MBW Reacts is a series of short commentaries by the MBW team. These are our ‘quick’ reactions – through the lens of music – to major entertainment news stories.
If you’ve listened to MBW’s most recent Talking trend audio files – and thousands of you already have – you may have picked up a data point that is particularly relevant for the modern music business.
According to MBW’s read of Goldman Sachs‘ latest Music in the air reported, TikTok has paid recorded music copyright owners (i.e. labels and artists) a total of approx. 179 million dollars in 2021.
Here’s how MBW solves that problem:
According to Goldman Sachs, TikTok made an estimated contribution 13% revenue from record labels’ “emerging platforms” in 2021 (see below; Facebook/ Meta contributed 29%);
In return, Goldman estimates the revenue from this “emerging platform” generates 30% of all ad-supported streaming revenue paid to the recorded music business in 2021;
Based on IFPI Norecord ad-supported revenue for businesses in 2021 amounting to approximately $4.6 billion;
30% of the $4.6 billion To be 1.38 billion dollars
13% of the 1.38 billion dollars To be… 179 million dollars.
The current. Based on BloombergTikTok created revenue is coming4 billion dollars globally by 2021. TikTok is expected to triple this number to 12 billion dollars in 2022.
As a percentage of that total 2021 revenue, the amount TikTok estimates paid to recorded music rights holders (179 million dollars) thus works at 4.5%.
So it’s the right time to do a quick fundamental comparison with another platform – one of TikTok’s main competitors – on which the modern music industry is also heavily dependent. this platform.
And last June, YouTube declare that it has been paid off 4 billion dollars to music copyright holders in the previous 12 months.
That 4 billion dollars equivalent to 13.9% YouTube ad revenue in 2021.
However, there are some caveats around that calculation.
The first, 28.84 billion USD numbers are just YouTube ads; it doesn’t include the additional billions the company has collected in 2021 through subscriptions to services like Music on YouTube.
In addition, Goldman Sachs’ TikTok estimated, importantly, is just how much it pays the music copyright holders. By YouTube 4 billion dollars conversely, the amount covered is paid to both the publisher/song copyright holder, and copyright owner of recorded music.
So, for the sake of argument, let’s say a third of this number goes to publishers and musicians. (By all accounts that’s suggestive OTT; most industry estimates suggest that, when it comes to on-demand streaming, publishers/musicians get paid anywhere between 1/5 to 1/4 of the total royalties.)
This means YouTube paid $2.64 billion to music copyright holders recorded within the 12 months through the end of June 2021.
As a percentage of total YouTube advertising dollars generated in calendar year 2021, that $2.64 billion figure would equate to 9.1%.
As the basis for any comparison between what TikTok pays the music industry and what YouTube pays the music industry lies an important difference: Two contrasting models that both companies distributes money to record labels and music publishers.
This is the core tenet of that MBW Talking trend audio file:
By YouTube the advertising business pays the music industry a share of the revenue from any promotional play (monetization) of a video using music on its platform;
TikTokconversely, do not pay a portion of play-based advertising. Instead, it licenses music from major record companies through individual “blind checks” payments, each of which includes a certain grace period. During these grace periods, TikTok (and its users) may incorporate copyrighted music at will.
On a yearly basis, Goldman Sachs seems to be suggesting, these “blind checks” from TikTok amount to about 179 million dollars for record business in 2021.
TikTok’s global music leader, Ole Obermann (pictured), defended the fact that TikTok does not engage in a revenue-sharing model to pay music copyright holders.
In a statement send to MBW Last week, Obermann argued that TikTok is a “powerful marketing and advertising platform for artists of all genres,” claiming, “We’re not a streaming platform and we’re not. offer subscription model.”
The idea that TikTok is not a place where people actively play/consume music – and is really just an “advertising platform” to ‘launch’ trending songs on streaming services other – will be a major point of debate for the music industry in the months and years to come.
So let’s take that debate to the next level here, by moving on to the hit of summer 2022.
By Kate Bush Run up that hill (Deal with God) is experiencing massive global popularity right now, almost entirely thanks to the synchronization on Netflix series (Strange things).
Almost two months from the date debut of that killer sync on May 27th, Run up that hill still the top song on Spotify globally.
The track, largely in response to that sync boom, is now used in at least 2.4 million won separate videos on TikTok (see below).
These are big numbers.
Based on ChartMetric data analyzed by MBW, only top 1,000 The most popular of these over 2 million videos, to date, has attracted 4.93 billion plays between them.
(Therefore, it is obviously safe to assume that, go beyond Top 1,000 videos on TikTok have Run up that hilli.e. taking into account the whole 2.4 million + videos, songs by Kate Bushhas been played more than 5 billion won number of times on TikTok so far.)
Main point 1: Since there is no revenue sharing/royalty-based agreement between her distributor (Warner Music Group) and TikTok, Kate Bush was not paid for any of those plays. (Externally, i.e. the aforementioned ‘blind check’ was sent to Warner by TikTok at a certain time in the past. And only if Warner has paid any of it to the artist.)
Main point 2: Kate Bush’s song has more than 5 billion views (unpaid) on TikTok. 5 billion! The song has just over 400 million streams on Spotify, despite holding the global #1 spot for that platform for weeks. So is TikTok really ‘promoting’? Run up that hill? Or the fact that it is cannibalizing the play of the song that could have happened on ‘revenue-sharing’ streaming platforms like Spotify?
Adding to the music industry’s concerns about the second key point above: The argument that TikTok videos are simply “30/60-second trailers” for tracks is now officially void.
In February of this year, TikTok notice it is Maximum length extension of its videos to 10 minutes.
That news comes less than a year after TikTok increased the maximum video length up to three minutes in July 2021. (Maximum was previously set at 60 seconds).
How important is this strategy – allowing TikTokers to upload videos long enough to hold two or even three full songs to its platform – to TikTok/Bytedance?
To find out, you just need to sign up for a TikTok account.
Once you do, one of the first things you’ll see is a cheerful how-to message located next to the ‘Upload’ button, notifying you that the video can now be 10 minutes long on TikTok – and recommending it. encourage you to take advantage.
And there’s one more pitfall for the music industry here: Statistics show that Gen Z’s music tastes are becoming less influenced by Spotify playlists than by TikTok.
Check out these Scary stats from a survey by Midia Research conducted in Q3 2021:
Only ten% 16-19 year olds globally listening to curated playlists on streaming services (like Spotify);
Opposite, 24% create their own playlists and one third use TikTok every day
So TikTok can’t just cannibalize Spotify plays; it could also increase its influence in the number of potential Spotify subscribers tomorrow.
There is a labor risk in point: Spotify = revenue sharing with studios/artists; TikTok = no revenue sharing with brands/artists.
So, let’s keep all of that straight in our minds:
The most popular song in the world right now – Run up that hill– has been played more than ten times on TikTok (5 billion or more) than on Spotify (≈400m);
TikTok videos are now allowed – and indeed, encouraged – to be long enough to include the entire song twice;
No royalties (revenue sharing) are paid for plays Run up that hillbecause TikTok argued that it was an “advertising” platform and “not a streaming service”;
However, TikTok itself (via TikTok For Business) proudly admits that “88% TikTok users say that sound is essential to the TikTok experience “and” is almost inseparable [sic] a TikTok from the sound of it, otherwise the video makes no sense.”
All of that sounds like it might be worth a few times more to the music industry than 179 million dollars each year?
Especially when TikTok is forecast to turn upside down 12 billion dollars in 2022 – roughly the size of the entire US record industry (21 sales: 15 billion dollars)?
You can see why concerns about the balance of power with TikTok are starting to spread among high-profile figures in the music business.
TikTok’s “blind checks” payments – even without a revenue-sharing agreement – can seem like ‘easy money’ to record labels over the past few years.
But for some, that picture is now starting to look like an industry sleepwalking into a generational mistake, and forgetting to see the writing on the wall.
“The last time we let a company of this size and power run away from everything without paying us well was MTV.”
As I mentioned above Talking trend audio filesa major record company source neatly summed it up for me last week.
“It won’t be long before TikTok becomes too big and too powerful for us to force it into a revenue-sharing arrangement,” he said.
“The last time we let a company of this size and power run away from everything without paying us well was MTV.”Worldwide music business
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