The Major Labels Are Reportedly Demanding a Slice of TikTok’s Shrinking Ad Revenue Amid Licensing Negotiations

Bytedance share buyback
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The major labels are reportedly demanding a portion of TikTok’s advertising income as part of licensing talks – even though the ByteDance-owned platform has slashed its 2022 revenue target by north of $2 billion.

The Big Three labels’ push for a piece of TikTok’s ad income came to light in a recent report from Bloomberg. Despite remaining the subject of criticism owing to shocking user-privacy concerns, TikTok continues to reach billions of users around the globe.

And as music plays a key role on the video-sharing platform, higher-ups have taken several steps in 2022 to expand TikTok’s industry presence. On the year, the short-form app has quietly rolled out a distribution service, encouraged artists to upload releases to TikTok first via this service, unveiled StemDrop, and, perhaps most notably, trademarked “TikTok Music.”

Regarding the latter, sources with knowledge of the matter have indicated that the ByteDance subsidiary is plotting a potential buildout into actual music streaming – although an agreement is said to be far off. Moreover, the majors’ present calls for TikTok advertising revenue are tied to the current use of tracks in the app’s videos.

The Big Three – that is, Universal Music, Sony Music, and Warner Music – are specifically requesting that TikTok “share the advertising revenue and increase the royalties it pays,” per the aforesaid report. These discussions have been taking place “all year,” the same piece relays, and the entities are attempting to iron out a pact “before their contracts expire in the coming months.”

(On the indie side, the years-old tie-up between Merlin and TikTok is said to have expired towards 2022’s beginning, with “short-term extensions” having prevented a takedown thus far amid ongoing negotiations.)

Worth bearing in mind is that Sony Music yanked its catalog from Resso, a streaming service that ByteDance operates in India, Indonesia, and Brazil, earlier in 2022. Also through this year’s initial 10 months, TikTok has laid off team members, restructured divisions, and, as noted, sliced its annual revenue target by $2 billion.

This reduction was announced by execs in September and entered the media spotlight in a newly published report from the Financial Times, which communicated that TikTok’s anticipated 2022 revenue “is now believed to be closer to $10bn.”

And as an anonymous exec with the major labels expressed the belief “that TikTok should be paying between two and ten times more than its existing agreement” when speaking with Bloomberg, it’ll be interesting to see how the discussions play out during the remainder of 2022.

The likes of Facebook and YouTube are experiencing material advertising slowdowns of their own, and Meta today laid off approximately 13 percent of its staff. Nevertheless, Google-owned YouTube is reporting continued growth on the paid-user side, referring to a noteworthy 80 million subscribers between YouTube Music and Premium.