How India’s Royalty System Works And Why It’s Controversial?

As India’s music industry continues its rapid digital expansion, questions around royalty distribution, transparency, and creator compensation have moved to the centre of industry debate. With the recorded music market now valued at over ?3,000 crore and streaming consumption growing exponentially, the challenge lies in ensuring that the value generated by music ultimately reaches the creators behind it.

At the heart of the conversation is the structure of music rights and the mechanisms through which royalties are collected and distributed across composers, lyricists, artists, labels, and publishers.

Vitasta Kaul, Chief Marketing Officer at Hoopr, explains that India’s royalty ecosystem fundamentally operates around two layers of rights,the sound recording, often referred to as the master, and the underlying musical work comprising the composition and lyrics.

“Every piece of music exists within two rights frameworks,” Kaul says. “The sound recording, which is typically owned by producers or record labels, and the underlying work, which belongs to composers and lyricists. When music is used commercially,whether on streaming platforms, radio, television, live performances, or brand campaigns,revenues flow through these rights structures before reaching the respective stakeholders.”

These revenues are generated from a wide array of sources, including streaming services, television and radio broadcasts, live concerts, public performances in commercial establishments, and sync licensing in films, advertisements, and digital content. Each of these usage points triggers royalty payments that are collected through licensing frameworks and rights management organisations.

However, despite the apparent structure, the system has long been criticised for imbalances in bargaining power and visibility, particularly between large rights holders and independent creators.

“The controversy around royalties in India largely stems from structural imbalances,” Kaul notes. “The 2012 Copyright Amendment was a critical step in strengthening the rights of authors,composers and lyricists,by ensuring they receive a share of royalties. But legacy contracts signed before those reforms, opaque reporting systems, and fragmented enforcement mechanisms continue to create friction in how royalties are tracked and distributed.”

Another major point of debate is the transparency of revenue flows across the ecosystem.

Over the past decade, digital technologies and streaming analytics have improved reporting practices within the industry. Yet many independent creators still face challenges when trying to fully understand how their music generates income across multiple platforms.

“Transparency has definitely improved,” Kaul explains. “Major labels today operate sophisticated accounting and reporting systems, and digital platforms offer far greater usage data than traditional media ever did. But independent artists still often struggle with delayed royalty statements, complex recoupment clauses, and limited insight into secondary revenue streams such as sync deals or international collections.”

Leakages can also occur because of the sheer scale and fragmentation of music usage in India’s digital economy. With thousands of digital videos, brand campaigns, and social media posts incorporating music daily, accurately tracking every usage remains a technological challenge.

“India produces an enormous amount of digital content,” Kaul says. “Music is embedded across OTT platforms, short-form video ecosystems, and branded content. While tracking technologies are improving, real-time, end-to-end transparency,from the platform where music is played to the creator receiving payment,is still evolving.”

From a rights management perspective, licensing remains the backbone of the royalty ecosystem.

Rakesh Nigam, Chief Executive Officer of the Indian Performing Right Society (IPRS), says the system is built on a fundamental principle: whenever music is used commercially, creators and rights holders must be compensated.

“India’s music royalty system operates on the idea that music is intellectual property, and every commercial use of it should generate income for the people who created it,” Nigam says. “Whether music is played on radio, television, streaming platforms, at concerts, in restaurants, hotels, or digital spaces, the creators behind that music are entitled to royalties.”

The process begins with licensing. Music users obtain licenses from copyright owners or authorised representatives, allowing them to legally use music within their businesses or platforms.

“At IPRS, we issue licenses on behalf of composers, lyricists, and publishers,” Nigam explains. “Once those licenses are in place, we collect royalties and distribute them to our members based on actual usage data. The more structured and compliant the licensing ecosystem is, the stronger and more sustainable the royalty flow becomes for creators.”

Within a single song, however, multiple rights exist simultaneously.

“There are publishing rights, which belong to composers and lyricists and are often administered by publishers, and there are sound recording rights, which are typically owned by record labels,” Nigam says. “IPRS administers the authors’ and publishers’ share of the musical and literary works. The royalties collected are distributed according to internationally accepted rules and based on usage data.”

He adds that under Indian copyright law, composers, lyricists, and publishers typically share royalties equally within the publishing framework.

“At the same time, it is important to understand that IPRS only licenses and distributes royalties for musical and literary works,” Nigam clarifies. “We do not collect royalties for singers or performers, nor for sound recordings owned by record labels. Those rights are administered separately by the respective rights holders or their authorised entities.”

While reporting systems have improved significantly in the digital era, transparency remains closely linked to the quality and completeness of usage data submitted by licensees.

“Digitisation has certainly strengthened transparency,” Nigam says. “Streaming platforms and digital services provide detailed usage information, allowing for far more granular royalty distributions. At IPRS, we follow defined distribution cycles and provide members with detailed statements showing where their works have been performed and what they have earned.”

However, he acknowledges that challenges arise when usage data is incomplete or inconsistent.

“In situations where data from licensees is not fully available, it becomes difficult to allocate royalties strictly on performance metrics,” Nigam explains. “In such cases, we apply approved distribution rules and established analogical methodologies to ensure royalties are still distributed in a fair and structured way despite those limitations.”

Beyond transparency, the industry is also grappling with a fundamental economic issue: the low monetisation of music consumption in India.

Streaming has dramatically expanded the reach of Indian music worldwide, but the financial returns per stream remain relatively low.

“Streaming has transformed access and discovery,” Nigam says. “Indian music today reaches global audiences through licensed digital platforms where royalties are distributed based on usage data. However, the full economic potential of streaming in India has not yet been realised.”

The primary reason is the limited penetration of paid subscriptions.

“A large proportion of listeners in India still consume music on free, ad-supported tiers, while paid subscribers represent only a small fraction,” he notes. “This restricts the overall revenue pool from which royalties are distributed, and that directly affects what creators earn.”

Industry estimates suggest that streaming payouts in India often fall between Rs 0.05 and Rs 0.10 per stream, among the lowest globally. In such an environment, scale becomes a decisive factor in earnings.

“Large labels naturally have an advantage because they control extensive catalogues and distribution pipelines,” Kaul says. “When revenue is driven by volume, scale becomes the biggest driver of income. Independent artists, with smaller catalogues, often need to diversify their monetisation strategies.”

Despite these structural challenges, both Kaul and Nigam believe the ecosystem is gradually moving toward a more balanced model.

Nigam identifies three critical pillars that could strengthen India’s royalty framework: stronger licensing compliance, accurate usage reporting, and consistent enforcement.

“Every commercial user of music,from large digital platforms to small hospitality businesses,must obtain a valid license and recognise music as protected intellectual property,” he says. “Equally important is accurate metadata: proper song registrations, correct IPI numbers, and clear publishing information. Without accurate data, royalty distributions cannot be truly fair.”

Regulatory enforcement also plays a vital role in closing revenue gaps.

“Without consistent enforcement and accountability, gaps in licensing and reporting will continue to impact creator earnings,” Nigam adds. “A robust royalty ecosystem ultimately rests on three foundations: proper licensing, accurate reporting, and firm enforcement across all sectors where music is used.”

As India’s music economy grows and global interest in Indian artists increases, the royalty debate reflects a broader transformation within the industry. Artists are increasingly exploring hybrid models,retaining publishing rights, launching independent labels, and monetising through sync deals, brand collaborations, and international markets.

The evolution of these models may gradually reshape how value is distributed across the ecosystem.

For now, however, the central question remains unresolved: whether India’s royalty system can fully balance the interests of labels, platforms, and creators in a rapidly expanding digital music economy.