New revenue opportunities for music rights owners: TikTok
In this two-part series, we tackle the ongoing changes both in Twitter and TikTok that present new opportunities for music rightsholders.
TikTok has made headlines in the last two years for its abrupt growth and impact on the music industry. This article will tackle the latest news on the platform and the existing pressure to alter its way of rewarding rightsholders.
The short-form video platform solely relies on videos up to 10 minutes in length, although speculation indicates that the video duration will increase in the long run.
TikTok has reported a growth of 180% between the ages of 15 and 25 in the earliest months of 2020, according to Statista. A recent report by International Federation of the Phonographic Industry (IFPI) states that 50% of the 44,000 respondents use short-form video apps, and for those respondents, music was central to 63% of all the time they spent watching videos on short-form video apps.
In order to create audio on the platform, creators have three options: they can record their own, use other creators’ audio files, or master recordings. The latter is possible because TikTok negotiates deals with record labels, distributors, and music publishers that give its users free access to substantial catalogues of licensed music.
So far, so good. However, the way that TikTok operates when it comes to music rights and remuneration is unique. When TikTok purchases a catalogue, artists and music rightsholders receive a one-off payment at the time of the acquisition. Regardless of how many times a song is used on TikTok, the songwriter, artist and/or rightsholder will only be remunerated at the time of the acquisition.
YouTube, by comparison, rewards rightsholders differently. They receive a revenue share of any ad-running or monetized content play, meaning that the more that video is played, the more the respective music rightsholders will be rewarded. In other words, the revenue that rightsholders make off of each video directly correlates to how many views those videos receive.
Pressures & Disruptions
The recent Goldman Sachs The Music In Air report estimated that TikTok contributed 13% towards record labels’ emerging platform revenues in 2021. An extensive study by Music Business Worldwide showcased the staggering difference between what YouTube and TikTok were paying to music rights owners. They estimated that only 4.5% of the total 2021 TikTok turnover was paid to recorded music rightsholders. Conversely, that share represented around 9.1% of YouTube’s total advertising money generated in the calendar year of 2021.
Even after considering an error margin, it is evident that YouTube rewards music rightsholders significantly more than TikTok and that this is due to TikTok refusing to adopt a similar revenue-share model.
Ole Obermann, TikTok’s global Head of Music, has defended the platform by stating that it is not a streaming platform and does not rely on a subscription model. He also emphasised the platform’s ability to popularise pieces of music, stating that TikTok is a “powerful marketing and promotional platform for artists of all genres,” and therefore, deserving of some slack when rewarding artists and rights owners.
One example highlighted in the mentioned Music Business Worldwide article is Kate Bush’s recent viral song Running Up The Hill. The song was first released in August 1985, but since it was featured in Netflix’s Stranger Things, it regained popularity. It remained for months as Spotify’s top song and has been used in at least 2.4 million TikTok videos, not to mention that it has been played over 5 billion times on that same platform.
Now guess how much Kate Bush has made directly from her work’s TikTok traction? Zero. She’s not being rewarded for any of those videos and views, even though it’s her music people are using. Her song’s popularity on TikTok will bring other beneficial – and monetisable – opportunities, like higher streaming revenues, live performance invites, media appearances, and so on. Nevertheless, it is still understandable how music rightsholders are dissatisfied with TikTok’s impunities, given that, in contrast to Bush, TikTok is undoubtedly making a lot of money from all those views.
As time passes, the more the industry will undoubtedly grow frustrated with the situation. For example, Billboard pointed out that a piece of music used in more than 500,000 videos received in return less than $50,000 from TikTok.
However, according to Music Ally’s take, there’s much more on TikTok’s plate. From being accused of suppressing voter-turnout videos in the US to being implicated as a contributing factor towards a 12-year-old boy’s death, TikTok is full of problems to solve.
Let’s all hope the platform can handle its issues quickly.