Who Gets Paid When the Music Plays? A Guide to Indonesian Music Royalties in Commercial Premises

 

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For many businesses, music has become an inseparable part of their daily operations. A cozy café curates playlists to create ambience, hotels use background music to elevate guest experience, and even banks or offices often play soft tunes in their waiting areas. Although playing music in public spaces may seem trivial, or even essential to support a business atmosphere, there are certain rights that need to be understood.

Each instance of music being played through Digital Streaming Platforms (“DSPs”) or other recorded formats in commercial spaces is regarded as a form of commercial exploitation of copyrighted works. Playing music in a business setting is not without cost, it comes with royalty obligations to the relevant rightsholders.

In this ARMA Update, we unpack the legal framework on music royalties in Indonesia, explain Lembaga Manajemen Kolektif Nasional (“LMKN”)’s central role, and outline practical steps and alternatives for businesses to manage their obligations effectively.

  1. Who Gets Paid when Music Plays?

    In essence, every song made commercially available actually carries two layers of copyright:

    1. The copyright in the musical composition (the melody and/or lyrics) – owned by the composer or songwriter.
    2. The copyright in the sound recording (commonly referred to as “Master”) – typically owned by the producer or record label.

    The composer or songwriter holds copyright over the composition itself, while the producer or record label enjoys copyright protection over the fixation of that composition in the form of the sound recording (commonly recognised as neighbouring rights).

    Playing a Master recording in commercial spaces (such as office buildings, restaurants, or other facilities covered under the Decree of the Minister of Law and Human Rights No.: HKI.2.OT.03.01-02 of 2016 on the Ratification of Royalty Tariffs for Users Engaging in the Commercial Utilization of Copyrighted Works and/or Neighbouring Rights in Music and Songs) is considered a form of commercial exploitation. This triggers an obligation to pay royalties to two groups: (i) the Composer/Songwriter, and (ii) the Producer/Record Label. In Indonesia, the collection and distribution of these royalties are centrally administered by LMKN. 1

  2. The Role of LMKN

    LMKN functions as the central body responsible for royalty collection and distribution in Indonesia, ensuring that both copyright holders and neighbouring rights holders receive their respective shares from commercial uses of music.

  3. Royalty Payment Process

    While the Indonesian Copyright Law (Law No. 28 of 2014 on Copyright, and its Amendments) requires businesses to pay music royalties, it does not spell out the technical steps. In practice, it is the LMKN that provides the practical roadmap. There are two main pathways, depending on the nature of the business:

    1. General or Annual Businesses (permanent establishments) – Hotels, restaurants, and other businesses with fixed locations fall under this category and are handled manually. The process begins when the business contacts LMKN through its website. From there, a licensing officer assists in completing the necessary documentation, calculating the applicable fees, and arranging the collection of royalties.
    2. Periodic Businesses (event-based activities) – Concerts, exhibitions, and other temporary activities are treated differently. In these cases, royalty payments are made online. Users simply fill out a form on LMKN’s licensing portal, which then calculates and processes the royalty obligations electronically.

    The amount of royalties payable is determined based on sector-specific tariffs set out under the Minister of Law and Human Rights Decree No. HKI.2.OT.03.01-02 of 2016, which serves as the main reference for businesses engaging in the commercial use of music.
    1. Article 3 of GR 56/2021 jo. Article 21 of MOL Reg 27/2025

Disclaimer:
This client update is the property of ARMA Law and intended for providing general information and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. ARMA Law has no intention to provide a specific legal advice with regard to this client update.

 
 

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