Latest Music Licensing Deals Underscore Social Media Giants’ Frenemy Status
Even as the dust has settled after Universal Music Group and TikTok’s months-long standoff, the sticking points from that beef — artist royalties and AI — continue to make or break the latest wave of music licensing deals.
The first few weeks of October proved to be busy in that sector, starting with YouTube and performance rights organization SESAC striking an 11th-hour agreement on Sept. 30. The deal between the companies was set to expire Oct. 1, but music videos by the invite-only PRO’s clients, which include Adele and Kendrick Lamar, were removed from YouTube ahead of the deadline.
“We have reached an agreement with YouTube to equitably compensate SESAC’s songwriters and publishers for the use of their music,” SESAC president and COO Scott Jungmichel said in a statement to Variety. A YouTube spokesperson said the company was “pleased that SESAC reconsidered our offer” — a somewhat ominous statement considering it was YouTube that deleted the music videos.
Oct. 1 also happened to be the day that TikTok’s licensing deal with Merlin, a nonprofit distributor that handles digital licensing for over 30,000 independent music labels, was due to end. But any hopes of compromise were dashed when TikTok shut down negotiations before they even began, according to a letter Merlin sent to its members.
TikTok claims that streaming fraud left unaddressed by Merlin was its reason for walking away, which Merlin’s letter denied. The company also went further, alleging TikTok’s real goal was to “[Fragment] the Merlin membership” and force indie labels into individual deals, with the goal of minimizing royalty payouts to artists.
Though the details of TikTok’s individual deals with labels aren’t public, sources told Variety that TikTok’s divide-and-conquer approach has already resulted in less favorable contracts than the blanket deal made with Merlin.
“TikTok would like to offer all of the world’s music to our users,” said a TikTok spokesperson in a provided statement. “We are committed to working with the independent sector as well as the major labels and publishers. We know that our community of over a billion music fans value the diversity and richness that independent music brings to our platform. We are committed to entering into direct deals with Merlin members in order to keep their music on TikTok.”
These latest instances of tension between music publishers and tech giants are not just indicative of the arduous battle over streaming and social media platforms fairly paying artists. They also highlight an inconvenient truth for the music industry: Social media’s ace in the hole, especially with music consumption, is influence.
Exclusive data from Luminate’s “U.S. Music 360” survey, consisting of a base of around 40,000 Americans and most recently conducted this past August, shows that not only are YouTube (45%) and TikTok (28%) two of the most used social media platforms for the total population surveyed, but those percentages are even higher among those who identify as regular music listeners (64% and 33%, respectively).
Honing in on where listeners find new music shows that social media is also a top source, especially among the key Gen Z (49%) and Millennial (47%) demographics. Some 49% of Gen Zers also cited social video clips on websites and apps, while more traditional radio and TV discovery routes are significantly less impactful for the younger generations.
To keep reaching consumers and helping their artists grow, music publishers and labels are obligated to, eventually, play ball with social media. We don’t know the terms of SESAC and YouTube’s new agreement regarding music royalties, but we do know it’s in SESAC’s best interest to keep its high-profile clients’ videos accessible on one of the most watched streaming platforms.
Similarly, when faced with the choice of a lesser deal or having their artists removed from TikTok, some indie labels — smaller and less resource equipped than the majors — feel strong-armed into taking the former (with one source describing TikTok’s negotiation style as a “veiled threat”).
But early October wasn’t all dire for music licensing. Warner Music Group and Meta reached a multiyear licensing deal across Meta platforms, including WhatsApp for the first time. The deal comes just a couple months after a similar agreement between Meta and Universal Music Group, which also brought WhatsApp into the fold.
We don’t know Meta’s plans for music on WhatsApp yet, but all signs point to something AI-related. A WMG spokesperson specifically told Music Business Worldwide the company was looking forward to “furthering our discussions on the potential of AI“ with Meta, which has been going all-in on AI integration on its platforms as of late.
Concurrently, both WMG and UMG have been proactive in combating AI’s more harmful effects on the music business. Both labels have issued open letters stating their steadfast commitments to AI regulations in favor of protecting artists, while WMG CEO Robert Kyncl (and Warners artist FKA Twigs) urged the Senate Judiciary Committee to address unauthorized deepfakes last spring.
Seeing as Meta is full steam ahead on AI development, it makes sense that Warners and UMG would want to stay friends with Meta and have a say in how AI will impact their artists and bottom line.
To Meta’s credit, the feeling seems mutual: The previous major revision to WMG and UMG’s licensing deals was instituting an ad revenue-sharing model for artists whose music is used in Facebook videos, which was described by all involved parties as a positive step for social media platforms properly compensating artists (although others didn’t agree).
But even this overall positive deal between WMG and Meta speaks to social media’s grip on music consumption. Before the deal was announced, WMG EVP/CFO Bryan Castellani noted that Meta opting out of licensing premium music videos will likely result in a $10 million loss per quarter going forward. UMG, meanwhile, saw a 3.9% YoY decline in ad-funded streaming revenues for Q2 2024, citing the lost Meta premium music video license as the cause.
The first few weeks of October proved to be busy in that sector, starting with YouTube and performance rights organization SESAC striking an 11th-hour agreement on Sept. 30. The deal between the companies was set to expire Oct. 1, but music videos by the invite-only PRO’s clients, which include Adele and Kendrick Lamar, were removed from YouTube ahead of the deadline.
“We have reached an agreement with YouTube to equitably compensate SESAC’s songwriters and publishers for the use of their music,” SESAC president and COO Scott Jungmichel said in a statement to Variety. A YouTube spokesperson said the company was “pleased that SESAC reconsidered our offer” — a somewhat ominous statement considering it was YouTube that deleted the music videos.
Oct. 1 also happened to be the day that TikTok’s licensing deal with Merlin, a nonprofit distributor that handles digital licensing for over 30,000 independent music labels, was due to end. But any hopes of compromise were dashed when TikTok shut down negotiations before they even began, according to a letter Merlin sent to its members.
TikTok claims that streaming fraud left unaddressed by Merlin was its reason for walking away, which Merlin’s letter denied. The company also went further, alleging TikTok’s real goal was to “[Fragment] the Merlin membership” and force indie labels into individual deals, with the goal of minimizing royalty payouts to artists.
Though the details of TikTok’s individual deals with labels aren’t public, sources told Variety that TikTok’s divide-and-conquer approach has already resulted in less favorable contracts than the blanket deal made with Merlin.
“TikTok would like to offer all of the world’s music to our users,” said a TikTok spokesperson in a provided statement. “We are committed to working with the independent sector as well as the major labels and publishers. We know that our community of over a billion music fans value the diversity and richness that independent music brings to our platform. We are committed to entering into direct deals with Merlin members in order to keep their music on TikTok.”
These latest instances of tension between music publishers and tech giants are not just indicative of the arduous battle over streaming and social media platforms fairly paying artists. They also highlight an inconvenient truth for the music industry: Social media’s ace in the hole, especially with music consumption, is influence.
Exclusive data from Luminate’s “U.S. Music 360” survey, consisting of a base of around 40,000 Americans and most recently conducted this past August, shows that not only are YouTube (45%) and TikTok (28%) two of the most used social media platforms for the total population surveyed, but those percentages are even higher among those who identify as regular music listeners (64% and 33%, respectively).
Honing in on where listeners find new music shows that social media is also a top source, especially among the key Gen Z (49%) and Millennial (47%) demographics. Some 49% of Gen Zers also cited social video clips on websites and apps, while more traditional radio and TV discovery routes are significantly less impactful for the younger generations.
To keep reaching consumers and helping their artists grow, music publishers and labels are obligated to, eventually, play ball with social media. We don’t know the terms of SESAC and YouTube’s new agreement regarding music royalties, but we do know it’s in SESAC’s best interest to keep its high-profile clients’ videos accessible on one of the most watched streaming platforms.
Similarly, when faced with the choice of a lesser deal or having their artists removed from TikTok, some indie labels — smaller and less resource equipped than the majors — feel strong-armed into taking the former (with one source describing TikTok’s negotiation style as a “veiled threat”).
But early October wasn’t all dire for music licensing. Warner Music Group and Meta reached a multiyear licensing deal across Meta platforms, including WhatsApp for the first time. The deal comes just a couple months after a similar agreement between Meta and Universal Music Group, which also brought WhatsApp into the fold.
We don’t know Meta’s plans for music on WhatsApp yet, but all signs point to something AI-related. A WMG spokesperson specifically told Music Business Worldwide the company was looking forward to “furthering our discussions on the potential of AI“ with Meta, which has been going all-in on AI integration on its platforms as of late.
Concurrently, both WMG and UMG have been proactive in combating AI’s more harmful effects on the music business. Both labels have issued open letters stating their steadfast commitments to AI regulations in favor of protecting artists, while WMG CEO Robert Kyncl (and Warners artist FKA Twigs) urged the Senate Judiciary Committee to address unauthorized deepfakes last spring.
Seeing as Meta is full steam ahead on AI development, it makes sense that Warners and UMG would want to stay friends with Meta and have a say in how AI will impact their artists and bottom line.
To Meta’s credit, the feeling seems mutual: The previous major revision to WMG and UMG’s licensing deals was instituting an ad revenue-sharing model for artists whose music is used in Facebook videos, which was described by all involved parties as a positive step for social media platforms properly compensating artists (although others didn’t agree).
But even this overall positive deal between WMG and Meta speaks to social media’s grip on music consumption. Before the deal was announced, WMG EVP/CFO Bryan Castellani noted that Meta opting out of licensing premium music videos will likely result in a $10 million loss per quarter going forward. UMG, meanwhile, saw a 3.9% YoY decline in ad-funded streaming revenues for Q2 2024, citing the lost Meta premium music video license as the cause.