By Gary Symons
TLL Editor in Chief
Warner Music Group has announced what it calls a “first-of-its-kind” partnership, expanding its relationship with TikTok.
Warner Music says the deal will result in TikTok getting access to a multi-year, multi-product license for the entire repetoire of music from Warner Recorded Music and Warner Chappell Music.
Warner says the deal will benefit its stable of musical artists and songwriters, while TikTok sees the expanded agreement as a major benefit for its billion-plus users.
“We are very excited to partner with Warner Music Group to create a shared vision for the future in which artists, songwriters, music fans and the industry can all benefit from the power of discovery on TikTok platforms,” said TikTok CEO Shou Chew.
TikTok users will now have access to the full music library for use in TikTok, TikTok Music, CapCut, and TikTok’s Commercial Music Library.
“The deal will expand the level of partnership, collaboration, and innovation between the two companies,” WMG said in a statement. “It will create new revenue, marketing and insights opportunities for WMG’s artists and songwriters, while deepening the engagement with TikTok’s huge audience of passionate music fans.”
As part of the deal, WMG and TikTok will find new ways to harness TikTok’s revenue generation and promotional capabilities, as well as a wealth of data insights.
In addition, artists and songwriters will have access to new ways of working with TikTok’s brand partners, as well as to new fandom development and monetization features, like merchandise, ticketing, and digital goods and services, among other opportunities. Further, the deal will see the joint development of additional and alternative economic models.
Robert Kyncl, CEO, WMG said: “We are happy and excited for our next chapter together with TikTok. Through this expanded and significantly improved partnership for both companies, we can jointly deliver greater value to WMG’s artists and songwriters and TikTok’s users.”
Additionally, the companies have agreed to a licensing deal for TikTok Music, the premium subscription streaming service that recently launched in Indonesia and Brazil, with plans for further growth in other markets.
The deal also paves the way for WMG artists and songwriters to leverage the unique promotional capabilities and engage with the growing community of users on TikTok’s sister app, CapCut. The CapCut app is essentially the video editing application for users who want to upload more sophisticated, edited videos to the TikTok platform.
The agreement is also extremely important for TikTok, which relies heavily on licensed music used by creators as backgrounds to their videos, while for the music publishers TikTok has become one of the most important marketing channels. In fact, many songs that go viral on TikTok also become top hits on Spotify and other music streaming platforms. In fact, according to a study by MRC Data in late 2021, roughly two-thirds of TikTok users are more likely to seek out songs on music streaming services, after hearing them on TikTok.
What’s more interesting for the future of music licensing is how TikTok could become a top sales channel for artists and music publishers.
TikTok has launched a variety of experimental programs to see how the platform can provide more revenue for all parties involved, including the artists. But, to realize that potential revenue, TikTok has to convince the labels that it won’t take away from their revenue stream. Its ability to maintain close relationships with the major rights holders is critical as the parties negotiate licensing agreements like the one announced by WMG.
“If they want to be a long-lasting platform, they need to kind of lock arms with artists in the music industry,” said Jonny Kaps, cofounder and CEO of the independent label +1 Records. “There’s money to be made all over the place here if it’s done in collaboration.”
TikTok also offers musicians something of critical importance, just as Much Music and YouTube did in the past: namely, the storytelling power of music videos. Labels now encourage their artists to actively participate in TikTok videos, as the short form format is ideal for the promotion of artists.
“TikTok has really become a critical part of artist storytelling,” Kristen Bender, SVP of digital innovation strategy and business development at Universal Music Group, told Insider during a webinar on TikTok’s impact on the music industry. “Our labels have been extremely leaned into the platform.”
On the other side of the ledger, popular TikTok stars are also earning good money by promoting new music through song promotion deals. Some of these creators can earn hundreds or even thousands of dollars for a single video when they promote a new song.
“Music marketing on TikTok is huge,” Jesse Callahan, founder of the upstart marketing firm Montford Agency, recently told Insider magazine. “It’s a big way that labels have brought artists into the spotlight the last couple of years. It’s also a big way that creators have made a lot of money.”
That’s something that the respective deal makes know all too well. The CEO of Warner Music Group, Robert Kyncl, was formerly the CEO at YouTube, which in the days before TikTok was the number one platform for music videos.
On TikTok’s side of the negotiating table is Bytedance’s Global Head of Music Business Development (and therefore TikTok’s de facto global head of music), Ole Obermann.
Obermann spent 13 years at major record companies, including a decade at Sony Music/BMG and then three years at Warner Music Group before joining ByteDance in 2019. Given his tight ties with WMG, this new deal seems very deliberate, built as much on personal relationships as on the opportunity.
In fact, analysts says deals like this are being made because Obermann understands music labels and publishers are still quite leery about TikTok getting too much power in the music industry, and therefore of taking too much of the revenue.
For example, the labels are quite freaked out by the recent launch of TikTok’s in-house indie artist distribution-and-services platform SoundOn, and the fact it’s recently started locking down exclusive contracts with successful unsigned acts. That line of business is definitely one that competes head to head with the music labels, as is the direct sale of music or music rights.
But Obermann, in a recent interview with Music Business Worldwide, says TikTok is full speed ahead on its own ecommerce solution for music.
“We are really bullish on e-commerce, and we are really bullish on opening up a commercial music library that has all the world’s music in it, where a small business can choose to use any song that they want at the click of a button, and then pay out a sync fee, but not have to jump through the hoops of weeks or months of clearances, legal fees, and everything else,” Obermann explains.
“There are a bunch of areas where I think we will create really big lines of business for music rights holders that are additional to royalties.”
Obviously, TikTok can’t build that business without gaining the license to that music, and for that, it has to keep the big music publishers and rights holders on side. For that reason, TikTok appears to be aggressively pursuing mutually beneficial partnerships with companies like Sony, Warner and Universal, and locking up its access to the world’s largest music libraries.
What that tells you is that, for TikTok and for the big music labels, licensing deals resulting in new business models for streaming and/or downloads will be the top priority in the coming years.