Home Business News The music trade is headed for a tussle with TikTok over payouts

The music trade is headed for a tussle with TikTok over payouts

The music trade is headed for a tussle with TikTok over payouts


MBW Reacts is a sequence of brief remark items from the MBW staff. They’re our ‘fast take’ reactions – via a music biz lens – to main leisure information tales.

TikTok’s mum or dad ByteDance has a plan to topple Spotify. Bother is, that plan is struggling to get off the bottom.

ByteDance’s music subscription platform, Resso, is at present accessible in simply three markets – Brazil India, and Indonesia.

In response to the Wall Street Journal, ByteDance desires the music trade to license Resso for 12-plus extra world territories, with an eventual plan to launch within the US (and, greater than doubtless, for Resso to be renamed as ‘TikTok Music’).

None of those 12-plus territories, MBW hears, are thought-about main music trade markets.

Both means, the file trade – led by the three main music firms – isn’t taking part in ball.

For one factor, Sony Music just lately refused to re-license Resso full-stop, with its catalog pulled off the service in consequence.

On the identical time, there’s a a lot greater tussle happening: The ginormous development in TikTok’s promoting revenues isn’t – in keeping with a handful of very senior figures within the music trade interviewed by MBW – being mirrored within the cash the platform is paying via to the file enterprise.

And the file enterprise is dropping persistence.

The slowing promoting state of affairs

To know why the file trade is rising more and more aggravated by TikTok’s payouts, it’s price briefly delving into numbers released last month by US commerce physique, the RIAA.

For one factor, the US file trade noticed a major slowdown in development in subscription streaming revenues in H1 2022.

In response to RIAA knowledge, the US recorded music enterprise noticed subscription revenues (‘premium’ and ‘restricted tier’ subscriptions mixed) hit USD $5.03 billion within the first half of this yr. That was up by $462.2 million on the identical interval of 2021.

This was a smaller annual bounce than each equal improve since 2015 – absolutely the primary strong signal of a predictable plateauing of development for music streaming subscriptions within the States.

However let’s be trustworthy: Nobody’s going to be getting overly apprehensive by a YoY improve of practically half a billion {dollars}.

What’s more likely to be rankling/in regards to the world’s greatest music firms proper now?


As you possibly can see above, ‘on-demand ad-funded streaming’ generated $871.5 million for the US file trade in H1 2022.

That’s an RIAA determine, and refers solely to promoting generated on free on-demand companies, together with YouTube, the ad-supported tier of Spotify, plus Facebook… and TikTok.

(This determine doesn’t embody cash generated by YouTube or Spotify’s subscription tiers, nor cash from promoting on ‘lean-back’ digital radio companies.)

“That’s a contraction of annual advert streaming income development of practically two-thirds in actual phrases (2021 vs. 2020) year-on-year.”

The $871.5 million paid by these companies to the file trade within the first half of this yr was up by $123 million on H1 2021 – once more, not a determine to be sniffed at.

Besides when it’s. As a result of in 2021, the US file trade noticed revenues from these ad-supported companies develop by $327.1 million, in keeping with RIAA knowledge analyzed by MBW.

That’s a contraction of annual advert streaming income development of practically two-thirds in actual phrases (2021 vs. 2020) year-on-year ($123m vs. $327.1m, i.e. the 2 orange bars furthest to the appropriate beneath).

A few of that contraction, in fact, is all the way down to the digital promoting market’s robust bounceback in 2021 following the unsure Covid-hit interval of H1 2020.

And a few of it’s all the way down to the macro-economic uncertainties of 2022, with many specialists predicting a softening of digital ad spend usually within the second half of this yr.

However there’s one other narrative at play right here, too.

In response to eMarketer revealed in March, US promoting revenues generated by TikTok are anticipated to almost triple within the US this yr – up from $2.10 billion in 2021 to $5.96 billion in 2022.

That might signify YoY development of over +180% (vs. +170.0% in 2021), and imply TikTok generates extra US advert revenues this yr than Snapchat and Twitter mixed.

So with that explosive development happening, why is it that music’s US advert development from TikTok (and different companies) in H1 2022 didn’t bounce as quick as some would love?

Credit score: QuiteSimplyStock/Shutterstock

The problem at hand

One reply to that query is easy: The capped licensing offers that, thus far, the foremost file firms have struck TikTok.

It is a topic we’ve covered before on MBW:  ‘buy-out’ agreements being inked with TikTok by music’s greatest firms.

In essence, these offers see TikTok pay a lump sum to make use of licensed music throughout its service from a significant’s catalog for two-year durations.

Some within the music trade imagine that is straightforward ‘extra’ cash: i.e. they’re solely licensing TikTok for sub-30-second movies which – some argue – basically act as promotion for correctly monetized music (i.e. on subscription platforms like Spotify).

Others within the music trade, nonetheless, view issues in a different way.

These individuals argue that TikTok is rising off the again of music’s reputation on its platform, and that the music biz’s greatest firms should strike ‘revenue-share’ agreements with TikTok sooner relatively than later. This might give music rightsholders a assured proportion of all income generated on music-led TikTok movies.

There are potential indicators that this latter cohort might now embody Sir Lucian Grainge, Chairman and CEO of Universal Music Group – i.e. the world’s strongest music rightsholder.

We’ll get to why shortly.

The larger drawback

There may be one motive above all others for file firms to be slightly fearful of TikTok: eMarketer concludes that right now, practically two-thirds (61.3%) of ‘Gen Z’ within the US makes use of TikTok not less than as soon as a month.

To place that in easier phrases: TikTok has turn into an lively a part of the lives of the vast majority of younger individuals in america.

That’s the subsequent technology of music shoppers, counting on TikTok for his or her leisure, their advertising, their data – and their new music listening habits.

“That’s the subsequent technology of music shoppers, counting on TikTok for his or her leisure, their advertising, their data – and their new music listening habits.”

You may see why some music executives at the moment are beginning to attract historic parallels to different platforms – MTV and YouTube, particularly – which grew to such a stage of cultural energy, the music trade consequently struggled to dictate business phrases in licensing negotiations.

This was some extent touched on by Sir Lucian Grainge talking on the Music Matters conference in Singapore final month, the place he known as on the music trade to “keep away from repeating previous errors” that had led to energy imbalances with MTV and YouTube particularly.

“[We] got a variety of the explanation why our artists shouldn’t receives a commission,” mentioned Grainge of sure digital platforms over the previous 20 years.

“Folks mentioned, ‘It’s nice promotion’, or ‘you should use it as a platform for locating new artists’ [and then] expertise platforms have been constructed on the backs of the artists’ arduous work and those that invested in artists early of their careers, with little or no return.”

Grainge then famous how Common Music Group – and the music trade alongside it – has made main progress in more moderen occasions by placing forward-looking partnerships with firms corresponding to YouTube and Meta/Fb.

Discussing YouTube, Grainge pointed to the platform’s recent announcement that it paid music rightsholders $6 billion within the 12 months to finish of June 2022 – and that round $2 billion of this determine got here from adverts on user-generated content material.

Grainge known as this a “sea change” from ten years prior – days when the file trade would normally assault YouTube for the so-called “value gap” between the quantity of consumption taking place on its platform and the dimensions of the funds making their strategy to artists, labels, songwriters, and music publishers.

Discussing Meta, Grainge famous that, 5 years in the past, the music trade generated “virtually no cash” from the world’s strongest social platform.

Now, he mentioned, not solely is Meta in UMG’s Prime 10 revenue-generating digital companions, however a ground-breaking revenue-sharing agreement has simply been inked between Common Music Group and Meta for sure sorts of movies on Fb internationally.

Grainge known as his firm’s current partnerships with YouTube and Meta “win-win relationships” the place artists are being “extra pretty compensated” for the engagement they drive on the platforms.

So ought to TikTok now observe Meta and in addition decide to paying a hard and fast proportion of its advert revenues to music trade rightsholders?

Grainge stopped brief at demanding that – and, certainly, of even mentioning TikTok by identify – at Music Issues.

However in MBW’s view, Grainge’s subtext was clear: The fast development of short-form video firms, because of music on their platforms, goes to turn into an issue if the cash paid by these platforms to artists doesn’t begin pretty reflecting their very own income development.

The Common boss raised issues that, simply because the music trade has seen “vital progress” in narrowing the “worth hole” on companies like YouTube, “one other hole is [now] forming quick within the new iterations of short-form video”.

“one other [value] hole is forming quick within the new iterations of short-form video… Let’s work collectively as an trade —majors, indies, and DIY artists alike — to make sure music has each cultural and business worth.”

Sir Lucian Grainge, Common Music Group

Grainge then tellingly known as on your entire music rightsholder enterprise – “majors, indies, and DIY artists alike” – to make sure “music has each cultural and business worth”.

Added Grainge: “If we’ve realized something from the previous, we are going to lead that cost, and create even higher alternatives for a brand new technology of artists rising from markets all around the world.”

Some, MBW included, will see these feedback as one thing of a rallying cry from the world’s greatest music firm for all gamers within the fashionable music enterprise to begin demanding higher phrases from short-form video companies – TikTok particularly.

Watch this area.Music Enterprise Worldwide



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