MBW Reacts is a series of analytical commentaries from Music Business Worldwide written in response to major recent entertainment events or news stories. Only MBW+ subscribers have unlimited access to these articles. The below article originally appeared within February’s MBW+ Monthly Review email, issued exclusively to MBW+ subscribers.
Have you ever felt that ineffable moment of pre-violence in a pub or bar? When the temperature suddenly drops without, scientifically speaking, actually dropping – as some primordial instinct deep within you shouts through the mental fog: “Physical pandemonium is about to kick off. Get. Out. Of. The. Way.”
I’m detecting a similar murmur right now RE: UMG and TikTok.
If you hadn’t noticed, we’re currently just four days away from March 1, when – according to sources – around 4 million songs affiliated with Universal Music Publishing Group‘s writers will no longer be legally licensed for use on TikTok. These 4 million songs will therefore join/overlap with the ~3 million recordings from UMG that have already been removed from TikTok’s public library.
Sources suggest that UMG’s rival major music companies – Sony Music Group and Warner Music Group – have in the past fortnight each been sent extensive lists by TikTok detailing which of their hit recordings will be pulled off ByteDance‘s service as a result of a UMPG catalog takedown.
(You’ll already know this, but it bears repeating: If a UMPG writer has a minority cut on a song, whether just 1% or 5%, any recording of that song will in theory be rendered un-clearable should UMPG’s license with TikTok lapse.)
So far, Universal Music Group‘s No.1 reason for its fight with TikTok – to be paid bigger checks from ByteDance for music licensing – has won broad industry support. Understandably so: any music copyright holder who doesn’t believe a digital partner is offering fair value is well within their rights to pull their music. (I suspect Universal’s fight with TikTok may have also won applause from China’s Tencent/Tencent Music, which leads a consortium that owns around 20% of UMG. Tencent has a long-running, um, ‘competitive’ relationship with ByteDance at the best of times.)
That being said, the robust music industry support that has so far rallied around UMG may soon be tested.
Firstly, UMG’s actions, as UMPG’s copyrights get dragged into the mire, will seriously meddle with the plans of its rival record companies (both indie and major) and their artists.
A prime example: Warner Records-signed Dua Lipa is on a tear right now, building momentum for her new album. Her comeback singles, both released over the past three months – Training Season and Houdini – were each co-written by British musician Danny L Harle… who signed a global publishing deal with UMPG in December. Consequently, without an eleventh-hour deal between UMG and ByteDance being signed this week, Training Season and Houdini will presumably have to come off TikTok with the rest of UMPG’s catalog. (Conversely, there may be market-share-winners from this scenario: If, say, either Beyoncé’s Texas Hold ‘Em or Benson Boone’s Beautiful Things had no UMPG writers on them, they would naturally enjoy a boost on TikTok as their chart rivals get deleted.)
A reminder of how big this story is set to become: Multiple MBW industry sources generally agree with the estimate that up to 80% of all “relevant music repertoire” on TikTok will be affected by UMG’s actions should the UMPG catalog come down. (This stat, say sources, encompasses both UMG’s recorded music plus the copyrights repped by UMPG. TikTok flat-out denies it, claiming that UMG’s recorded music and publishing catalogs combined only touch 30% of “popular music” on its platform.)
Arguably the worst-hit artists by the UMG/TikTok takedown are emerging acts. Last week, MBW reported on Good Neighbours – the molten-hot UK duo whose signature is now being chased by a range of major labels in the States. Good Neighbours came to prominence because their viral hit, Home, exploded on TikTok in January. Distributed by Virgin Music Group, it was culled on TikTok in the UMG recorded music takedown, but has since re-appeared on the service (it’s now distributed by [PIAS], according to its YouTube video). That interruption in TikTok momentum may be a factor in Home falling out of the Billboard Hot 100 this past week, having previously reached No.77.
Good Neighbours will be fine; they’ve already won the attention of label heads.
The next Good Neighbours? That’s a less obvious story.
One other group who may have reason to curse UMG’s hold-the-line action against TikTok? Artist managers.
Last week I heard from one top-tier, US-based manager who argued that his artists won’t see much additional money from any improved deal for UMG with TikTok. Yet removing his artists’ music from TikTok, he said, damages their ability to grow/replenish their online fanbase – with one particular act’s long-planned new release campaign now potentially thrown into disorder. Another manager I spoke to made a stark comparison between UMG’s fight for a bigger proportion of TikTok’s revenues, and the sub-20% royalty share that many older artists are paid by labels for their catalogs on streaming.
So what if March 1 comes and goes with no renewal between UMG and TikTok, and UMPG’s songs are all pulled down? A second semi-official ‘deadline’ for a UMG/TikTok deal may then start playing on the minds of both sides.
At the Grammys earlier this month, Taylor Swift announced to the world that she would be releasing her new studio album, The Tortured Poets Department, on April 19. Swift is signed to UMG for recordings (via Republic Records) and for publishing. Will she really go ahead with TTPD’s release when her fans aren’t able to share the music from that album – including any singles issued ahead of its arrival – on TikTok?
All of this increases the stakes for UMG in its pursuit of signing an agreeable deal with ByteDance. But the stakes are pretty sky-high on TikTok’s side, too.
Universal Music Group‘s power as the globe’s biggest music rightsholder is immense: The IFPI just announced its list of 2023’s Top 10 biggest revenue-generating global recording artists. Nine of them are distributed by UMG: Taylor Swift (1); SEVENTEEN (2); Stray Kids (3); Drake (4); The Weeknd (5); Morgan Wallen (6); TOMORROW X TOGETHER (7); New Jeans (8); and Lana Del Rey (10).
The only artist not signed to a recordings deal with UMG? Bad Bunny (9)… who’s repped by UMPG for publishing.
How long can TikTok feasibly go on without music from superstars like this – especially if the ‘red button scenario’ of UMPG’s full catalog coming down on March 1 is triggered?
Ultimately, here’s what this dispute boils down to: according to UMG, TikTok pays it around USD $110 million per year. (UMG says that it receives around 1% of its annual revenues from the service.)
That $110 million represented a wafer-thin sliver of TikTok’s global advertising revenues last year, which various sources peg somewhere between $13 billion and $18 billion.
Now… guess how big the annual revenues of TikTok’s parent, ByteDance, were in 2023? According to Bloomberg, a full $110 billion.
That’s one thousand times the size of the approximate sum that TikTok paid UMG last year.
A final thought on all of this. One of the biggest threats for investors in music rights today (like 10%-UMG-owner Bill Ackman) is the apparent near-saturation of streaming subscribers in mature markets like the US and UK.
Yet surely there should be a fresh generational source of new subscribers in these markets every few years – i.e. Gen Z maturing into young adults with their own disposable income to spend.
Some bad news on that score: According to research from Luminate, American Gen Z listeners are losing, rather than gaining, a willingness to spend money on music streaming.
Luminate regularly questions over 4,000 music listeners for its Music 360 surveys in the US. As the chart below (from Luminate’s latest EOY report) shows, in Q3 2023 Gen Z music fans in the States reported spending 11% less on monthly music streaming services than they did in the prior year (Q2 2022).
This is an alarming statistic for the music rights business, which has grown accustomed to consistent YoY growth in subscription revenues over the past 15 years.
The record industry is rightly excited about streaming subscription growth in previously under-monetized international territories. But a trend of young US consumers turning their backs on paying for music is a flashing danger sign – one which warrants a united industry attempt to reverse it.
The brand that’s arguably best placed to encourage Gen Z to part with their cash for a streaming music subscription? TikTok, of course.
Especially so if the ByteDance company is both incentivized, and licensed, (a) To launch its existing subscription streaming music service, TikTok Music, in the United States, and (b) To actively push TikTok’s 150 million+ users in the US towards this paid-for platform.
Right now, with UMG and TikTok glaring at each other across the negotiating table, such a possibility hangs in the balance.
