From Sony to Universal Music, the largest record labels want a bigger cut from TikTok as the app becomes a hit-maker

Sam Smith remix on loop… a TikTok loop, that is. As TikTok turns more tunes into viral hits, the world’s biggest music labels have taken note. Yesterday, Bloomberg reported that Universal Music, Sony Music, and Warner Music Group want TikTok to pay up to 10X more in license royalties — and share its lofty ad revenue with them. And negotiation time is ticking as contracts near expiration.

• Trending up: TikTok raked in $4B in revenue last year and is on track to triple that this year as advertisers keep flocking to it.
• Trending down: Back in 2020 labels were OK receiving a flat fee for TikTok to use their extensive music catalogs. But now that it has 1B+ users — and countless music-backed videos — labels want more $$ when their artists’ songs are used.

Running up that hill… As TikTok’s popularity has grown, so has its ability to turn tracks into chart-topping tunes. Now labels have started relying on the addicting app to promote new artists and singles, and with good reason:

• HotTok: Last year 175+ songs that trended on TikTok charted on the Billboard Hot 100, double the number from 2020.
• Nearly half of active TikTok users pay for a music subscription like Spotify or Apple Music, versus just a quarter of the general population.

THE TAKEAWAY

Musical attention spans are shrinking... but music’s presence is expanding. In the ’80s, people were listening to albums beginning to end. Then single-song streaming took over, and now tracks are featured in everything from 30-second cooking clips to games like Fortnite. TikTok has modeled itself as more of a promo tool and doesn’t pay labels with the same revenue breakdown as Spotify or YouTube. But while TikTok needs the music industry, the industry increasingly needs TikTok.