MBW Reacts is a series of analytical commentaries from Music Business Worldwide written in response to major recent entertainment events or news stories. MBW Reacts is supported by JKBX, a technology platform that offers consumers access to music royalties as an asset class.
You click on the video of viral TikTok star Nathan Apodaca skating down the freeway with his bottle of Ocean Spray. Yet instead of hearing Fleetwood Mac’s Dreams – which Apodaca’s feelgood video famously turned into a TikTok megahit in 2020 – all you hear is the sound of his wheels on the tarmac… because the song has been permanently muted by the ByteDance-owned video giant.
Now picture the same silent scenario for Harry Styles’ viral As it Was challenge, or Taylor Swift’s Anti Hero Challenge, or any other music-led viral moment on the platform whose rights are controlled by a major music company.
This is the hypothetical reality of TikTok without major record company content, and a script that doesn’t seem wildly far-fetched when you take a closer look at the platform’s chess moves with the music business over the past couple of years.
Earlier this month, we learned that TikTok was running a test in Australia to see how important major record company-signed music is for its users when they’re creating content on the app.
The test involves limiting access to songs for a select group of users in the market when they upload new videos, but also – importantly – ‘muting’ the sounds of some songs used in previous videos.
Just to reiterate: TikTok has removed major record company music from its service for a subset of users in Oz. That silent scenario I just asked you to visualize is already happening to content on the platform.
According to the Guardian, Australian TikTok star Mary McGillivray, whose content has been liked 10.9 million times, has seen ‘approximately 57% of her back catalogue’of video content on the platform ‘rendered unwatchable’ due to sounds being muted by TikTok in Australia.
Some in the music industry argue that viral, music-centered videos have driven TikTok’s growth. The majors therefore want more money from the platform for the use of their content.
Such deals could secure the majors a guaranteed proportion of revenue generated on music-led TikTok videos, as opposed to the so-called blanked ‘buy-out’ agreements struck by the majors with TikTok for their rights to date.
MBW’s sources suggest that the results of the ongoing test in Australia are being used by TikTok in their current licensing negotiations with the majors.
Here are two possible outcomes from TikTok’s Australia test:
(a) User engagement drops off when major label content is removed. TikTok discovers that it needs this ‘premium’ music to keep its user base happy and engaged.
(b) User engagement stays the same, or even grows during the test phase. TikTok proves, at least in the short-term, that it doesn’t need major label content to run a successful platform.
Imagine the latter happens, and, as a result, TikTok refuses to pay more or ink revenue-share deals with the majors.
All of the record companies’ catalogs eventually get pulled from the platform. And when TikTok’s billion-plus users inevitably find ways to upload major label content to TikTok, the service is hit with a blizzard of copyright takedown notices from their one-time friends in music-land.
Here’s the really interesting thing about such a plausible outcome: ByteDance might well have preparing for a worst-case scenario like this, where some (or all) major label content disappears from its TikTok video platform.
That preparation has largely taken the form of two strategic moves: (i) TikTok’s entrance into the artist services space via SoundOn; and (ii) TikTok/ByteDance’s investment in AI music-making.
TikTok’s entrance into the artist services space via SoundOn
TikTok has already established its own independent distribution and marketing service, SoundOn, will ensure a steady flow of music to the platform.
The distro service, which launched in the UK, US, Brazil and Indonesia in March 2022, was rolled out in Australia this past week, curiously arriving in the territory at the same time that the company started limiting access to major label music for some users.
If you haven’t yet registered how seriously TikTok is taking the development of its own music repertoire sources, check out these two job titles that are currently live ByteDance’s careers site:
Global Music Distribution Operating Lead. Required: 5+ years of music industry experience. Sample job ad text: “Work with key partners in business, legal, copyright and royalties to help shape the services for artists and labels.”;
A&R and Label Services Lead, North America. Required: 8+ years of music industry experience, with a “demonstrated track record of finding emerging artists with world-class talent and commercial potential”. Sample job ad text: “In this role you’ll ensure that artists and label partners see TikTok as the #1 partner for artist development, promotion and monetization. Focusing on the music landscape in North America, you will sign and develop artists and partners that you believe in.”
SoundOn is described by TikTok as “an all-in-one platform for music marketing and distribution”, and was designed “to empower new and undiscovered artists”.
Artists signing up to the platform get access to audience insight and development, as well as “expert advice” from a dedicated SoundOn artist team.
According to SoundOn’s website, the platform will soon let artists work with TikTok creators to amplify their music and it will also let artists “spend their music promotion budget” through self-serve tools.
Artists can also directly upload their music to TikTok’s commercial music library ‘allowing brands to use [their] tracks in organic and promoted videos,’ according to SoundOn.
TikTok’s commercial music library also features music and sounds from over 20 ‘Sound Partners’, ranging from United Masters to Songtradr and Epidemic Sound.
ByteDance’s Artificial intelligence bet…
MBW broke the news last summer that TikTok and parent company ByteDance were hiring for a number of highly-skilled machine learning and AI music creation specialists in both the US and China.
The hiring spree appeared to mark a doubling down on ByteDance’s AI-powered music-making ambitions, following its acquisition in July 2019, of Jukedeck, a UK-based AI Music startup that specialized in creating royalty-free music for user-generated online videos.
If you take a closer look at what’s happening in the wider global music streaming market in regards to AI music, the possibilities around TikTok’s investment in AI music-making talent and tools becomes a lot clearer.
MENA-focused Spotify rival Anghami, for example, claimed in December that it will soon become the first platform to host over 200,000 songs generated by AI.
In November, MBW reported that Tencent Music Entertainment (TME) – the owner of China’s largest music streaming platforms – had created and released over 1,000 tracks containing vocals created by its own AI tech that mimics the human voice.
What’s stopping TikTok from flooding its own platform with AI-generated tracks?
At the end of October, on Universal Music Group’s Q3 earnings call, UMG‘s Chairman and CEO, Sir Lucian Grainge, commented on TikTok’s future relationship with (and payments to) the music industry.
Grainge told analysts “I’ve seen this movie before”, citing YouTube as an example of a social media platform that has become a significant revenue generator for the music industry.
He continued: “When you look at where the industry was where we were as a company with YouTube 10, 12, 15 years ago; YouTube recently announced that they were paying out to rightsholders $6 billion over a year-long period. They have stated that they want to be the number one contributor of revenue to the music industry by 2025.
“When you look at what the funnel that TikTok has, when you look at the billions of views, the rate at which the company has grown, we will fight and determine how our artists get paid and when they get paid, in the same way that we have done throughout the industry for many years. I have seen this movie before, I know the ending.”
But what if ByteDance has another ending in mind for this movie? An ending that can live without major-label content?
Could its billion-plus users around the world really stomach losing the sounds of superstars – and be willing to replace them with indie acts and AI music?
What would this mean for the TikTok trend-hunting that has driven major record company promotional strategy in recent years?
Unlike YouTube, TikTok has never publicly announced that it wants to be the music industry’s biggest revenue generator. But it has been very vocal about its role as artist kingmaker.
According to TikTok’s end-of-year recap, 13 out of the 14 Billboard Hot 100 No.1 songs in 2022 “were driven by significant viral trends on TikTok”.
The industry’s current power dynamic would therefore be immediately scrambled if TikTok blew up its relationships with the majors, and its access to some or all of their content.
With music playing such a key role in TikTok’s rise, if major label content does disappear from the platform – and the gap is somehow successfully filled by indie and AI-driven creations – TikTok could be said to have pulled off one of the biggest heists in music business history. A bait and switch for a billion users.Music Business Worldwide
