Last week saw TikTok announce two significant deals with the music industry.
One of those deals was a straightforward global licensing agreement, with the US-based National Music Publishers’ Association. That agreement will see TikTok officially permitted to use the repertoire of NMPA members who opt-in.
The second deal was a little more far-reaching. TikTok renewed its existing licensing agreement with Believe, one of the world’s biggest independent music companies that claims – largely via its ownership of TuneCore – to distribute over a third of all music releases, by volume, across the world.
But the Believe deal had other, interesting elements bolted on too. Dubbed a “marketing and distribution” agreement, Believe said the deal would provide it with in-depth analysis of market trends on TikTok, as well as enabling Believe’s artists and labels to “benefit from more marketing coverage and optimise revenue opportunities” on the platform.
TikTok is yet to strike multi-year deals with the major record companies right now, and is continuing instead on a temporary and/or rolling licensing basis with Universal, Sony and Warner. It did, however, ink a global licensing deal with powerful indie label/distributor consortium Merlin in April.
To get further into the nitty gritty of the Believe deal, and discuss the wider implications of TikTok’s soaring success on the music industry, MBW caught up with TikTok’s Global Head of Music, Ole Obermann, and Believe’s CEO, Denis Ladegaillerie.
Here, we discuss why both parties believe TikTok is adding revenue to the music business – rather than cannibalizing it – as well as the future of the platform’s relationship with labels, and whether industry charts need to change…
TikTok has now announced an agreement with both Believe and Merlin. How significant is this Believe announcement in terms of TikTok’s recorded music licensing – and what message do you hope other in the industry take from it?
Ole Obermann: We want to be licensed across the board with all of the labels, all the publishers – we are engaged with all of those [companies].
Because of the really good history in our relationship with Believe, it made sense to start here. Just because we’ve got this deal done, it doesn’t mean we’re not having a few other conversations right now, and hopefully there’ll be news on some other deals soon.
Believe is a cornerstone of the independent artist sector, which continues to grow industry market share globally. Do you have any observations on the growth of independent artists, and the role at TikTok is playing in the development of that market?
Obermann: One of the things that has really jumped out at me on TikTok is that you do not need any history of performance metrics for something to go viral; if something is working, even if you’re a first-time uploader with no ‘Likes’, views or creations in place yet, you have an equal and democratic chance of spiking on the platform as something with tons and tons of history.
That’s pretty unique, relative to other platforms, and obviously paves the way nicely for any type of artists – whether independent, major or unsigned.
TikTok has already been downloaded over 2bn times worldwide. Denis, how big do you expect TikTok to become for the global music industry?
Denis Ladegaillerie: They’re a significant and leading player globally, no doubt about it, exactly for the reason that Ole just described. Our experience has been that TikTok is a unique platform when it comes to artist discovery and to helping artists or songs emerge.
We’re starting to see a generation of artists born and raised on TikTok; The Limba, signed to Believe in Russia, is a good example. We’ve taken him to be the largest artist in Russia in the past several months – both on and outside of TikTok – and TikTok was the No.1 reason why he [was able to] reach the top.
“Barring current political and world events, I don’t see any reason that would stop TikTok from building global leadership in this space.”
Denis Ladegaillerie, Believe
Short-form videos are becoming more and more popular. Barring current political and world events, I don’t see any reason that would stop TikTok from building global leadership in this space.
The trends are fantastic, the product is fantastic and the value is there from both a creator standpoint and from an audience engagement standpoint.
There’s a concern in the broader music industry about artist development versus track development, and how streaming services – TikTok included – are impacting on the fan’s relationship with artists. Do you believe TikTok can help the building of artist profiles versus simple track popularity?
Obermann: It’s something we spend a lot of time thinking about.
We certainly see that a song can break without an artist having a presence on TikTok. But if you want to put longevity around that song, or break other songs from that same artist, it quickly becomes very important to really focus on the artist’s profile, and have the artist be active on the platform.
“The more effort you put in, the more you’re going to be able to break an artist [on TikTok].”
Ole Obermann, TikTok
We do A/B testing on this. Some label partners, and some artists themselves, are incredibly engaged [on TikTok]; they’re on the platform every few days, sometimes every day, maybe even multiple times a day, posting and doing other things to engage with fans. You’re absolutely seeing those artists and their songs break away. But if a song is just there [without the artist building a presence on TikTok] it might be sort of a one hit wonder – it won’t see that same sort of exponential curve.
We think we’re giving the labels and the artists tools to do the things they need to do to break, but we need them to lean in; we need the artists to take the time to get to know TikTok, and then engage with the platform.
The more effort you put in, the more you’re going to be able to break an artist.
Ladegaillerie: I totally agree. The music industry has always produced great one-hit-wonder tracks where the artist never built [beyond one song], and at the same time it has also helped great artists become known as great artists. That is nothing new. What we’re seeing on TikTok is just a reflection of how the world has always been.
Where TikTok is unique is it has the ability to make popular music emerge very rapidly, and also give [artists/labels] the power to expose that music to very large audiences very rapidly. That allows for development of tracks in a way that’s much faster and more reactive than what we’ve seen before. So how do you leverage a track’s [popularity] to build artists at the same time? You absolutely need to do the work, and that’s exactly what happened with The Limba in Russia.
“The concern about ‘TikTok is just propagating track-based pop music’ is a completely wrong perception.”
My strong belief is that we are coming into a world where audiences want to engage with artists, they want to engage with the content; they do not want to be passive listeners. They want to participate in the creative process and create [something new] using the music.
So yes, TikTok can help a track emerge – but if you want to build something longer-term, artists must understand how the TikTok audience wants to engage with them. The artist/fan dialogue will lack that intensity if the artist himself or herself is not a user of a platform.
The concern about “TikTok is just propagating track-based pop music” is a completely wrong perception. It is helping surface pop music, but it is also helping to build our artists’ careers.
Believe has always been an optimistic company over the monetization of music video, notably dismissing the industry’s concerns over YouTube‘s ‘Value Gap’. Driven by TikTok’s success, and with Facebook reportedly entering the music video space, is this a particularly exciting time for you in that regard?
Ladegaillerie: Yes. The way we think about the music video space is twofold. The first part is that of the traditional, official music video – the 3 minutes, 30 seconds long [project] – for which YouTube has been the champion globally for the past 15 years. And then you have the world of much shorter videos. They are two different things, and the music industry has to understand that difference.
You need to know how to leverage both separately in order to drive artist success and artist development.
On the official music video side, it seems we’re finally getting to a place where Facebook might meaningfully engage. We’re also having discussions with TikTok on experiments there, and we are seeing other players – especially in Asia, like JioSaavn and Gaana, and then VK in Russia – who are all gearing to launch their own music video services, or to integrate music video more as part of the overall experience on their platforms.
There are a few TikTok rivals becoming apparent now in the short-form video world, including Instagram‘s Reels through to startups like Triller. How will TikTok stay ahead over the next 12 months?
Obermann: Obviously we respect these companies that are coming in; some of them are smart, innovative, well resourced and well capitalized, so we’re keeping a close eye on it.
But we’ve got a good head-start, because we have a tremendous amount of understanding [of the space] and also a relationship with the creators that are on the platform. We’ve really been digging into questions like: How do creators use the platform? What creates a hit? How does that flywheel of more creation breeding more views [play out]?
“We’ve got a good head-start, because we have a tremendous amount of understanding [of the space] and also a relationship with the creators that are on the platform.”
We now understand all of that incredibly well. And we’re hyper-focused on making that an even better process, with even better creation tools, and even better marketing and promotion [opportunities] once something starts taking off on the platform.
We’ve got unique relationships with creators, we’ve obviously got relationships with labels, publishers, content partners, and we’ve got a ton of data. And then we’ve also got that focus on product and product innovation.
So while you’re going to see other companies out there with some of the same basic functionality [as TikTok], the way we’ll stay ahead is to keep building on top of those things. Something I’m really focused on right now is that process of creating and uploading a video to TikTok; could we make that process broader for a musical creator, giving them even more that they can do right at the point of the creation?
Ole, you joined TikTok after a long period working for major record companies at Sony and Warner. If you could go back for a day to work for a major music rightsholder, what one thing above any other would you evangelize about TikTok internally?
Obermann: The fact that to really understand the potential of TikTok, you have to embrace the notion that the way fans, especially young fans, interact with music is changing. They don’t just want to consume the music they like; they want to create on top of it – they want to put their own stamp on it.
At TikTok, we put more focus on the metric of creation than we do views. When we look at the health of a song, and when we look at the health of the business overall, [we focus on] that ratio between creations and views.
What we see is that user creation activity is the leading indicator of a song that is going to break. We all know that on any [standard audio streaming] service, if you do enough merchandising, positioning, marketing, promotion, playlisting, a song will get some big numbers. But are those numbers really due to the fans falling in love with that song? Or is it just because you hit No.4 in a big playlist, so now you’re getting played a lot by [an audience] who is sitting back?
The creation metric shows that your audience is fully leaning in, literally using their own resources, so to speak, to do something new with your song. So [the music industry] has got to embrace the idea that the way that music fans are going to interact with music in future is changing.
“The music industry has got to embrace the idea that the way that music fans are going to interact with music in future is changing.”
Any rightsholder that has gotten their head around that fact is really engaged with us right now, because they understand that they can get ahead of this a bit; they can kind of plan today for where it’s all going tomorrow by working with us in a deep way. That largely depends on the cultural acceptance [of changing user consumption habits] within these various companies.
One other thing that I’d like to raise: there’s this concern about “could TikTok be cannibalistic to music industry revenue streams?”. We’ve done a bunch of case studies on this, and we see that when a song breaks on TikTok, it will [also] break on Apple Music, Deezer, Spotify, Amazon Music and YouTube Music etc. within weeks, days, hours or minutes. There’s a very direct impact.
There have been more than a few times where we’ve seen an explosion [on TikTok] on a song that was not getting any coverage anywhere else, and then within a very short period of time, that song is in the charts of all these other premium subscription services.
We’re very, very convinced [of that trend] and I think the labels are starting to see it.
You’ve both talked about the desire of young audiences to engage and interact with music via short-form video in a new way. Do you have any views on how that should be reflected in industry charts? Because a teenager spending two hours making a TikTok video based on a tune they love arguably demonstrates more engagement / fan activity than them rinsing a track within a playlist in the same time period.
Obermann: We’ve seen a conversation in the industry for years now about how almost faceless streaming consumption can be, and also how crowded the market is getting, with an unprecedented number of tracks being released every single day onto these platforms.
This is where the [unique] engagement on TikTok comes into play; fans are plucking stuff out in a way that really no other platform is able to do. They’re almost putting a ‘face’ on the music that is going to become popular.
Of course, it always starts with the song, and sometimes a song is just so powerful that without a ‘face’ it blows up and becomes an anthem. Or sometimes it’s the artists personality, or the way they perform the song live, or it’s the music video, or it’s the lyric that just perfectly captures the cultural Zeitgeist; all of these things play into why a song becomes popular. TikTok gives you the lenses to put across all of these things.
“I absolutely think we need to rethink the charts…”
To your question, I absolutely think we need to rethink the charts. I go back again to this creation and engagement metric. We’ve seen industry charts that weight different types of consumption in different ways [with paid-for streams now typically worth more in charts than free streams].
My vision is that that creation, that kind of engagement, will become a key metric. And I think it should be a heavily weighted metric. Because, again, it’s the opposite of a passive view or listen.
I hope that the industry is going to be ready, in the relatively short term, to rethink how its charts indicate where fans are focusing their energy, and what songs and artists they are excited about.
Ladegaillerie: Do I think we need to completely revisit the way charts are being produced in this new world? Yes, that’s long overdue. Having a Top 100 or Top 200 Billboard chart is great [for those companies who] traditionally have 80% of their revenues coming from 200 artists.
But in a world where video consumption is a key part of the engagement between artists and users, and where engagement through creativity also becomes a key [element], we absolutely need to look at the way charts are being produced. In a digital world, the development of successes has a different rhythm than it once did, and creator engagement is a key component of that.Music Business Worldwide