Cheeky dance videos on TikTok just got a lot more awkward. Universal Music the $54 billion company behind more than a third of the market including pop sensation Taylor Swift and rapper Bad Bunny, pulled its dominant catalogue from the social-media app after the two companies failed to reach an agreement on a new licensing contract. The silence will be deafening.
Bad publicity at Sunday’s Grammy Awards should provide a fresh spark for the talks. Host Trevor Noah called out TikTok for “ripping off artists,” joking that that was Spotify’s job. The zinger echoes Universal’s own complaint in an open letter, that TikTok is not willing to compensate artists fairly when their songs are used as backing tracks on user-generated clips.
While it’s not clear how much TikTok had been paying, Universal said the platform accounts for less than 1% of its roughly $11 billion in revenue and during negotiations had offered to pay “a fraction of the rate” offered by rival social-media services. Another supposed sticking point for Universal is TikTok’s support of artificial intelligence-generated tunes, which could jeopardise income for the singers and bands who write the original tracks.
Perhaps more notable is that Universal generates more money from users who pay to listen than from advertising-dependent business models. Through the nine months ending Sept 30, digital subscriptions brought in $3.4 billion, more than triple what streaming did.
Few musicians have Swift’s following, however. Far more of them will be squeezed by losing an important way of reaching wider audiences, a concern voiced recently by singer-songwriter Muni Long. Ditching TikTok also will limit Universal’s ability to milk additional money from older hits, which can be lucrative with the help of the app’s ballyhooed algorithm, as occurred with Fleetwood Mac’s “Dreams.” Songs that get popular on TikTok often drive listening elsewhere, making it one of the industry’s most powerful promotional tools.
TikTok has its own incentives to get Universal’s music playing again. Because it’s owned by China’s ByteDance, it faces pressure from US lawmakers as it feverishly tries to further capitalise on its success with an initial public offering. Having grown into a worldwide phenomenon from an app called Musical.ly, TikTok can ill-afford to stray too far from those roots. Although renowned twosomes like Simon & Garfunkel and Sonny and Cher famously parted ways, there are plenty of financial reasons for this particular duo to get back together.