Why TikTok Blinked in Its UMG Standoff, and What Happens Next
After a three-month breakup between Universal Music Group and TikTok, the two companies finally reached a compromise last week. While the deal’s specifics aren’t fully public, it’s safe to say the world’s biggest record label ultimately had more leverage over the hugely popular but battered social media platform.
One of the biggest questions that emerged when UMG and TikTok’s initial deal lapsed at the end of January was which company could hold out the longest. On one hand, UMG’s artist roster consists of millions of songs and some of the biggest artists, not just on TikTok but the world at large. The sheer amount of suddenly muted TikToks that used UMG-related music was hard for users to ignore.
On the other hand, TikTok is undoubtedly one of the most vital promotional tools for working musicians and artists — a fact UMG indirectly conceded when it let Taylor Swift bypass the boycott to promote her new album.
In the end, it appears UMG wasn’t bluffing when saying TikTok accounted for only 1 percent of its total revenue. In a press release sent the day after the new deal, UMG announced a solid Q1 2024 despite the standoff. Non-subscription streaming revenue, which includes revenue generated from social media platforms, rose from €315 million (roughly $340 million) in Q1 2023 to €343 million this past quarter.
UMG’s desire to renegotiate its deal with TikTok was just part of an ongoing effort to redefine its relationship with social streaming platforms into what it deemed an “artist-centric” approach. The specifics vary between platforms, but the key tenets are greater compensation for artists and stronger protections against infringing content, including emerging AI music tools.
Unsurprisingly, those goals were also UMG’s main grievances against TikTok detailed in its open letter released at the start of the split.
TikTok may have initially refused UMG’s terms, but its competitors obliged. On top of the existing deals with Meta, Snap and Deezer, UMG also announced an expanded partnership with Spotify shortly after the TikTok split. YouTube, meanwhile, launched a music video remixing feature for its TikTok-esque Shorts format just weeks into the standoff, prominently featuring UMG artists in its announcement.
Perhaps these deals caused more pressure for TikTok not to fall too far behind its rivals. There’s also the fact that the self-described “Music Discovery” platform is losing even more music thanks to the National Music Publishers’ Association recently letting its license expire over compensation concerns.
The biggest blow arguably came not from UMG but the U.S. government voting to ban the platform. It’s entirely likely TikTok decided to pick its battles and compromise with UMG as the company gears up for defending its continued existence in the U.S.
So what happens from here, assuming TikTok doesn’t get banned? The specifics remain unknown, but UMG CEO Lucian Grainge noted in an internal memo that TikTok will “implement tools and processes” to combat AI-generated music and other modified audio that takes royalties away from artists.
Still, UMG’s three-month absence may have made that task more difficult to solve than it already was. About a month after UMG purged its artists’ songs from TikTok, a study by content ID company Pex found 38% of songs on TikTok were speed or pitch modified — one of the biggest YoY increases for a UGC platform from 2022 to 2023.
That number almost certainly increased this year, as TikTok users and artists had to find ways around the UMG ban. UMG has weathered the standoff in terms of money, but its artists will likely have to wait a good while before seeing any direct benefits to the new deal.
