Neighbouring rights: the royalty US radio does not pay performers

Neighbouring rights are performance royalties paid for the use of a sound RECORDING, as distinct from the performance royalties paid for the underlying composition.

The mechanism

Two separate copyrights exist in most songs: the composition and the recording of it. Performing rights organisations collect for the composition. Neighbouring rights collect for the recording, and are split between the featured artist, the non-featured performers and the rights holder. They are administered by different bodies in different territories, which is why they are the most commonly unclaimed income in music.

A worked example

A record played on digital radio generates a composition royalty routed through a PRO to the writers, and a separate recording royalty routed through a neighbouring-rights body to the performers and the label.

A song on US terrestrial radio pays the writer and pays the performer nothing.

What it is confused with

Performing rights organisation A PRO collects for the composition and pays writers and publishers. Neighbouring rights collect for the recording and pay performers and the recording's owner. Registering with one does not register you for the other.
Master versus composition Master versus composition is the ownership distinction. Neighbouring rights are one specific income stream that flows from the recording side of that split.

Why it matters

In the United States, terrestrial AM/FM radio pays the composition side but pays the recording side nothing at all. A record can be in heavy rotation on American radio and generate zero neighbouring-rights income domestically, while the same play in most other countries would pay the performers.

Sources: US Copyright Office
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Related: Recoupment · Black box royalties · 360 deal