One factor that strengthened TikTok as a content creation tool was the inclusion of an extensive musical catalog, available thanks to the signing of contracts between the platform and the main companies in the recording sector.
Universal Music Group, Sony Music Entertainment and Warner Music Group asked ByteDance for an increase in the royalties paid by TikTok, now that the platform registers a source of income not contemplated at the time of negotiating their respective contracts: the inclusion of advertising.
Major record companies want to renegotiate the presence of their music on TikTok
The three major record labels mentioned above, Sony, Warner and Universal, announced their contracts with TikTok in November 2020, January 2021 and February 2021, respectively.
The agreements between the social network and the record companies subjected the platform to a system of fixed rates to access its music collection, instead of charging a percentage of the company’s income. This model was applied considering that at that time, TikTok was just beginning to roll out its advertising system.
Over time things changed. As reported BloombergTikTok’s advertising business has already consolidated, absorbing part of the share previously monopolized by YouTube and Snap, being a key factor in the $12 billion dollars projected as earnings for 2022, considerably exceeding the $4 billion dollars earned by the company a year ago.
Contracts between TikTok and record labels are for two years, but can be extended for additional short terms, should negotiations drag on, to prevent music from disappearing from the platform.
While the record companies seek to increase their profits in the face of the company’s growth, considering that their contracts date from times when the platform was much smaller, TikTok defends itself by arguing that it has already contributed enough to the music industry as a promotional tool, being a bridge between artists and audiences, by acting as a complement to listening to music and not a replacement for platforms like YouTube or Spotify.
“We are committed to creating value for rights holders, songwriters and artists when their music is used and we are proud of the deals we have struck and the growing revenue stream we have brought to the industry in just a few short years.”Ole Obermann, TikTok’s global head of music and a former Warner executive, said in a statement to Bloomberg.
In conversation with the aforementioned source, an executive from one of the major record labels pointed out that TikTok should be paying between two and ten times more than its existing agreement, in relation to the rates applied with other massive platforms, such as Facebook and YouTube.
A new factor that could be reconfiguring this scenario is the eventual incursion globally by ByteDance in the streaming music sector, possibly under the TikTok Music brand. They already have Resso, a platform available in three countries, which ByteDance has tried to expand to more territories, but offering its partners a lower payment than its peers, such as Spotify and Apple Music. Given the refusal ofFor rights holders, this road has been uphill for them, to the point that Sony removed their music from Resso earlier this year.
As cumbersome as this scenario may seem, between executive and legal matters, the parties involved stated that they wanted to reach an agreement regarding music on TikTok without reaching any public lawsuit, valuing the reciprocal contribution that this relationship generates.
