TikTok vs. record labels

In the beginning, TikTok paid labels a flat fee to license music for use in users’ videos.

Today, TikTok is massive:

• It earned $4B in revenue in 2021 and is on track to earn $12B in 2022.
• There are 1B+ users with videos featuring music on the platform.

Now, Universal Music Group, Sony Music Entertainment, and Warner Music Group — which, combined, hold 70%+ of market share — want TikTok to fork over more in advertising revenue and royalties, per Bloomberg.

TikTok…

… is a huge music marketer, surfacing new talent — 75% of US TikTok users find new music there — and promoting artists.

Songs can also go viral, like Megan Thee Stallion’s “Savage,” used in 24m+ videos. But, due to that flat fee, they don’t generate extra revenue.

• One exec says TikTok should be paying 2x-10x more, based on similar agreements with other platforms, per Bloomberg.
• For example, YouTube paid the music industry $6B+ between July 2021 and June 2022.

TikTok argues it shouldn’t have to pay the same as music platforms ‘cause it isn’t one.

Or is it?

TikTok parent company ByteDance has a music streamer, called Resso, in Indonesia, Brazil, and India with plans to expand.

Other clues:

• It recently registered a trademark for a “TikTok Music” app.
• Its SoundOn feature allows artists to upload and earn royalties on their music.
• It’s hiring people to sign and develop new artists.

TikTok and the labels will likely come to an agreement, or at least an extension, before contracts expire in a few months. But TikTok may ultimately end up on top.