So… how much did TikTok pay the music industry out of its $4 billion in revenue last year?

MBW Reacts is a series of short comments from the MBW team. It’s our ‘quick’ reactions, through the lens of the music business, to major entertainment news.

If you listened to the most recent of MBW talking about trends podcast, and thousands of you have already done so, you may have captured a data point particularly relevant to the modern music business.

According to MBW’s reading of the latest Goldman Sachs report music in the air report, TikTok paid recorded music rights holders (i.e. record labels and artists) a total of around $179 million in 2021.

This is how MBW solved it:

  • According to Goldman Sachs, TikTok contributed an estimated 13% of record labels’ “emerging platform” revenue in 2021 (see below; Facebook/Meta contributed 29%);
  • In turn, Goldman estimates that revenues from these “emerging platforms” are made up of 30% of all ad-supported streaming revenue paid to the recorded music business in 2021;
  • According to IFPI figures, advertising revenue paid to the record business in 2021 amounted to approximately $4.6 billion;
  • 30% of $4.6 billion it is $1.38 billion
  • 13% of $1.38 billion it is… $179 million.

Now. According to BloombergTikTok generated revenue approaching $4 billion globally in 2021. TikTok is expected to triple this number by $12 billion in 2022.

As a percentage of that total 2021 turnover, TikTok is estimated to have paid recorded music rights holders ($179 million) therefore works on 4.5%.

So it’s a good time to do some quick basic comparisons with another platform, one of TikTok’s main rivals, which the modern music industry also heavily relies on.

Namely: YouTube.

Chubo / Shutterstock

YouTube vs. TikTok: Music Industry Payments

According to tax returns released 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 of last year, YouTube claimed that it had paid more $4 billion to music rights holders in the previous 12 months.

That $4 billion It is equivalent to 13.9% of YouTube ad revenue in 2021.

However, there are a couple of caveats when doing that calculation.

  • First of all, the $28.84 billion the figure is just the amount of YouTube advertising; does not include the additional billions the company made during 2021 through subscriptions to services such as youtube music.
  • In addition, Goldman Sachs’ tik tok The estimate, crucially, was only for the money it paid to recorded music rights holders. from YouTube $4 billion figure, on the contrary, covered the money paid to publishing/song rights holders, Y recorded music rights holders.

So, for the sake of argument, 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/composers are paid between a fifth and a quarter of total payouts.) of royalties).

This would mean that YouTube paid $2.64 billion to recorded music rights holders in the 12 months to the end of June 2021.

As a percentage of YouTube’s total ad dollars generated in the calendar year of 2021, that $2.64 billion figure would weigh around 9.1%.

Underpinning any comparison between how much TikTok pays the music industry and how much YouTube pays the music industry is a crucial difference: the two contrasting models through which both companies distribute money to record labels and music publishers. .

This was the core principle of that MBW talking about trends podcast:

  • from YouTube the ad business pays the music industry a share of the revenue from any (monetized) play that triggers ads of a video that uses music on its platform;
  • tik tok, on the other hand, does not pay for a part of the advertising based on plays. Instead, it licenses music from major record companies through individual “blind check” payments, each covering a certain grace period. In these grace periods, TikTok (and its users) can incorporate copyrighted music as much as they like.

On an annualized basis, Goldman Sachs appears to suggest that those TikTok “blind checks” amounted to around $179 million for the record business in 2021.

TikTok Global Music Director, Ole Oberman (inset in photo), has defended the fact that TikTok does not engage in a revenue-sharing model to pay music rights holders.

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 are not a streaming platform and we do not offer a subscription model. “.

The idea that TikTok is not a place where people actively play/consume music, and is in fact just a “promotional platform” that ‘starts the fire’ of popular songs on other streaming services, will be a key discussion point for music. industry in the months and years to come.

So let’s take that discussion to the next level here, by addressing the summer 2022 hit track.

kate bush Running down that hill (A deal with God) is experiencing massive worldwide popularity right now, almost entirely thanks to a sync-up on a Netflix series (Strange things).

Nearly two months after that killer sync debuted on May 27, up that hill it remains the top song on Spotify globally.

The track, largely in reaction to that sync blast, has also now been used in at least 2.4 million separate videos on TikTok (see below).

Here come the big numbers.

According to the ChartMetric data analyzed by MBW, only the top 1000 most popular of these more than 2 million videos, to date, have attracted 4.93 billion views among them.

(Therefore, it is obviously safe to assume that, beyond top 1000 TikTok videos with up that hillthat is, taking into account all 2.4 million+ videos, kate bush song has been played 5 billion times on TikTok to date).

  • Key point 1: Because there is no royalty-based/revenue-sharing agreement between her distributor (Warner Music Group) and TikTok, Kate Bush does not get paid for any of those works. (Outside, i.e., the aforementioned ‘blind check’ sent to Warner by TikTok at a certain point in the past. And only if Warner has paid the artist something.)
  • Key Point 2: Kate Bush’s track has over 5 billion (unpaid) views on TikTok. 5 billion! The song has just over 400 million streams on Spotify, despite being the world number 1 on that platform for weeks. So TikTok is really ‘promoting’ Up that hill? Or is it, in fact, cannibalizing streams of the song that might otherwise have occurred on ‘revenue-sharing’ streaming platforms like Spotify?

Adding to the music industry’s concerns about the second key point above: the argument that TikTok videos are simply “30/60 second sneak peeks” for music tracks these days is officially null and void.

In February of this year, tik tok announced that it would extend the maximum length of its videos to 10 minutes.

That news came less than a year after TikTok raised the maximum video length to three minutes in July 2021 (the maximum was previously set at 60 seconds).

How important is this strategy, which allows TikTokers to upload videos long enough to contain two or even three full songs on their platform, to TikTok/Bytedance?

To find out, you just have to sign up for a TikTok account.

When you do, one of the first things you’ll see is a cheerful guidance message next to the “Upload” button, informing you that videos can now be 10 minutes long on TikTok and encouraging you to take advantage of it.

And there’s another bogeyman for the music industry to contend with here: Statistics show that Gen Z’s music taste is increasingly less influenced by Spotify playlists than by TikTok.

Check out these scary stats from a Midia Research survey conducted in Q3 2021:

  • Single 10% of 16-19 year olds globally listen to curated playlists on streaming services (such as Spotify);
  • Unlike, 24% make your own playlists, and one third use TikTok every DAY

So TikTok might not just be cannibalizing plays on Spotify; it could also be gobbling up clout among tomorrow’s potential Spotify subscriber base.

At the risk of dwelling on the point: Spotify = revenue sharing with record labels/artists; TikTok = no revenue share with record labels/artists.

So let’s get all of that clear in our minds:

  • The most popular song in the world at the moment: up that hill – has been viewed more than ten times on TikTok (5bn+) you have on Spotify (≈400m);
  • TikTok videos are now allowed (and, in fact, encouraged) to be long enough that the full song can be included twice;
  • Royalties (revenue sharing) are not paid for plays by up that hillbecause TikTok argues that it is a “promotional” platform and “not a streaming service”;
  • However, 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 is “nearly impossible to separate [sic] a TikTok of your sound, or the video doesn’t make sense anymore.”

Does all of that sound like it might be worth a few quid more to the music industry than $179 million by year?

Particularly when TikTok is anticipated to deliver $12 billion in 2022, approaching the size of the entire US recording industry (2021 revenue: $15 billion)?

You may be able to see why concerns about the balance of power with TikTok are starting to spread among high-level figures in the music business.

TikTok’s “blind check” payments, even without a revenue-sharing agreement, may have seemed like “easy money” to record labels in recent years.

But to some, that image is now starting to look like an industry sleepwalking into a generational mistake and forgetting to see the writing on the wall.

“The last time we let a company of this size and power walk away with things without paying us properly was MTV.”

As I mentioned in the talking about trends podcast, a major record company source summed it up neatly for me the other week.

“Soon, TikTok will be too big and powerful for us to force into a revenue-sharing deal,” he said.

“The last time we let a company of this size and power walk away with things without paying us properly was MTV.”Music business around the world

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