Happy Hump Day.
Peep Tupac in the background dancing..
MONEY TREND
I usually only like to write about things that have lasting value and point us towards future progress - rather than regurgitating current events and topics - but I recently read an article on Music Business Worldwide which really got me thinking. You can read the article here.
The article piqued my interest because it expressed much of the sentiment I covered in my article, ‘Artists are Media Companies’. Here’s an excerpt from the MBW article:
“As my major record company source put it 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. The last time we let a company of this size and power run away with things without paying us properly… was MTV.”
The article dives into the contractual relationship between Tik Tok and the major record labels; and how, according to the article, Tik Tok has essentially “bought out” the right(s) to use records controlled by the major record labels (which is over 70% of revenue generating sound recordings) - via license agreements - for the length of the license term(s).
In other words, Tik Tok pays the “majors” a flat fee for a specific amount of time; and for that period of time, they don’t pay the record labels anything else for the use of the sound recordings (note: use of the sound recording is distinct from use of the underlying composition).
IMPORTANT POINT: This means that, in terms of sound recording royalties, it’s up to the major record labels to proportionally divide this license fee between its artists; AND it’s up to the artists, signed to major record labels, to understand how and if they’re getting paid for the use of their music on Tik Tok.
So how much did Tik Tok pay the major record labels? Well, we don’t know exactly, but the article reports the following:
“$179 million, is what Goldman Sachs appears to be suggesting TikTok paid the record industry out of its $4 billion in revenues last year.”
If you consider that, in 2021, the major labels’ market share of recorded music revenue was 70.1% then….
DIFFERENT NOTES FOR DIFFERENT FOLKS
Another key point to know is that Tik Tok has different deals with different labels and distributors. So while Tik Tok has entered into a flat fee licensing arrangement with the major labels - its deals with independent distributors would be notably different.
So how much does Tik Tok pay if your music isn’t distributed through a major record label?
Well, it depends.. (lol)
Tik Tok has different deals with different distributors as well; but this article seems to suggest somewhere around $0.030 cents. Others have said similarly.
If anyone out there has seen, somewhat, significant revenue from Tik Tok - feel free to reach out. I would be interested in hearing from you - elijah@thrivesportsent.com
It’s also important to note that Tik Tok doesn’t consider itself a streaming service, so the way it pays out royalties to recording artists is a bit… um, different.
“Royalties for TikTok are based on market shares rather than metric views. To calculate the market shares, TikTok use what is called a creation. A creation is when a user selects a release from the Horus Music catalogue from TikTok’s library to make a video. Users can then make their own creations inspired by existing creations, all amounting to new creations. So, to put this simply, every time a user decides to use your music to make a video, this generates a royalty.”
NÜ MTV?
The main thing I want to drive home, however, isn’t the payment methodology of Tik Tok - even though every recording artist should be briefed by their label and/or distributor - in addition to ensuring that they are registered with a Performing Rights Organization since the use of an artists song in a tik tok is a public performance.
The main thing I want to drive home is Tik Tok’s key insight that there has been a convergence between music and media; and that artists are media companies. Tik Tok is essentially looking to build the media company of the future - a place where people come to not only listen to music, nor only watch videos - but do both.
I was about to make a prediction that we see Tik Tok create its own original programming, but I decided to google it, and what do you know?
Outside of that, Tik Tok recently announced that it would be allowing ten minute video uploads; in addition to its announcement of the launch of their music distribution and marketing platform, SoundOn, which “pays out 100% royalties to music creators in the first year and 90% after that”.
I’ll be doing some digging into ‘SoundOn’, and will follow up on my findings.
What both of these announcements tell me is that Tik Tok is looking to become something different from a record label; yet, still capitalize on the attention and influence of music - while also capturing the virality of an Instagram Post - in addition the revenue of YouTube.
Tik Tok is looking to build a media empire on the attention that its platform has gotten, in large part, thanks to music. This was my whole point about how music is often promotional, and ancillary, instead of the “main thang”.
While many (most?) artists don’t really care about Tik Tok royalties; and simply use Tik Tok - to hopefully drive attention to their streams and Instagrams - to hopefully drive ticket and merch sales… many people, however, miss the point that Tik Tok is not a streaming service. It’s main customer is not the recording artist, and its main product is not music.
The focal character for Tik Tok is the everyday user, who simply uses music as a paintbrush on the canvas of their lives.
Don’t believe me? Read this.
Most people don’t really care about the artist, whose song is being used, in the latest Tik Tok trend (unless they’re already big or the artist makes them care)…
..most people hop on the trend simply because it’s the trend..
..it wouldn’t matter if it was Barney on the record.
Until next time..
Elijah Adefope is a media, entertainment, and technology consultant and attorney. He is Lead Counsel at Substack, a media technology platform for creatives, and has written two books on the music and sports industries. He lives in Atlanta, Georgia and can be reached on LinkedIn or at elijah@thrivesportsent.com