Direct Licensing: An Alternative to Collective Royalty Management in Copyright

The collection of royalties for songs and/or music in Indonesia is carried out by authorised institutions that collect, distribute, and manage royalty rights — namely Collective Management Institutions (LMK) and the National Collective Management Institution (LMKN), as regulated under Law No. 28 of 2014 on Copyright and its implementing regulation, Government Regulation No. 56 of 2021 on the Management of Copyright Royalties for Songs and/or Music.

Having two institutions involved in royalty management — LMK and LMKN — has the potential to create disharmony in authority, particularly around collection, calculation, and distribution. This has led to legal uncertainty, compounded by juridical debate over the limits of LMKN's authority. A number of musicians and songwriters have also voiced frustration at a mismatch between the royalty amount received and what they believe they are owed, suggesting that the current distribution mechanism lacks sufficient participation and may run counter to the principle of distributive justice in protecting a creator's economic rights.

Out of these issues has emerged the idea of direct licensing as an alternative mechanism. This system allows a copyright owner to license a user directly, without going through a collective management institution such as LMKN. Indonesia's Copyright Law itself leaves room for this, particularly through the recognition of economic rights under Article 9(1) and the licensing provisions in Article 81 — though it does not yet explicitly regulate direct licensing as a standalone system.

One key issue that arises is the potential for double royalty collection. In practice, even where a creator has entered into a direct licence with a user, that user can still be required to pay through LMKN under a blanket licensing mechanism — a collective licence covering an entire catalogue of works for a single payment. In that context, direct licensing is seen as an alternative grounded in the creator's exclusive right under Article 9(1) of the Copyright Law. The regulatory landscape here also intersects with Government Regulation No. 56 of 2021 and Minister of Law and Human Rights Regulation No. 9 of 2022 as implementing rules. Even so, the absence of explicit regulation for direct licensing remains the main obstacle to a fairer, more transparent, and more adaptive royalty management system.

According to Tomi Suryo Utomo, the legal complexity in the copyright regime stems from disharmony between provisions of Law No. 28 of 2014 on Copyright — specifically between Article 9(3), Article 23(5), and Article 81. He argues that while Article 9 affirms a creator's exclusive right to permit or prohibit use of their work, Article 23 introduces a collective management mechanism through LMK, while Article 81 in turn allows a creator to license directly. This meeting point between individual and collective approaches creates a normative tension that fuels debate over direct licensing. He has also questioned the effectiveness of LMKN's royalty management, particularly on transparency and accountability in distributing royalties to creators.

Indonesia's Directorate General of Intellectual Property (DJKI) has highlighted several strategic issues in the copyright regime as part of an effort to refine the music royalty system through a revision of Law No. 28 of 2014 on Copyright. One issue receiving particular attention is the application of direct licensing. While there is support for the coexistence of direct licensing alongside the collective system, DJKI has stressed the importance of designing protections for musicians who are in a relatively weak bargaining position. This has given rise to the idea of a Direct Licensing Data Centre (PDDL) as a potential solution requiring further legislative development. At the same time, DJKI maintains that a single-gateway royalty payment system through LMKN remains the most efficient and equitable mechanism — one that prevents fragmentation in licence management, improves transparency, and more evenly guarantees the rights of creators, copyright holders, and related-rights owners.

The various issues in royalty collection by LMK and LMKN have driven the emergence of direct licensing as an alternative collection mechanism. It offers a solution by giving creators direct control, which can improve transparency, distribution efficiency, and flexibility in licensing arrangements. Without clear regulation, however, direct licensing could also create new problems — making it more appropriate, for now, as a complementary alternative within the broader royalty management system rather than a wholesale replacement for it.