The new “value gap” in the music industry: TikTok – Music Industry

TikTok is by now the standard for popping up new artists and promoting new releases. Yet artists and executives compare success in TikTok with a lottery, since achieving virality is totally random. But the most important thing is that in this comparison, winning the lottery on TikTok does not mean that it is the platform that would pay.

Financial rewards accrue off-platform in the form of royalties from streaming waves or record label advances, with seven-figure deals routinely offered to viral artists in recent years.

TikTokwhich has built a thriving business based largely on users syncing videos to music, pays “almost nothing,” according to a music distribution executive quoted by Billboard.

There is no set fee for music on TikTok; record labels and distributors negotiate licenses individually. But one thing seems constant: “The numbers are horrible,” says a manager who has had several popular songs on the app and shared his royalty statements with the publication.

A marketer who oversaw the campaign for a single used in roughly half a million TikTok videos reports his artist took home less than $5,000 from the platform, despite views numbering in the billions.

One million views equals $8

The parent company of TikTok, ByteDance, “he doesn’t see music as an added value,” says another senior executive. “They just see music as a cost center that they have to limit as much as possible.”

So far, ByteDance has been very successful in doing just that. An independent label boss shared several months of royalty information indicating that 1 million views on TikTok generates around $8actually a better rate than that exhibited in the most recent statements of three other independent labels that were shared with Billboard.

In contrast, managers say that while payouts from Youtube vary, 1 million views will generally generate between $500 and $2,000.

It is surely no coincidence that the music industry’s complaints about the flow of money from TikTok are gathering steam as major labels are negotiating licenses with ByteDance, that plans to expand its streaming service, Ressobeyond test markets in Brazil, India and Indonesia.

Speaking at a recent industry conference in Singapore, Mr. CEO of Universal Music Group (UMG), Lucian Graingewarned the music business about a value gap that “it is quickly shaping up in the new iterations of short-form video.”

As TikTok’s business expands, gaining more users and selling billions of dollars worth of ads, record labels and distributors aren’t participating in that growth.

In a statement, TikTok’s global head of music, Ole Oberman, he said: “We are proud of the partnerships we are building with the industry and artists, and we are confident that we are enhancing musical engagement.” He added: “That translates directly into more financial and creative opportunities for music creators.”

Part of the debate about how much artists should earn from TikTok stems from a debate about the nature of the platform itself. TikTok is video-based, and Obermann has pointedly said that “it’s not a streaming platform.” He reiterated it in his statement to Billboard: “Our community comes to TikTok to watch videos, not listen to full-length tracks.”

But the app is already threatening established streaming platforms, which must scramble for time with addictive video clips. TikTok. And some in the music industry dispute Obermann’s claim: They already see a generational shift where “some people have a TikTok playlist and just use it as their music service,” as one label boss puts it. Independent.

The new value gap

Sources say record labels and individual distributors have different deals with ByteDancewhich negotiates up-front payments to use your recordings on TikTok for a set period of time.

Also, each label and distributor can make their own decision on how to dole out those payments to artists. Many of the sources who spoke for this story are paid by their labels or distributors based on the number of individual video uploads their songs garner.

Reports from an independent label executive showed that artists he manages earned around $150 from TikTok for roughly 100,000 videos made with their music.

A manager who works with various artists who have found success on TikTok shared reports of individual tracks: One single grossed around $100 after being used in some 60,000 clips, while another earned $350 from over 80,000 videos.

Other sources say they only see TikTok views, rather than how many videos have been created with their music, in the royalty reports they receive from their label or distributor, or make a decision to rely on views to calculate royalty payments. TikTok internally.

“If you pay based on the works, that means that it doesn’t matter if a song is heard once or a billion times, and that would really devalue the music,” says the head of the independent label.

When executives examine TikTok payouts compared to views on the platform, the money made seems even more miniscule. “TikTok doesn’t pay nearly what any other view pays,” says the head of a record company that is distributed by a major. “It’s astronomically lower.”

Some in the industry who value TikTok as a marketing tool they point out that the money flowing into the music industry has improved over time. And several sources compared the current situation to the music industry’s early and combative relationship with YouTube.

In Singapore, Grainge warned against “repeating past mistakes,” citing both mtv like Youtube. “They gave us a lot of reasons why they shouldn’t pay our artists,” Grainge told attendees.

“They said ‘It’s a great promotion,’ ‘Or you can use it as a platform to discover new artists’… The technology platforms were built on the hard work of artists.”

graine he called on key players to protect the “cultural and commercial value” of music. And the senior executive who believes ByteDance sees music as a “cost center” expressed a similar sentiment. ByteDance “needs to move to a more rational model that equates more value with what drives its business,” he says. “Only pressure will get them there.”