In the beginning, TikTok paid labels a flat fee to license music for use in users’ videos.
Today, TikTok growth 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 the market share — want TikTok to fork over more in advertising revenue and royalties.
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.
TikTok growth and the music industry
One exec says TikTok should be paying 2x-10x more, based on similar agreements with other platforms. To put it in context: 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 – because 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.
Clues that TikTok could cut out the middleman and become its own music partner:
- It recently registered a trademark for a “TikTok Music” app.
- Its SoundOn feature allows artists to upload and earn royalties on their music.
- The company is 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 I think TikTok is going to win this one.
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