MBW Reacts is a series of short comment pieces from the MBW team. They are our ‘quick take’ reactions – through a music biz lens – to major entertainment news stories.
If you listened to the MBW’s most recent Talking Trends podcast – and thousands of you already have – you may have picked up on a particularly relevant data point for the modern music business.
According to MBW’s read of Goldman Sachs‘ latest Music In The Air report, TikTok paid recorded music rightsholders (i.e. labels and artists) a grand total of around $179 million in 2021.
Here’s how MBW worked that out:
- According to Goldman Sachs, TikTok contributed an estimated 13% of record labels’ “emerging platform” revenues in 2021 (see below; Facebook/Meta contributed 29%);
- In turn, Goldman estimates these “emerging platform” revenues made up 30% of all ad-supported streaming revenues paid to the recorded music business in 2021;
- According to IFPI numbers, ad-supported revenues paid to the record business in 2021 amounted to approximately $4.6 billion;
- 30% of $4.6 billion is $1.38 billion
- 13% of $1.38 billion is… $179 million.
Now. According to Bloomberg, TikTok generated revenues approaching $4 billion globally in 2021. TikTok is expected to triple this figure to $12 billion in 2022.
As a percentage of that total 2021 turnover, the amount TikTok is estimated to have paid recorded music rightsholders ($179m) therefore works out at 4.5%.
A good time, then, to make a quick basic comparisons to another platform – one of TikTok’s key rivals – on which the modern music industry is also heavily reliant.
YouTube vs. TikTok: Music industry payouts
According to fiscal filings posted by parent company Alphabet, YouTube generated a total of $28.84 billion in advertising revenue in the 12 calendar months of 2021.
And in June last year, YouTube claimed that it had paid out over $4 billion to music rightsholders in the prior 12 months.
That $4 billion is equivalent to 13.9% of YouTube’s advertising revenues in 2021.
However, there are a couple of caveats around making that calculation.
- Firstly, the $28.84 billion figure is only YouTube’s advertising haul; it doesn’t include the additional billions the company pulled in during 2021 via subscriptions to services such as YouTube Music.
- In addition, Goldman Sachs’ TikTok estimate, crucially, was just for the money it paid recorded music rightsholders. YouTube’s $4 billion figure, by contrast, covered money paid to both publishing/song rightsholders, and recorded music rightsholders.
So, for argument’s sake, let’s say a third of this figure went to publishers and songwriters. (By all accounts that’s an OTT suggestion; most industry estimates suggest that, when it comes to on-demand streaming, publishers/songwriters are paid anywhere between a fifth and a quarter of total royalty payouts.)
This would mean YouTube paid out $2.64 billion to recorded music rightsholders in the 12 months to end of June 2021.
As a percentage of YouTube’s total advertising money generated in the calendar year of 2021, that $2.64 billion figure would weigh in at around 9.1%.
Underpinning any comparison between how much TikTok pays the music industry vs. how much YouTube pays the music industry lies a crucial difference: The two contrasting models via which both companies distribute money to record labels and music publishers.
This was the core tenet of that MBW Talking Trends podcast:
- YouTube’s ads business pays the music industry a revenue share of any ad-triggering (monetized) play of a video that uses music on its platform;
- TikTok, by contrast, does not pay out a share of advertising based on plays. Instead, it licenses music from major record companies via individual “blind check” payments, each of which covers a certain period of grace. In these grace periods, TikTok (and its users) can incorporate copyrighted music as much as they please.
On an annualized basis, Goldman Sachs seems to be suggesting, those “blind checks” from TikTok amounted to around $179 million for the record business in 2021.
TikTok’s global Head of Music, Ole Obermann (pictured inset), has defended the fact that TikTok doesn’t engage in a revenue-share model to pay music rightsholders.
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 stating: “We’re not a streaming platform and we do not offer a subscription model.”
The idea that TikTok isn’t a place on which people actively play/consume music – and indeed is only a “promotional platform” that ‘starts the fire’ of trending songs on other streaming services – will be a key debating point for the music industry in the months and years ahead.
So let’s take that debate to the next level here, by turning to the hit track of summer 2022.
Kate Bush’s Running Up That Hill (A Deal With God) is experiencing massive global popularity right now, almost entirely thanks to a sync on a Netflix series (Stranger Things).
Nearly two months on from the debut of that killer sync on May 27, Running Up That Hill remains the top song on Spotify globally.
The track, largely in reaction to that sync exploding, has also now been used in at least 2.4 million separate videos on TikTok (see below).
Here come the big numbers.
According to ChartMetric data analyzed by MBW, just the Top 1,000 most popular of these 2 million-plus videos have, to date, attracted 4.93 billion plays between them.
(It’s therefore obviously safe to assume that, beyond the Top 1,000 TikTok videos featuring Running Up That Hill, i.e. taking into account the full 2.4 million+ videos, Kate Bush’s song has been played over 5 billion times on TikTok to date.)
- Key point 1: Due to there being no revenue share / royalty-based agreement between her distributor (Warner Music Group) and TikTok, Kate Bush is not getting paid for any of those plays. (Outside, that is, of the aforementioned ‘blind check’ sent to Warner by TikTok at a certain point in the past. And only if Warner has paid any of it through to the artist.)
- Key Point 2: Kate Bush’s track has over 5 billion (unpaid) views on TikTok. 5 billion! The song has just over 400 million plays on Spotify, despite being that platform’s global No.1 for weeks. So is TikTok really ‘promoting’ Running Up That Hill? Or is it in fact cannibalizing plays of the song that could otherwise have happened on ‘revenue share’ streaming platforms like Spotify?
Adding to music industry concerns: Questions over the long-running idea that TikTok videos are simply “30/60 second teasers” for music tracks these days.
In February this year, TikTok announced it was expanding the maximum length of its videos to 10 minutes.
That news came less than a year after TikTok raised its maximum length of videos to three minutes in July 2021. (The maximum was previously set at 60 seconds).
How important is this strategy – enabling TikTokers to upload videos long enough to contain two or even three full songs to its platform – to TikTok/Bytedance?
To find out, you only have to sign up for a TikTok account.
When you do so, one of the very first things you’ll see is a cheerful guidance message hovering next to your ‘Upload’ button, informing you that videos can now be 10 minutes long on TikTok – and encouraging you to take advantage.
And there’s a further boogeyman for the music industry to deal with here: Statistics show that the music taste of Gen Z is becoming far less influenced by Spotify playlists than it is by TikTok.
Check out these scary stats from a Midia Research survey undertaken in Q3 2021:
- Just 10% of 16-19-year-olds globally listen to curated playlists on streaming services (like Spotify);
- In contrast, 24% make their own playlists, and one-third use TikTok each DAY
So TikTok might not just be cannibalizing plays on Spotify; it might also be gobbling up influence amongst tomorrow’s potential Spotify subscriber base too.
At the risk of laboring the point: Spotify = revenue-sharing with labels/artists; TikTok = no revenue-sharing with labels/artists.
So let’s get all of that straight in our minds:
- The world’s most popular song of the moment – Running Up That Hill – has been played over ten times more on TikTok (5bn+) than it has on Spotify (≈400m);
- TikTok videos are now permitted – and indeed, encouraged – to be twice the length of the average song;
- There is no royalty (revenue share) being paid for each play of Running Up That Hill, because TikTok argues it’s a “promotional” platform and “not a streaming service”;
- Yet TikTok itself (via TikTok For Business) proudly admits that “88% of TikTok users said that sound is essential to the TikTok experience”, and that it’s “nearly impossible to separation [sic] a TikTok from its sound, or else the video no longer makes sense”.
Does all of that sound like it might be worth a few quid more to the music industry than $179 million per year?
Particularly when TikTok is forecast to turn over $12 billion in 2022 – closing in on the size of the entire US record industry (2021 revenue: $15bn)?
You may be able to see why concerns about the power balance with TikTok are starting to spread amongst senior figures in the music business.
TikTok’s “blind check” payments – even with a lack of a revenue-share agreement – may have felt like ‘easy money’ for record labels over these past few years.
But for some, that picture 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 run away with things without paying us properly was MTV.”
As I mentioned on the Talking Trends podcast, one major record company source summed it up neatly to me the other week.
“Soon TikTok is going to be too big and too powerful for us to force it into a revenue share deal,” he said.
“The last time we let a company of this size and power run away with things without paying us properly was MTV.”Music Business Worldwide