On January 31st Universal Music Group’s licensing deal with TikTok expired to the dismay of almost everyone. A day before the expiration, UMG released a statement about the breakdown in contract negotiations, alleging that TikTok tried to “bully” them into a subpar deal. TikTok responded hours later stating “It is sad and disappointing that Universal Music Group has put their own greed above the interests of their artists and songwriters… TikTok has been able to reach ‘artist-first’ agreements with every other label and publisher. Clearly, Universal’s self-serving actions are not in the best interests of artists, songwriters and fans.” Ouch.
Now, TikTok is deleting UMG’s catalog from its databases, and muting videos that feature UMG songs. UMG, the largest label/publisher in the world, houses some of the biggest artists of our time—Taylor Swift, The Weeknd, BTS, Bad Bunny, Ariana Grande, Billie Eilish, and many, many, many more. For TikTok, an app reliant on music at its conception (and perhaps still), it’s unclear how many videos will be affected—millions surely.
The palpable hostility in the company’s respective letters makes it unlikely that any deal will be reached soon. Both companies will face consequences. Almost certainly, one will fare worse than the other. For now though, here are five things you should know about this heated dispute.
1. TikTok pays artists based on the number of videos that use a soundbite, not the number of listens it gets.
This is critical background information.
TikTok, unlike other platforms similar to it, pays royalties per video a song is used in, not per view the videos get. Thus, the popularity of a clip means nothing. Whether a video gets a billion views or one view, rights-holders will earn the same amount regardless. Maybe this made sense before TikTok gained mega-popularity. Now, a company with over a billion annual users (as TikTok boasts in its statement) should be responsible for more no? With this kind of math, the more listens a song gets on TikTok, the less it earns for rights-holders for the value it provides to viewers.
Got all that? Now, let’s move on to the current.
2. UMG wants more protections for users, not just more money.
UMG blames the breakdown in negotiations on TikTok unwillingness to budge on three issues. The first (and the most frequently discussed in media) is sufficient compensation. Not unexpectedly, both companies want as much money as they can get. According to UMG, TikTok’s proposed deal would pay artists and songwriters “at a rate that is a fraction of the rate that similarly situated major social platforms pay” and “worth less than the previous deal, far less than fair market value.”
The second key issue is protections against AI-generated songs. TikTok recently launched a feature that allows users to generate songs from user prompts, even allowing for multiple genre options. TikTok allegedly asks for a contractual right to these songs, thereby diluting the royalty pool for human creators. Streaming royalties typically do not pay a set amount per song, but rather divide a certain percentage of revenue amongst the rights-holders. AI-generated songs, which can be produced at a volume far greater than any artist or songwriter could achieve, could potentially flood the market, overshadowing songs created by real humans.
Finally, the third key issue raised is the online safety of TikTok users, a prevalent problem for most social media platforms. UMG contends that the platform’s handling of copyright infringement, problematic AI-generated content, and harassment and hate speech is a cumbersome and inefficient process. It demands greater measures to address the growing need for moderation of such harmful content for the safety of all users.
TikTok’s curt counter-statement offered zero additional insights to these claims.
3. TikTok’s defense is a familiar refrain in the music business.
What TikTok’s statement did do is attempt to capitalize on decades-old defunct logic. In its letter, TikTok argues that it serves as a “free promotional and discovery” service for artists, and UMG struck back quickly calling the rhetoric “woefully outdated.”
Musicians are frequently asked (and expected) to provide their music for free, whether through performances, physical merch/music, or digital downloads. The benefactors argue that in exchange for these goods and/or services, the artist receives exposure. Music, however, is more than just a cultural touchstone, it is also a source of income and career for many. Artists give up their time and their resources to provide services. If music is what attracts patrons to a venue, then the artist is providing value that should be compensated for.
The same argument applies to TikTok’s platform. Expecting musicians to create their work for no real compensation, particularly when creators drive people to your platform in the first place… seems a bit unfair no? As UMG contends, TikTok’s dependency on music and its inception as a music-centered service originally called Musical.ly rationalizes that TikTok derives immense value from musical creators. No one seems to agree on how much that value is worth just yet.
4. A lot (like really, a lot) of songs are going to disappear from TikTok.
Now that the deal has expired, UMG’s catalog is disappearing from TikTok. UMG is the largest of the big three major labels (followed by Sony and Warner). Its catalog of artists is humungous, consisting of major players and rising stars. However, what’s important to note is that an artist doesn’t have to be signed to a UMG label for their songs to be removed. Any songwriter, signed to UMG’s equally large publishing group, will also see their catalogue disappear. The removal process might take a little bit longer, but its escalating impact will be sorely felt.
5. This will likely expose problems with the “viral hit” approach to breaking new talent.
Now, let’s consider something else: what do the labels have to lose? Although UMG noted in its letter that TikTok royalties account for roughly 1% of UMG’s total revenue, it’s more than likely that TikTok’s impact was being felt in other revenue streams as well, as TikTok inadvertently directed listeners to traditional streaming services.
In recent years, labels have been reckoning with the increased difficulty of converting emerging artists to mainstream fame. TikTok had a somewhat democratizing effect on the music business. Although the almighty algorithmic gods have their own unpredictable whims and require relentless content production from artists, it also gives them a greater opportunity to build momentum without the traditional resources that come with a record deal.
Labels monitor viral trends like hawks to snatch the hottest new thing as soon as possible, banking on recouping investments quickly as the streaming numbers are already there. Then, instead of building on viral moments by investing in traditional marketing and properly developing young artists, labels offload the work onto artists, relying on continuous virality.
Ultimately, something has to give. Social media-discovered artists must learn to build sustainable, organic fan bases. Perhaps, this might be just the thing to shift the music business (again) into a newer direction. Or maybe, UMG and TikTok will bury the hatchet when they recognize the symbiotic nature of their relationship. Meanwhile, emerging artists will continue to hope that they’re not the ones who get screwed over (again) somewhere in the process.
Buket is recent graduate of the University of Georgia (Music Business Alum) and the current Editor-in-Chief of Vinyl Mag. She believes that a sincere lover of music can find something to like in just about any song. She loves to write to escape the grueling drudgery of capitalism. She is currently on a gap year abroad, spending her free time drumming up new ideas for Vinyl Mag and trying to beat her previous Spotify Wrapped "My Minutes Listened" record.