The proliferation of short-form video is setting a new direction for artists, management companies, and record labels via new licensing and promotion opportunities
Since my first blog back in June 2020, there has been a significant shift in how music is being discovered. Traditionally, music discovery involves searching through Billboard charts, playlists, or even hearing a tune on the radio for the first time. Today, however, short-form video platforms are the leading avenues for music discovery. Despite not having a first-mover advantage following the likes of Vine and similar platforms, TikTok currently dominates the short-form video space over Instagram Reels, YouTube Shorts, and Snapchat Spotlight.
TikTok’s influence is undeniable. Since launching back in 2017, the Chinese app and ByteDance subsidiary has amassed over 3.6 billion downloads, with an outstanding global reach of 1.2 billion monthly active users (MAUs). TikTok’s monthly downloads have remained consistent at an average of 60 million downloads per month since July 2020, making it the most downloaded app of the past two years.
Music manager and entertainment investor Scooter Braun describes music as a “youth-driven business” as upcoming generations often act as tastemakers for what is next in music culture. To no surprise, TikTok’s user base is predominantly youth-driven with over 67% of teens in the U.S. actively using the service. Although the content being uploaded on TikTok is diverse in nature, music plays an incredibly vital role with almost 70% of the videos being centred around the music being played (see chart below). Such videos include dance challenges, lip-syncs, and even remixes of existing songs.
Recognizing these changes in music discovery has created a gold rush effect in the industry and forced all stakeholders to adapt. How exactly does TikTok’s influence impact artists, management companies, and record labels alike?
TikTok is the most popular short-form video platform, despite growing market competition
Time spent on platform (hours per week)
Source: IFPI “Music Consumer Study” 2021
Increased revenue-generating opportunities among emerging platforms
Despite the unfavourable current economic environment and frequent lockdowns in the past two years, the music industry is showing strong signs of growth. According to Goldman Sachs’ most recent annual “Music in the Air” report, 2021 was a record year of growth for the global music industry being up 18.5% YoY to US$25.9 billion. Some of the drivers of this growth include stronger-than-expected paid streaming revenues, ad-funded streaming, physical music sales growth, as well as the return of worldwide touring. Although the on-demand subscription model for music is dominating at record rates, the fastest source of growth is deriving from emerging platforms such as TikTok and Instagram Reels, having grown 41.3% YoY. New licensing revenues from short-form video platforms, connected fitness (e.g., Peloton, Apple Fitness+), gaming (e.g., Fortnite, NBA2K), and podcasts have significantly increased YoY and already contribute to 5% of global music revenues in 2021, with estimates of growth to 12% by 2030.
With millions of songs being constantly streamed on TikTok, music rightsholders have a new path to monetize their catalogues. In TikTok’s early days, most of the music on the platform was unlicensed, which meant that rightsholders including record labels, publishers, and independent artists were not getting paid. This resulted in many lawsuits from the major labels against TikTok, however, the company has since signed global licensing deals with the labels to license recorded music from their artists and songwriters. More recently, independent music distributors, such as UnitedMasters and TuneCore, have partnered with short-form video platforms so that independent artists using their services can monetize their catalogues as well. With these licensing deals in place, TikTok’s algorithm will detect any time a licensed and copyrighted sound is used in a video and it will be logged in their records. From there, the label or distributor is paid out their royalties and the funds trickle down to the artists and/or rightsholders depending on the agreement.
With their newfound partnerships, short-form video platforms have also become important avenues to market artists. This is increasing the efficiency of A&R, talent-scouting, and marketing spending for major labels and management companies. In addition to monetizing music through licensing agreements, TikTok users are also more likely to spend money on music in terms of purchasing artist merchandise.
New methods of music promotion
TikTok and other short-form video platforms have paved a new lane for artists yearning for a hit song. Over the past two years, many songs uploaded on TikTok from both unknown and household artists have gone viral on the platform. Realizing this potential has made TikTok a marquee promotional tool for artists and record labels alike. Many songs that have gone viral on TikTok have also soared to the top of the charts. According to TikTok’s annual music report, over 175 songs that trended on TikTok in 2021 charted on the Billboard Hot 100. An AudienceNet survey also discovered that more than a third of TikTok users that like a song on TikTok go search and listen to that specific track on a streaming service such as Spotify. This is an incredible indicator of TikTok’s strength as a music-sharing and discovery platform, in addition to its ability to create monetization opportunities beyond the app itself.
Unlike traditional streaming platforms, songs that have been outside the mainstream for years can take off as well, giving old songs an entirely new life through remixes and mashups. TikTok is a free market for users to upload content and as with any free market, it is extremely competitive and consumer-centric. Record labels and artists are flooding the app with their music but attempting to market music in hopes of catching on to a trend is nothing but complex with TikTok’s algorithm. To combat the competition, marketers are paying significant amounts to large influencers to promote their artists’ music. With TikTok’s user base becoming saturated, marketers are working with smaller influencers as well. As Zach Friedman, co-founder of the record label Homemade Projects explained, "the way the TikTok algorithm works, it's hard to know what's going to be successful. Instead of paying a premium for a D'Amelio, you could pay a micro-influencer $200 and their TikTok could get 10 million views. Because of this, it's better to cast a wider net." Influencers can be paid to include a song in the background of a video or even paid to create an entire dance challenge as well – the possibilities are endless.
Despite the benefits of this new marketing channel, TikTok is heavily influencing the music creation process for artists, producers, and songwriters alike. With the pressure to go viral, many artists attempt to reverse engineer songs that blow up on short-form video platforms. This could mean focusing on creating songs with short vocal hooks or even songs with distinct beat drops. These guidelines are no doubt affecting new music being released or at least driving artists’ creative intentions for better or worse.
Breaking down barriers for independent artists
As mentioned earlier, one of the biggest differentiators between TikTok and traditional streaming platforms is that TikTok is a free-market platform that is consumer-centric. If a video or song is gaining traction on the app, the algorithm will help that song trend even further. Contrarily, traditional streaming platforms are heavily biased as they are influenced by gatekeepers including major labels and playlist curators. This creates a disadvantage for independent artists that release music with the potential of being mainstream. TikTok is democratizing the playing field by putting power back in the hands of the consumer as opposed to industry gatekeepers. With the potential that TikTok and short-form video provides, artists that previously relied on labels now can do much of the promotion themselves. Not only is TikTok benefiting music discovery, but it is creating a new lane for artist discovery as well. If a song goes viral on TikTok and the recording artist is unsigned, labels are rushing to book meetings to sign that song and/or artist. Many artists and songs that were under the radar have been discovered this way on TikTok.
Where do I see TikTok headed next in the music industry?
At least for the foreseeable future, TikTok is here to stay and poised to make noise across the industry. Being one of the most popular (if not the most) social media apps amongst the youth and reaching almost US$12 billion in annual revenue this year, TikTok seeks to solidify itself beyond the advertising business. TikTok has shown several signs of entering the music distribution and record label space.
Earlier this year, TikTok announced that they are starting their own music distribution and marketing platform called SoundOn, which allows independent artists to distribute their music to TikTok and other DSP’s like Apple Music. This is an incredibly unique vertical integration strategy as TikTok is effectively attempting to bypass working with independent distributors by allowing artists to directly license their music to them. Taking the middleman out of the equation leaves TikTok with a bigger piece of the pie. However, the large music distributors such as TuneCore have a strong foothold in the market with high customer retention.
TikTok is taking it another step further with their recent US trademark application for “TikTok Music” which would allow users to “purchase, play, share, download music, songs, albums, lyrics” as well as “live stream audio and video.” This clearly indicates TikTok’s ambitions to compete in the DSP space against the likes of Spotify. Despite the overwhelming competition, TikTok Music certainly has the potential to stir up the music streaming space.
Starting off as a short-form video platform, TikTok is looking to make its mark as a record label, streaming service, and music distributor. The whole industry has its sights set on TikTok to see how far the company’s ambitions will go.
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