Sony, Universal and Warner’s contract with TikTok is expiring. Music majors are demanding higher royalties and lower advertising costs.According to a Bloomberg report, the world’s most influential music labels are close to clashing with TikTok. Majors such as Sony, Universal and Warner would have asked the company that owns the ByteDance social network to increase royalties significantly.
According to an anonymous source, the record companies have asked for an increase ranging from two to ten times what TikTok currently pays.
But not only. The request would also provide for a sharing of revenue from advertisements broadcast while playing proprietary songs. And at the same time, a reduction in advertising costs is to be calculated based on the number of content with a musical background by a contracted artist.
For its part, the developer ByteDance seems unwilling to raise its offer. According to the owners, a platform is a promotional tool available to the majors. Also because on TikTok, you can listen to very few seconds of music. Therefore, the social network cannot in any way replace streaming platforms such as Spotify, Apple Music or YouTube itself.
How Much TikTok Earns, And How Much The Majors Ask
TikTok has been launched since 2016 and is certifying simply prime numbers. Suffice it to say that in 2022 it could triple its revenues compared to the previous year. In 2021, the social network had a turnover of 61.7 billion dollars, with a profit of 4 billion. This year, insiders expect revenue of about 12 billion dollars.
TikTok now pays record labels a lump sum, which allows it to use licensed music. The deal is for two years, and many majors are close to expiring dates. The contract with Sony expires in November 2022, and the one with Warner in January 2023. Finally, the one with Universal expires in February 2023.
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According to labels, music plays a considerable role in the success of TikTok. For this, they would like to sign new revenue-share agreements to obtain a percentage of all revenue generated by videos with licensed music. The request is that TikTok considerably increases the current offer: rumors speak of a range of proposals ranging from a minimum doubling to a maximum of ten times the existing figure.
If ByteDance accepts, it will follow in the footsteps of YouTube, which recently announced its commitment to pay 6 billion dollars in royalties in one year. Platform 2.0 has announced plans to become the music industry’s top revenue contributor by 2025.
The major labels seem pretty concerned that TikTok has the potential to turn into a record label. The ByteDance company has already hired A&R managers in important cities in North America: from Los Angeles to Miami, from Toronto to New York. In early 2022 it launched SoundOn: a distribution platform that allows any song uploaded to reach a global audience.
SoundOn is presented as a promotional tool but holds 100% of the royalties generated by the songs uploaded to it. An assumption that helps to understand why the majors consider him a real potential threat.