Music industry

So… how much did TikTok actually pay the music industry out of its $4 billion in revenue last year?

MBW Reacts is a series of short comments from the MBW team. These are our “rapid” reactions – through a music industry lens – to major entertainment news.

If you have listened to MBW’s newest Telling trends podcast – and thousands of you have already done so – you may have discovered a particularly relevant data point for the modern music industry.

According to MBW’s reading of the latest Goldman Sachs report music in the air report, TikTok paid recorded music rights holders (i.e. labels and artists) a grand total of around $179 million in 2021.

Here’s how MBW worked it out:

  • According to Goldman Sachs, TikTok contributed approximately 13% record company “emerging platforms” revenue in 2021 (see below; Facebook/Meta contributed 29%);
  • In turn, Goldman estimates that these “emerging platform” revenues represented 30% of all ad-supported streaming revenue paid to the recorded music industry in 2021;
  • According to figures from IFPI, advertising-supported revenue paid to the recording industry in 2021 was around $4.6 billion;
  • 30% of $4.6 billion is $1.38 billion
  • 13% of $1.38 billion is… $179 million.

Now. According BloombergTikTok has generated revenue approaching $4 billion worldwide in 2021. TikTok is expected to triple that number to $12 billion in 2022.

As a percentage of that total 2021 revenue, the amount TikTok would have paid to recorded music rights holders ($179 million) therefore corresponds to 4.5%.

A good time, then, to make some quick basic comparisons with another platform – one of TikTok’s main rivals – on which the modern music industry also relies heavily.

Namely: YouTube.

Chubo / Shutterstock

YouTube vs. TikTok: Music Industry Payments

According to tax returns released by parent company Alphabet, YouTube generated a total of $28.84 billion advertising revenue in the 12 calendar months of 2021.

And in June of last year, YouTube claimed to have paid more than $4 billion to music rights owners in the previous 12 months.

This $4 billion is equivalent to 13.9% YouTube advertising revenue in 2021.

However, there are some caveats in making this calculation.

  • First, the $28.84 billion the figure is only the advertising transport of YouTube; it does not include the additional billions the company raked in in 2021 through subscriptions to services such as youtube music.
  • Additionally, Goldman Sachs ICT Tac the estimate, above all, was fair for the money he paid recorded music rights holders. from YouTube $4 billion quantify, on the other hand, the covered sums paid to the rights holders of the edition/song, and recorded music rights holders.

So, for the sake of argument, let’s say a third of that figure went to publishers and songwriters. (By all accounts, this is an OTT suggestion; most industry estimates suggest that when it comes to on-demand streaming, publishers/songwriters get paid between a fifth and a quarter of total payments royalties.)

That would mean YouTube paid $2.64 billion to rights holders of recorded music in the 12 months to the end of June 2021.

As a percentage of YouTube’s total advertising dollars generated in calendar year 2021, that $2.64 billion figure would weigh in at around 9.1%.

Any comparison between how much TikTok pays the music industry and how much YouTube pays the music industry hinges on one crucial difference: the two opposing models by which the two companies distribute money to homes. record companies and music publishers.

That was the basic premise of this MBW Telling trends podcast:

  • from YouTube the advertising industry pays the music industry a revenue share of any ad-triggering (monetized) play of a video that uses music on its platform;
  • ICT Tac, on the other hand, does not pay a share of play-based advertising. Instead, it licenses music to major record labels via individual “blind check” payments, each covering a certain grace period. During these grace periods, TikTok (and its users) can incorporate copyrighted music as much as they want.

On an annualized basis, Goldman Sachs seems to suggest, these “blind checks” from TikTok amounted to around $179 million for the recording industry in 2021.

TikTok Global Head of Music, Ole Obermann (inset photo), defended that TikTok does not engage in a revenue-sharing model to pay music rights holders.

In a statement sent to MBW last week, Obermann argued that TikTok is a “powerful marketing and promotional platform for artists of all genres”, while saying, “We are not a streaming platform and we do not ‘do not offer a subscription model’.

The idea that TikTok is not a place where people actively play/consume music – and is actually just a “promotional platform” that “ignites” trending songs on other services streaming – will be a key talking point for the music industry in the months and years to come.

So let’s take this debate to the next level here, by turning to the on track for the summer of 2022.

by Kate Bush Run up that hill (A deal with God) is enjoying huge worldwide popularity right now, almost entirely thanks to a sync to a Netflix series (stranger things).

Nearly two months after this deadly synchronization began on May 27, Run up that hill remains the best song on Spotify in the world.

The track, largely as a reaction to this outburst of sync, was also used in at least 2.4 million separate videos on TikTok (see below).

Here are the big numbers.

According to ChartMetric data analyzed by MBW, only Top 1000 the most popular of these more than 2 million videos have, to date, attracted 4.93 billion plays between them.

(So ​​it is obviously safe to assume that, beyond top 1,000 TikTok videos featuring Run up that hillthat is, taking into account all 2.4 million+ videos, the Kate Bush song was replayed 5 billion times on TikTok to date.)

  • Key point 1: Due to the lack of a revenue sharing/royalty-based agreement between her distributor (Warner Music Group) and TikTok, Kate Bush is not being paid for any of these plays. (Apart from, that is, the aforementioned “blind check” sent to Warner by TikTok at some point in the past. And only if Warner paid the artist part of it.)
  • Key point 2: Kate Bush’s track has over 5 billion (unpaid) views on TikTok. 5 billion! The song has just over 400 million streams on Spotify, despite being the platform’s No. 1 worldwide for weeks. So is TikTok really “promoting” Run up that hill? Or is it actually cannibalizing plays of the song that might otherwise have happened on “revenue-sharing” streaming platforms like Spotify?

Adding to music industry concerns: questions about the long-held idea that TikTok videos are simply “30/60 second teasers” for music tracks these days.

In February of this year, ICT Tac announced that it was extending the maximum length of its videos to 10 minutes.

This news comes less than a year after TikTok increased its maximum video length to three minutes in July 2021. (The maximum was previously set at 60 seconds).

How important is this strategy – allowing TikTokers to upload videos long enough to fit two or even three full songs on its platform – to TikTok/Bytedance?

To find out, just create a TikTok account.

When you do, one of the very first things you’ll see is a cheerful guidance message hovering next to your “Download” button, letting you know that videos can now be 10 minutes long on TikTok – and encouraging you to do so. to profit from.

And there’s another boogeyman for the music industry here: statistics show that Gen Z’s musical taste is influenced less and less by Spotify playlists than by TikTok.

Check out these chilling statistics from a Midia Research survey conducted in the third quarter of 2021:

  • Just ten% of 16-19 year olds worldwide listen to curated playlists on streaming services (like Spotify);
  • In contrast, 24% create their own playlists, and a third use TikTok every DAY

So, TikTok might not just cannibalize games on Spotify; it could also swallow up influence among Spotify’s potential subscriber base of tomorrow.

At the risk of insisting: Spotify = revenue sharing with labels/artists; TikTok = no revenue sharing with labels/artists.

So let’s put all this in mind:

  • The most popular song of the moment in the world – Run up that hill – has been played more than ten times more on TikTok (5 billion +) than on Spotify (≈400m);
  • TikTok videos are now allowed – and even encouraged – to be twice as long as the average song;
  • There is no royalty (revenue share) paid for each game of Run up that hillbecause TikTok claims it is a “promotional” platform and “not a streaming service”;
  • Yet TikTok itself (via TikTok For Business) proudly admits that “88% of TikTok users have said that sound is essential to the TikTok experience”, and that it is “nearly impossible to separate [sic] a TikTok of his sound, otherwise the video no longer makes sense”.

All of this seems to be worth a few pounds more to the music industry than $179 million per year?

Especially when TikTok should turn around $12 billion in 2022 – approaching the size of the entire US recording industry (2021 revenue: $15 billion)?

You might be able to see why concerns about the balance of power with TikTok are starting to spread among senior music industry officials.

TikTok’s ‘blind’ payments – even without a revenue-sharing agreement – ​​may have seemed like ‘easy money’ for record labels in recent years.

But to some, that image is now starting to look like an industry sleepwalking into a generational mistake and neglecting to see the writing on the wall.

“The last time we let a company of this size and power get away without paying us properly was MTV.”

As I mentioned on the Telling trends podcast, a major record company source summed it up nicely for me the other week.

“Soon TikTok will be too big and too powerful for us to force it into a revenue-sharing deal,” he said.

“The last time we let a company of this size and power get away without paying us properly was MTV.”The music industry around the world