Shulou(Shulou.com)11/24 Report--

According to people familiar with the matter, big record labels such as Universal Music Group, Sony Music Entertainment and Warner Music Group are putting pressure on byte jumping, asking TikTok to share advertising revenue and increase copyright royalties paid to them.

The labels have been negotiating with byte jump over the past year and hope to reach a new agreement before their contracts expire in the coming months, according to people familiar with the matter.

TikTok has attracted more than 1 billion users and is becoming increasingly popular, making it one of the most powerful star-making platforms in the music industry. Record companies rely on TikTok to find promising artists and promote newly released albums. Mark Mulligan, an analyst at consulting firm MIDIA Research, says TikTok has become the most important marketing tool for these companies.

At the same time, TikTok is beginning to profit from it. The platform generated $4 billion in revenue last year and is expected to reach $12 billion in 2022, according to market research firm eMarketer. Music companies want TikTok to share more revenue and get a commission from advertising sales based on the number of on-demand shows made by their artists.

A senior executive at a large record company said that under similar agreements with other platforms with large audiences such as Facebook and YouTube, TikTok should pay two to 10 times more than the existing agreement.

The music groups are weighing how to better increase revenue from TikTok without public disputes with their most important partners. TikTok positions itself as a promotional tool, but it doesn't have to pay like Spotify or YouTube.

"We are committed to creating value for copyright holders, songwriters and artists when using their music, and are proud of our deals and the growing sources of revenue we have brought to the industry in just a few years," Olle Ole Obermann, global music director at TikTok, said in a statement. Oberman previously served as chief digital officer at Warner Music Group.

When the music company first copyrighted TikTok, it was a small app that didn't make much money. TikTok paid a fixed fee to large music groups to allow users to use music from their catalogs in videos shared on the platform. Now, many of the songs that are at the top of the charts are due to the publicity they received on TikTok. TikTok attracts users to platforms like Spotify, which pay music companies based on the number of broadcasts.

Sony, Warner and Universal reached current agreements with TikTok in November 2020, January 2021 and February 2021, respectively. These companies continue to charge a fixed fee rather than a share of revenue, in part because TikTok is just beginning to explore its own advertising business. These contracts are valid for two years, but the parties tend to extend the current agreement for a short period of time during the negotiations rather than invalidate the contract.

TikTok's agreement with Merlin, a music digital rights agency representing independent labels, expired at the beginning of this year, and both sides agreed to extend their contracts for a short period of time to avoid removing music from TikTok services. Mulligan, an analyst at consulting firm MIDIA Research, said: "record companies and publishers have given TikTok licenses to monetize their music catalogs while figuring out how TikTok works. Now they seem to have achieved their goal."

TikTok is eating into the advertising business of competitors such as YouTube and Snap, so from the record company's point of view, now seems the right time to propose an increase in the share. Many music executives believe that TikTok should share advertising revenue and that its parent company byte beat should create a paid music service that can operate globally. Byte jumps can then use TikTok to provide users with their subscription products.

Byte Jump has created a paid music service called Resso in 2019 and introduced it to three markets in Indonesia, Brazil and India. Resso has tens of millions of monthly active users, but so far the service has struggled to turn many of them into paying users, according to people familiar with the matter.

Byte Jump has also been looking for opportunities to expand Resso to 12 new markets for more than a year. The company has asked partners to reduce fees and wants to pay lower fees than peers such as Spotify and Apple Music. Copyright holders hesitated, and Sony removed its music from Resso earlier this year. A spokesman for TikTok said: "We will not comment on the business negotiations. We are working with Sony to bring their music back to Resso."

Byte runout has registered the TikTok Music trademark and is discussing whether to use that name instead of Resso. But the company has not yet asked record labels to license TikTok to use their music in its own branded services. Music companies remain optimistic that they can convince byte jumps to share revenue and are looking for ways to deepen their relationship with the company. Universal has partnered with TikTok on a project to connect newcomers in the music field with famous songwriters such as Max Martin Martin.

The tense relationship between record companies and TikTok reminds music industry executives of their decade-long dispute with YouTube and Facebook. For years, music companies have criticized their business partners in Silicon Valley, saying they are not doing enough to stop piracy. Both YouTube and Facebook position themselves as marketing tools.

Record companies have urged YouTube to offer subscription-based music services, arguing that it can make a lot of money by turning a small portion of its 2 billion users into paying customers. YouTube's initial foray into paid streaming has had little success, and many music industry executives believe YouTube is not doing its best.

But YouTube overhauled its paid service in 2018 and has since added more than 50 million paying customers. YouTube paid more than $6 billion to the music industry from July 2021 to June 2022 and is now the industry's second-largest source of revenue after Spotify. YouTube provides copyright holders with a share of advertising revenue based on the number of songs played, while encouraging users to subscribe to ad-free music services. A portion of subscription revenue is also shared with copyright holders.

Although Facebook has not yet created a paid music service, it is now starting to share revenue with music partners.

In March, TikTok launched SoundOn, a service that allows artists to upload their music directly to TikTok and earn royalties when playing music. Earlier this month, byte beat began looking for executives who could find new people and sign up with them, just as record companies did. Several years ago, Spotify allowed artists to upload music directly. However, the company turned off the feature in less than a year.

Last month, Lucian Grange, Global's chief executive, told investors about TikTok: "We will fight for more pay for our artists. I have seen similar scenes before, so I know the end result."

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