How TikTok Became the Music Industry’s Greatest


  • TikTok has emerged as a key promotional tool for record labels and publishers.
  • The app’s future also relies on its ability to maintain access to song catalogs from rights holders.
  • This codependency has created a “frenemies” dynamic as the parties bargain over licensing deals.

The music industry is worried — and excited — about TikTok.

“There is a problem here,” Universal Music Group CFO Boyd Muir said when asked about the short-video app at Morgan Stanley’s Technology, Media, and Telecom conference earlier this week.

Muir described TikTok as “exciting” and a remarkable driver of engagement, but viewed its monetization deal with the app as trouble.

“We will move TikTok in a direction where there’s greater alignment financially based on the contributions that are made into the platform,” he said, noting that the way that will be accomplished is “complicated.”

Complicated is a fair way to describe the entangled relationship that’s formed between TikTok and the music world in the last few years. 

The social-entertainment app has become the go-to platform for discovering new music, regularly pushing songs into the mainstream and often to the top of the Billboard 100 or Spotify Viral 50. Record labels use the platform to promote songs via influencer marketing and advertising. Artists’ teams host private listening parties for TikTok creators, and A&R managers scan the app to find new talent. All of these promotional functions have benefited the music industry, boosting streams on platforms like Spotify or Apple Music and helping artists grow their fan bases.

But TikTok’s music ambitions extend well beyond 15-second song snippets. It launched in March its own song distribution platform called SoundOn. It offers SoundOn artists between 90% and 100% of royalties from their music, while hiring its own A&R scouts in some markets.

Its parent company ByteDance runs a Spotify competitor in three countries called Resso. The company filed a US trademark application in May for a potential music-streaming product called “TikTok Music,” Insider first reported. Licensing negotiations to either expand Resso or introduce TikTok Music into other markets are underway, a person with direct knowledge of the process told Insider.

TikTok is positioned to disrupt the status quo of how record labels, publishers, and artists make money from the internet. Digital streaming has been a bright spot for the music industry in recent years as platforms like Spotify and Apple Music have created a new revenue source for labels and publishers. As social media takes on a bigger role in consumption, music rights holders are keen to lock in their cut of revenue.

“The argument from the labels’ position is that TikTok wouldn’t have an app without music because that’s what people are primarily using in their videos,” said Tatiana Cirisano, a music industry analyst and consultant at the research firm MIDiA Research. “The argument from TikTok’s side is TikTok is now so important to the music industry that they can’t afford to not have their music on the platform.” 

“Labels and publishers want to have a good relationship with TikTok, and they want TikTok to be a partner,” she added. “But if they concede just how important TikTok is to the music industry, they lose a little bit of negotiating leverage.”

Gia Woods performs onstage in a white and grey outfit in front of a pink background at the "Thrive With Pride" concert.

Gia Woods performs at the “Thrive With Pride” concert hosted by LA Pride and TikTok on June 10, 2021.

Rich Fury/Getty Images for LA Pride.

Licensing negotiations are nearly constant in the music industry

ByteDance and TikTok already have existing agreements in place with major record labels and publishers like Warner Music Group, Sony Music Entertainment, the National Music Publishers’ Association, and ICE. But these agreements are short term and always in a renewal cycle, the person familiar with TikTok’s negotiating process told Insider.

Bloomberg reported last week that rights holders want TikTok to share advertising revenue and increase the royalties it pays them for song rights, writing that the company had been negotiating with Sony, Universal Music Group, and Warner for months as they try to reach a deal before existing contracts expire.

“There’s a joke amongst all of us who work in this that the minute that you finally get your long form signed, you have two months until you need to go into a renewal cycle,” said Vickie Nauman, a music licensing consultant who has advised companies like Spotify and Warner Music Group. “You’re almost always in a constant state of renegotiating and refreshing the partners that you have on both sides as to how your business is performing and how someone’s catalog is performing within your business.”

Representatives from TikTok and UMG declined to comment on the record. Sony and Warner did not respond to Insider’s requests for comment.

Why record labels are looking at YouTube as a model for TikTok

When executives in the music industry consider how to work with a tech powerhouse like TikTok, they often point to YouTube, which once was viewed as a revenue drain for the industry.

In its early days as a platform guarded by the “safe harbor” provision of the Digital Millennium Copyright Act, YouTube regularly skirted liability for hosting unlicensed copyrighted content in its videos.

“Artists, labels, publishers aren’t happy with the DMCA model of free content,” said Daniel J. Schacht, a music lawyer at the firm Donahue Fitzgerald LLP who represents musicians, music tech companies, and publishers like Wixen Music Publishing. “It’s very normal, especially as an app gets bigger, to demand more of that [revenue] participation, particularly where music is so fundamental to the app.”

In YouTube’s early days, its DMCA strategy created tension for digital staffers at the record labels. When Warner initially entered into negotiations with YouTube for licensing revenue, for example, its in-house team was told not to post on the platform, a former Warner staffer told Insider.

“Platforms will operate under the DMCA until they’ve grown enough that the music industry starts to say, ‘Okay, we’re not turning a blind eye anymore,'” Cirisano said. “It always happens the same way where it’s like: a platform comes up; music industry turns a blind eye; platform gets really big; and the music industry turns around and says, ‘Hold on, we want our share.'”

YouTube’s relationship with the labels has shifted dramatically over the last decade. In 2009, it colaunched Vevo with UMG, creating a more straightforward path to collecting ad revenue. In 2015, it built the standalone music-streaming service “YouTube Music.” It’s carving out revenue for music rights holders as it rolls out ads on its new TikTok-copycat feature Shorts in February. Last quarter, YouTube’s head of music wrote that the company paid out $6 billion to the music industry over a 12-month period.

TikTok and ByteDance could take a similar approach, adding new ways to compensate the industry by sharing a cut of ad revenue on short videos and expanding Resso or launching a TikTok-branded music streaming service.

Social is poised to become the next big money maker for the music industry

TikTok’s rapid ascent in the music industry caught record labels and publishers off guard.

“Four years ago, I didn’t — I don’t know if anyone did — I didn’t see TikTok as being an enormous player,” Warner Music’s CFO Eric Levin said at the JPMorgan Global Technology, Media & Communications Conference in May. “It just shows how new models can unlock consumer interest, spend, and create a new revenue model.”

Now that rights holders have recognized TikTok’s influence and its aspirations to build a business around music, they’re playing hard ball. Sony Music recently pulled its catalog from ByteDance’s Resso in the midst of negotations, for example. 

YouTube's former Chief Business Officer Robert Kyncl appeared at a company event in front of a screen featuring the logos of record labels and Vevo.

YouTube’s former chief business officer Robert Kyncl will take over as Warner Music Group’s top executive in January.

Noam Galai/Getty Images.

Arriving at licensing agreements with so many different rights holders around the world remains an immensely complicated task for any tech player, said Jordan Bromley, a partner who leads the entertainment practice at Manatt, Phelps, & Phillips, LLP and board member at the advocacy group, the Music Artists Coalition.

“It’s really hard to get licensed,” Bromley said. “It takes a long time. It’s very expensive. You’ve got to get the attention of these companies, too, and if you’re not big enough, you won’t.”

But the divide between social-media platforms, which often grow via unlicensed user-generated content, and traditional record labels and publishers, is narrower than one might think.

The revolving door between big tech and the music industry is spinning, with executives like Ole Obermann, the global head of music at TikTok and ByteDance, joining the company after serving as Warner Music’s chief digital officer. Many of the staff on TikTok’s in-house team that negotiates with rights holders once held roles at record labels or publishers. And the incoming CEO of Warner Music, Robert Kyncl, is leaving YouTube where he served as its chief business officer.

As apps like TikTok, YouTube, Instagram, and Snapchat peel consumers’ attention away from platforms like Spotify and Apple Music, the need for rights holders to build revenue models around social media will only grow.

“Social-media platform deals are relatively new in our economy and lead to nine figures of revenue a year now,” Bromley said. “It’s definitely a huge point of interest for us as an entertainment community to make sure everyone is properly licensed.”

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