UMG Got Tik’d, So Now Its Videos (& The Videos of Others) Don’t “Tok” On The Most Important Social Platform
At least one senior “insider” believes UMG’s decision could impact up to 80% of all music videos on TikTok
Sound on Millions of Videos Muted on TikTok - UMG Did It, But All Labels Were Impacted
A couple weeks ago, TikTok users woke up to the unthinkable – no sound to the videos of many of their favorite music artists like Taylor Swift and – god forbid – no way to add Swift’s and other music to their own videos. Universal Music Group (UMG), the world’s largest music label, had pulled the plug on the sound of up to three million videos with its recordings. But that move didn’t just mean that UMG artists went silent. Because UMG’s publishing arm (Universal Music Publishing Group or UMPG) helped yank that chord, and it represents four million songs itself, the videos of recording artists on other labels were also to be muted if UMPG songwriters helped write their underlying songs. Remember, music carries two copyrights – one for the master recording and one for the composition itself.
That fundamental legal reality has been mostly lost amidst the breathless news coverage, but is absolutely critical to understand the magnitude of UMG’s decision. Consider Adele, who is just one major artist caught in this complex music licensing web. She records for Sony Music, but her publishing is with UMPG. That means her videos are off limits to TikTok.
But it gets much stickier even than that. Consider songs written by multiple songwriters with multiple publishing houses, only one of which is UMPG – a situation not so unusual in hip-hop and dance. Leading industry publication Music Business Worldwide points out that “[i]f a UMPG writer contributed just 1% of the songwriting credits to that recording, it too would need to come off TikTok.” It then quotes a shellshocked senior executive from a rival publishing company who surmises that “up to 80% of all relevant music content” on TikTok and other platforms likely has at least some link to UMPG.
What Makes This Shot Across the Bow Unlike Anything Before It
That’s what makes UMG’s move the kind of massive shot across the bow unlike anything before it. Its potential impact is breathtaking, as are the understandable mixed emotions of the music industry that flow from it. Take emerging UMG recording artist Cody Fry, for example. His song “Things You Said” started to go viral just before it went dark. So while he supports UMG’s hardline stand, he feels like he is “just at the mercy of machinations of these multi-billion dollar corporations.” TikTok has played an increasingly critical role in artists’ lives after all, especially to emerging artists.
TikTok is also increasingly dominant in our online lives, of course, much to the chagrin of some in Congress who now seek to restrict the China-based company for national security reasons. They worry (or at least feign to worry to push their own political agendas) that the Chinese government is using TikTok as a way to indoctrinate and gather personal data from digital natives who can now barely cope with the stress of it all. UMG’s decision is more mud to sling at TikTok’s CEO Shou Zi Chew who just recently was in the Senate Judiciary hearing hot seat.
The battle of two titans – one with the largest content pipeline and the other with the largest social distribution – was triggered even before they were unable to reach agreement on terms to extend their contract past its January 31st, 2024 expiration date. In a scathing open letter before it took its drastic step, UMG accused TikTok of “trying to build a music-based business, without paying fair value for the music.” It further chastised the social media behemoth for allowing it “to be flooded with AI-generated recordings” and other moves that are “nothing short of sponsoring artist replacement by AI.”
UMG Has a Very Legitimate Point (As Painful as It Is)
UMG has a very legitimate point here, as painful as it is to all involved. TikTok has been almost unstoppable, and UMG – which boasts 32% of global recorded music market share and 23% of global publishing – correctly points out that the Big Tech social media giant is very open about its music ambitions. In its letter, UMG underscores that TikTok’s senior executives “proudly state publicly that ‘music is at the heart of the TikTok experience” yet, as UMG further points out, TikTok accounts for “only about 1% of [UMG’s] total revenue.” Music Business Worldwide did the math and estimates that means that TikTok pays UMG only about $110 million annually – and the entire music industry $400 million annually – despite the fact that TikTok was expected to close out 2023 with $18 billion in “net global advertising revenues.” If those numbers are right, TikTok’s payout to the entire music industry of just over 2%, despite the central role music plays in its herculean success!
We’ve Heard This Big Tech Song Before
Sure, some may cry foul at a major label’s protestations, especially young people who have grown up in an era where many have been trained to believe that music is free. But many in the entertainment industry understandably feel that Big Tech’s playbook has been to essentially steamroll over them in negotiations through sheer mass and gale force industry headwinds of the Internet, social media, and now generative AI. As I’ve pointed out repeatedly, Big Tech for the past few decades has largely built its massive user bases and resulting multi-trillion dollar valuations on the backs of the artist community. Let’s not forget that technology pipes without the content to fill them are, of course, ultimately just useless pipes.
The music industry, for example, looked to Big Tech to help save it after the original “bad” Napster wreaked havoc almost overnight on the system it had built up over decades. That’s when Steve Jobs played the part of white knight, cut albums into individual song pieces, created the world of $.99 downloads, and then took 30% of every song slice. There was no magic to those two numbers, but once Jobs conjured and negotiated them, they entered the wild and became industry religion. The rest, as they say, is history. Apple has used content – and the “sexy” marketing and engagement that flow from it - as its foundation to build the most valuable company on the planet (well, it has been; but Microsoft is #1 as of today due to the latest Big Tech machinations of generative AI).
Then, less than a decade after Napster’s great IP train robbery, YouTube entered the void and quickly built a massive user base by enabling unbridled uploading of copyrighted videos - many of which were music videos - by the millions. Still reeling from the pain of their music industry compatriots, the studios barely knew what had hit them. Viacom ultimately sued YouTube for mass infringement, and the two companies eventually settled after 800-pound Big Tech gorilla Google bought YouTube for $1.65 billion and bankrolled its mass infringement litigation in the steal of the century. Now, just about 20 years later, YouTube’s basic arbitrary ad-supported economics still rule the day - which is part of the reason Google’s market valuation sits at about $1.8 trillion while UMG’s hovers at roughly $50 billion.
TikTok Takes Big Tech’s Proven Playbook to the Next Level
TikTok picked up on Google’s ad-first antics and took them to the next level when the industry recalibrated to go where the kids were going, which is a song Big Tech has played on repeat for decades. UMG now hopes to lift the needle off that skipping record and finally understands that it holds power too. Artists, creators and their content, after all, sit at the center of the media universe, no matter what form of distribution. And UMG – not to mention the entire music industry – no longer need to play victim. They have learned their lessons the hard way and have become tech savvy too. Most importantly, the music industry is growing at breakneck speed after near obliteration not so long ago.
Given this new awareness of the role it plays, UMG has painfully – but understandably - decided to play the long game here to lock in rules of the game that attribute more value to artists. Perhaps it may not be the optimal conduit for planting this stake in the ground, but let’s not forget that size is the one thing that TikTok and other Big Tech platforms respect. Does anyone really doubt UMG’s claim that TikTok was playing a form of negotiation hardball tantamount to “intimidation”?
TikTok Never Expected UMG to Pull the Plug
It’s quite likely that TikTok never really believed that UMG would pull the plug. One industry “insider” who attended Variety’s TikTok-sponsored Grammy party noted that Ole Obermann, TikTok’s global head of music business development and IP rights (yes, that’s his title), “nervously gripped the podium as he tried to win over the room” and convince attendees that TikTok actively supports the artist community. “And it was not working,” she said.
So who will blink first?
UMG has the trickier needle to thread here, because TikTok users simply want their videos back. Artist compensation and fair deal terms are not likely top of mind in an instant gratification world with increasingly limited attention spans. UMG also needs to convince its major label and publishing partners, not to mention the entire artist community, that its battle is a noble cause that benefits all.
Here’s my prediction. The battling behemoths will resolve their very public differences and reach a new agreement by the end of this month.
(NOTE: I’ve run several tech-forward media companies, including serving as President of ubiquitous music software leader Musicmatch during the early “bad Napster” days. We were the first to negotiate on-demand streaming licenses from the major and indie labels that helped to build back the industry for artists after. I have run several other tech-fueled media companies since, so I readily embrace and celebrate new technology. But I’ve also heard Big Tech sing the same tune for decades now and believe that content always comes first).