TikTok and the new value gap as labels demand “hundreds of millions” – report


In yesterday’s bulletin, we covered the arrival of Spotlight, a new initiative on TikTok designed to help break new acts from South Korea and Japan on the short-form video platform. We wondered then if royalties were being paid on music used this way and what rightsholders would make of it all. We didn’t have to wait too long to find out.

The three major labels have licensing deals in place with ByteDance Ltd, the company behind TikTok and Douyin (how the service is known in China) and they are due to expire soon, with Bloomberg reporting that negotiations have stalled as the majors want more money while ByteDance is pushing back on this. With over 1bn app installs and a valuation of $75bn, TikTok/Douyin is a major force in entertainment and a massive promotional platform for music. As such, sources are claiming that the majors are demanding “hundreds of millions of dollars in guaranteed money” and a rate increase.

ByteDance says it is a different form of music use and should not be charged like a straight streaming service. “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,” Todd Schefflin, head of global music business development at ByteDance, told Bloomberg. “A short video on TikTok can become a valuable promotional tool for artists to grow their fan bases and build awareness for new work,” he added.

It is this exposure > revenue argument that could get the major labels’ backs ups, feeling it is a Groundhog Daying of the value gap debates they have been having with other services for years. We are well used to the public war of words that can erupt between content owners and services as a licensing renewal period approaches and how this can be used as form of negotiation in public.

There are many questions here. Is the move to sign up acts via Spotlight a pure promotional play, showing it supports new talent? Or is it a way to do direct deals with acts for lower rates than those the majors are demanding – effectively a form of content acquisition by stealth? But can it continue to grow without a library of licensed tracks made up of the huge international hits the three majors control? If the majors pulled their content, just how badly would that affect the TikTok experience for users and their dwell times on the app?

TikTok is still in the ascendancy and music is a huge part of what has taken it thus far. And, yes, it can be a promotional platform for music, but also the fast track to becoming a one-meme wonder. It is not clear from the sources Bloomberg has spoken to if the labels are also seeking wider marketing commitments from TikTok; but if they want to ensure their successes on there are not just short-term financial ones then such discussions should be top of the agenda.

Eamonn Forde

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