Major Labels Demanding ‘Guaranteed Money’ From TikTok Owners

Spring will shepherd in the cancellation of numerous music contracts, and with renegotiations on the table, three of the industry's biggest labels are eager to see if they can squeeze some additional revenue out of the rapidly growing social media platform TikTok.

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Guest post by James Shotwell of Haulix

With current contracts set to expire this Spring, three of the biggest labels in the world are trying to secure additional revenue from the fast-growing social media platform.

The big three record labels — Universal, Warner, and Sony Music — are demanding more money for songs played on TikTok and its Chinese counterpart Douyin, setting up a showdown with the hugely popular video apps, according to people with knowledge of the matter.

All three labels have contracts with the app owners, ByteDance, that are set to expire this Spring. Negotiations for new agreements have reportedly been ongoing for months, but little progress has been made. 

If a deal is not reached in the near future, the labels may choose to pull their catalogs from the service, which would likely force TikTok and Douyin to remove existing videos and prevent new uploads containing music owned by the companies. That action would ultimately lead to a diminished popularity for the app, which could eventually kill the platform altogether. 

Since negotiations are private, it’s unclear what money is currently being exchanged between ByteDance and the labels with music on its platforms. The fight for higher payouts allegedly stem from the rising popularity of the apps, which has “emboldened” the labels to seek better royalty payouts. Figures are, again, not public, but sources claim the big three labels are seeking a big enough change to earn them hundreds of millions in “guaranteed money.”

Reports of the platforms’ popularity are accurate. TikTok alone has over one billion downloads across iPhones and Google devices worldwide.

TikTok’s argument against the proposed changes is that the company is not a streaming service and therefore it should not be expected to meet the standard royalty rates paid by Spotify and similar platforms.

Todd Schefflin, Head of Global Music Business Development at ByteDance, responds to the reports of negotiations with:

“TikTok is for short video creation and viewing, and is simply not a product for pure music consumption that requires a label’s entire collection.”

Speaking to the platform’s ability to help artists, Shefflin added:

“A short video on TikTok can become a valuable promotional tool for artists to grow their fan bases and build awareness for new work.”

Shefflin brings up a good point. The irony in this story lies in TikTok’s ability to raise the profile of up and coming artists on a global scale. Lil Nas X currently has the number one song in America with the Billy Ray Cyrus assisted remix to his viral hit, “Old Town Road.” The song, which was initially released in late 2018, rose in popularity thanks in large part to a series of videos created by users of TikTok. Here are a few examples:

Major labels may see themselves as needing more money from TikTok, but they may need the platform’s ability to raise artist profiles even more. Removing music catalogs from an app with over one billion users would hurt music marketing at every level, but it would especially hurt developing artists.

That said, the industry’s growing reliance on streaming revenue cannot be denied. The music industry grew 9.7 percent in 2018, thanks mainly to the rise of paid streaming services Spotify and Apple Music. That’s impressive, but compared to where the music business was in 1999, there’s still a long way to go before the industry as a whole can reach its former heights of success.