Fixing Nepal’s Music Royalty System

Music is everywhere. It plays in our favorite clubs, fills hotel lobbies, energizes sports leagues, and quietly accompanies television ads. Lately, however, music has also been making headlines for a different reason: royalty disputes. From clubs facing fines to questions over music use in emerging sports leagues, one word keeps surfacing—royalties.

But what exactly are music royalties, and why should businesses, artists, and the public care? Simply put, music royalties  are payments made to creators for the use of their music. These creators include songwriters, composers, lyricists, performers, and producers. Whenever music is played publicly—whether live or recorded—it is not “free”. Someone owns it, and that owner has a legal right to be paid.

In Nepal, this right is protected under the Copyright Act, 2002, which recognizes musical works, sound recordings, and performances as protected subject matter. Playing music in a club, broadcasting it on television, streaming it online, or using it at a sports event all count as public use which triggers royalty obligations. Ignoring this does not only harm artists. It can also expose businesses to fines, operational disruptions, and even closure, as several recent cases in Nepal have shown.

Legal Framework Governing Music Royalties in Nepal

The Copyright Act grants creators economic rights, including the exclusive right to reproduce their works, perform them publicly, broadcast them, and communicate them to the public. To make royalty collection  practical, the law allows for collective  management of these rights.

This is where the Music Royalty Collection Society Nepal (MRCSN) comes in. Established under the Act, the MRCSN licenses music use and collects royalties  on behalf of creators. Royalty rates are generally fixed under  approved guidelines. For example, hotels pay annual royalties  based on room numbers and category; broadcasters pay a percentage of advertising revenue per song; and event organizers must obtain permission before using music publicly. Copyright protection lasts for the life of the author plus 50 years, and infringement can result in fines ranging from Rs 10,000 to Rs 200,000, as well as possible imprisonment.

How the Royalty System Works in Practice

Artists must first register with a collective  management organization, such as MRCSN or the Performers Society of Nepal, to receive royalties.  On the other hand, businesses such as clubs, hotels, broadcasters, and event organizers must obtain licenses or pay royalties according  to prescribed tariffs.

New sectors, particularly  professional sports leagues, are encountering these rules for the first time. Playing recorded music during matches or events counts as public performance. Failure to secure permission can—and already has—led to disputes. In theory, this system seeks to balance the interests of creators and users. In practice, however, rapid changes in technology and consumption patterns have exposed gaps that the law has yet to fully address.

Digital Platforms, YouTube, and the Question of Double Payment

One of the most contested areas today is the use of music from digital platforms such as YouTube. Music available on YouTube is not legally free. Artists and publishers earn revenue through advertisements, subscriptions, and licensing arrangements with the platform.  To users, however, the music appears freely accessible.

This has created confusion when restaurants, cafes, and shops are asked to pay royalties  even when  music is played from YouTube or when music is not intentionally provided as part of the business service. The law does not clearly distinguish between deliberate commercial use of music and incidental or uncontrollable use, such as customers playing music on their own mobile phones.

As a result, many businesses feel they are being charged twice: once indirectly through YouTube’s monetization system and again through local royalty demands. This lack of clarity has fueled resentment and disputes, particularly  among small and medium enterprises.

Public Performance Vs Incidental Listening

At the heart of this controversy lies the definition  of public performance. The law treats any music played in a public place as a royalty-triggering act, but it does not adequately account for context, intent, or control.

There is a clear difference between a nightclub that curates music to attract customers and a small restaurant where music, if present at all, is incidental and not part of the service offering. Similarly, there is a difference between a venue that installs sound systems for ambiance and one where customers play music on personal devices without the business’s involvement.

The absence of such distinctions has led to enforcement based on assumptions rather than evidence, undermining confidence in the royalty system.

Consumer Law Concerns and Hidden Costs

Another serious concern arising from this legal ambiguity is its potential impact on consumer rights. When the law is unclear about who must bear royalty costs, businesses may attempt to pass them on to customers by adding a “royalty charge” to bills.

This creates the risk of hidden costs imposed without the customer’s knowledge or consent. Not all customers will accept such charges, especially when music consumption was neither requested nor central to the service provided. Such practices may violate consumer protection principles, which require transparency, informed consent, and fairness in pricing.

The law should clearly state that royalties,  where applicable, are a cost of business compliance and must not be transferred to customers through compulsory or concealed charges. No customer should be forced to pay for intellectual property usage decisions made by a business.

What Has Been Happening in Nepal Recently?

Nepal has witnessed a noticeable rise in enforcement actions. Popular nightlife  venues, including clubs in Thamel, have faced legal action for the unauthorized use of music, with reported settlements amounting to hundreds of thousands of rupees in back royalties.  Hotels and casinos have also been penalized, in some cases facing license suspension for failing to pay royalties.

At the same time, awareness among artists remains  limited. Many creators still struggle to understand how royalties  are collected and distributed. While the standardization of rates through official guidelines  has helped  increase collections, transparency and trust in the system continue to be major challenges. The growing perception that enforcement targets users more than empowering creators risks undermining the legitimacy of the entire royalty regime.

Nepal Is Not Alone

Nepal’s debates over music royalty mirror disputes seen around the world. Internationally, artists have sued major labels over opaque deductions; class-action lawsuits have accused companies of withholding streaming income; and courts have struggled with complex questions of cross-border ownership of music catalogues.

These cases reflect the same concerns Nepal now faces: fair compensation, transparency, and effective enforcement in the digital age. As a member of the World Trade Organization (WTO) and a signatory to the TRIPS Agreement, Nepal must continue strengthening its copyright system while also ensuring that Nepali creators receive  reciprocal  protection and earnings abroad.

Toward a Balanced Approach

A modern royalty framework must evolve alongside changing technology and consumption habits. Clear legal definitions are needed to distinguish intentional commercial  use of music from incidental listening. Platform-level licensing solutions could help prevent double payment in cases where digital platforms already compensate rights holders. Equally important is clarity on liability. Royalties should remain a business obligation  and must not be passed on to consumers. Enforcement should be evidence-based, proportionate, and transparent, encouraging compliance rather than fear.

Why This Matters

Music royalties  are not about punishment or control; they are about respecting creative labor. When  royalties  are paid fairly and transparently, artists earn sustainably, businesses operate with legal certainty, consumers are protected, and cultural ecosystems can flourish.

When laws fail to keep pace with reality, confusion replaces compliance and disputes replace trust. So, the next time music plays at an event, in a bar, or during a match, remember that song is not just entertainment—it is someone’s livelihood, and the system governing it must be fair to everyone involved.

Looking Forward

Looking ahead,  it is essential for the MRCSN to clearly and unambiguously define who is required to pay music royalties  and under what circumstances. The mere act of operating a restaurant or a hotel should not automatically trigger royalty liability. The scope of compulsory payment must be limited to intentional and commercial use of music, and communicated transparently. Once that scope  is defined,  enforcement should be consistent and strict to avoid selective or arbitrary action.

There is also growing concern that disputes could arise in which a registered artist receives royalties, while the composer or lyricist does not, or vice versa, due to weak internal distribution mechanisms and lack of transparency. Strengthening accountability in royalty distribution is just as important as enforcing collection.  Rather than imposing blanket obligations on every business, a selective and evidence-based approach could offer a more practical short-term solution. Requiring proof of royalty clearance during business renewal, supported by targeted legal amendments,  could reduce confrontation while improving compliance.

If practical  and balanced reforms are not introduced soon, there is a real risk of backlash from restaurant and business associations, including organized protests. In such a scenario, the very artists whose livelihoods royalties  are meant to protect could become unintended victims. Sustainable solutions will not emerge through coercion alone. Artists, royalty societies, businesses, regulators, and consumer bodies must work together to build a system that is fair, transparent, enforceable, and trusted by all stakeholders.

(This opinion aricle was originally published in January 2026 issue of New Business Age magazine.)