Universal Music impasse with TikTok threatens to take more tracks off platform

Author: Editors Desk, Anna Nicolaou in New York and Cristina Criddle in London Source: Financial Times
February 29, 2024 at 08:23
Beyoncé’s new song, ‘Texas Hold ‘Em’, has soared to the top of the Billboard charts, helped by its prominence on TikTok © INSTARimages.com/Reuters Connect
Beyoncé’s new song, ‘Texas Hold ‘Em’, has soared to the top of the Billboard charts, helped by its prominence on TikTok © INSTARimages.com/Reuters Connect
Talks stumble over money, copyright and use of artificial intelligence

TikTok has failed in its attempts to restart negotiations with Universal Music, according to people familiar with the matter, leaving two of the most powerful companies in entertainment deadlocked over money, copyright and how to treat songs created by artificial intelligence.

The impasse means even more musicians face the prospect of their work disappearing from the social media platform, which has been one of the biggest drivers of music consumption in recent years.

Universal, which controls a third of the world’s music, last month stopped licensing its music to TikTok after a year of tense negotiations. Many videos on the site containing Universal music have already been muted, but the dispute is escalating significantly this week, with millions more songs set to be silenced.

In the past few weeks TikTok executives have repeatedly contacted Universal executives to try to restart negotiations. Ole Obermann, TikTok’s music head, Zhen Cao, the music lead at parent company ByteDance, and even TikTok chief executive Shou Zi Chew have been in touch through emails, text messages, Zoom and phone calls, according to people familiar with the matter.

However, Universal, whose negotiating team is led by digital chief Michael Nash and chief executive Lucian Grainge, does not view TikTok’s offers as compelling enough to agree a deal, these people said.

People familiar with the matter said when talks fell apart last month TikTok had been offering to pay Universal a “low single-digit” percentage of its advertising revenue for the use of its music, which includes the repertoire of stars such as Taylor Swift, Drake, The Weeknd and Lana Del Rey. 

TikTok recently came back with an offer that was higher but still well below the 20 per cent cut of advertising revenue that YouTube pays to the music industry, according to people familiar with the matter.

The other big sticking point is AI. Universal wants TikTok’s royalty money to go towards musicians, while TikTok wants the “royalty pot” to also be shared with fans who use AI to make their own tracks. Universal views this as a non-starter, people familiar with the matter said.

In a statement on Wednesday, TikTok said it remained “committed to reaching an equitable agreement” with Universal but was in the process of carrying out the music company’s requirement to remove all songs written or co-written by one of its songwriters.

“Their actions not only affect the songwriters and artists that they represent, but now also impact many artists and songwriters not signed to Universal,” TikTok said.

The stand-off is among the most heated clashes between tech giants and media groups in recent memory, as they battle for control over the future of entertainment.

Big music companies earn billions of dollars a year through royalty payments from streaming service and social media platform operators including Spotify, Apple and Meta. They typically renegotiate these contracts every couple of years, in licensing talks that are often tense but almost always result in a deal.

This is the first time in the streaming era that Universal has gone as far as removing its music from a tech company’s platform. The outcome of the TikTok-Universal dispute will affect music revenues for years to come.

Obermann, a former Warner Music executive who joined TikTok in 2019 to lead its negotiations with the big music labels, has been at the forefront of the talks. His boss at ByteDance, Zhen, has also been involved in recent weeks, with the communications sometimes appearing uncoordinated, according to people familiar with the matter. Chew, TikTok’s Singapore-based chief executive, has also been in touch with Universal to try to restart talks.

The stand-off has left Universal artists without their biggest marketing tool, while TikTok users are seeing their posts muted en masse.

Beyoncé, who is signed with Universal’s rival Sony, seems to have benefited from the stand-off. Her new song “Texas Hold ‘Em” has soared to the top of the Billboard charts, helped by its prominence on TikTok, where users are posting hundreds of thousands of videos using the track. 

However, this week’s expansion of the licensing takedowns will affect even artists who are not affiliated with Universal, such as Beyoncé. 

Every song has two sets of copyrights: one for the recording, and one for the “publishing”, meaning the writing and composition. Starting late on Monday, TikTok began removing songs tied to Universal’s publishing arm. This means that artists who collaborate with songwriters signed to Universal will have their work removed, too.

According to these rules, “Texas Hold Em’”, which was co-written with Raphael Saadiq, who is signed with Universal, would also be muted on TikTok.

Some executives and analysts estimate that 60-80 per cent of all the popular music on TikTok will be muted this week. TikTok disputes this, saying the figure is closer to 30 per cent.

People close to TikTok said it had not lost users since the removal of Universal’s catalogue but argued that the dispute was hurting the wider industry.

On Universal’s earnings call on Wednesday, Grainge said: “We’re friendly people. My phone is open, unfortunately, 24 hours a day . . . We negotiate and deal with platforms that combined are worth trillions. I’ve spent my entire career creating win-win situations.”

The waiting music ahead of the call included Sophie Ellis-Bextor’s “Murder on the Dance Floor”, a song Universal owns the rights to, which exploded in popularity on TikTok in recent months.

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