How Are Labels and Artists Affected by TikTok’s New Role in the Music Industry?

April 1, 2021

TikTok, a social media platform dedicated to “short-form mobile video”, is one of the most popular apps in the United States. It boasts over 100 million users in America alone and has surpassed two billion total downloads on videos posted to the app. Many of the videos posted to TikTok either include music in them or are largely based on specific songs, like the many dance challenges that have led TikTok to become “a wildly popular global platform for dance”. The pervasiveness of many of these videos has led TikTok to become a powerful force in the music industry, with the power to launch new songs to the top of the charts (like Lil Nas X’s “Old Town Road” in 2019) or help older songs gain a new audience. With this ability to create hit songs or even launch careers, there is some incentive for artists to have their songs in a TikTok video but will they (and potentially their record labels) get paid from it? The issues of music licensing and artist compensation present themselves and have even led the three biggest record labels in the country to grant widespread licensing deals to TikTok.

In February of 2021, Universal Music Group, the largest record label in the world, entered into a “global alliance” with TikTok. This partnership deepens the two companies existing relationship by granting long term licensing rights to TikTok for all of UMG’s catalog, which allows TikTok users to incorporate copyrighted music into their videos from UMG artists, ranging from Frank Sinatra to The Weeknd. While they had a short-term deal in place prior to the recent agreement, the long-term deal with UMG was the final of such deals between TikTok and each of the “Big Three” record labels: UMG, Sony, and Warner. Together, these labels are responsible for putting out two-thirds of the recorded music purchased or streamed. Their affiliated publishing companies also control almost 60 percent of the music publishing market.

Even if a video goes viral…that does not necessarily mean a big payday for an artist.

The alliance between UMG and TikTok was enacted in part to make sure that artists were given “equitable compensation” for the use of their music in TikTok videos. For any of the major labels, signing a licensing deal with TikTok alleviates much of the concern surrounding unlicensed use. However, there is still a large quantity of music not affiliated with these labels that may not be licensed to appear in any of the platform’s videos. Under the Digital Millennium Copyright Act, if a copyrighted work is being used without permission, the violating media is subject to a “DMCA takedown”, which can result in its removal from the platform. However, these takedowns are not automatic, or even regularly invoked by the actual platforms, they are the product of individual takedown notices. The responsibility of filing these takedown notices is on the musicians themselves or their representatives. For a large record label with seemingly inexhaustible resources, this would be less of an issue that it is for an independent label or artist who may have trouble locating every unauthorized use of their work until after it’s already gone viral. The platforms themselves, like TikTok, are not liable for their subscriber’s misuses of copyrighted works so long as they make it generally known that sort of practice is not allowed. Even if the issue of unauthorized use is set aside, the paltry amount that an artist obtains from royalties from a short-video platform like TikTok has hardly seemed like “equitable compensation” in the past.

For many hit songs, there are often two separate copyrights: one for the composition (music and/or lyrics) and one for the finished recording. Artists typically hold the composition copyright while the labels hold the rights to the recording. For an artist to get paid through the use of their song on a platform like TikTok, they would rely on a few different types of royalties that apply to the composition copyright. However, those royalties are gathered by a service that takes a percentage. And the amount of royalties gained from a TikTok video would be less than royalties from a music streaming service, due to the fact that many TikTok videos are only fifteen seconds long, so the entire song is not being used. After that small royalty is divided up between the different copyright holders, there may not be much left for the artist. Even if a video goes viral and racks up millions of views, that does not necessarily mean a big payday for an artist. According to DistroKid, a royalty collection service, TikTok pays royalties for each new video that uses that particular artist’s song, not for each view of a particular video. The Music Modernization Act (MMA), passed in 2018, streamlined the royalty process and created the Mechanical Licensing Collective to help ensure that artists got paid when their songs were accessed on music streaming platforms. Currently, these new developments do not apply to video platforms like TikTok, so artists do not have the increased security that the MMA now provides when it comes to royalties associated with a viral video.

With the three biggest music labels in the world all granting TikTok license to use their music, it seems that the industry itself sees the importance that social media platforms will play in music’s near future. And while details of increased payout under UMG and TikTok’s partnership are unknown, hopefully they will take the opportunity to deliver on their promise of “equitable compensation” for artists, who play such an important role in the popularity of these videos.

Drew Gustafson