of recorded music.”

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