TikTok’s Effect on the Music Industry
TikTok has revolutionised the music industry, with its massive user base, the app has created an entirely new model for music promotion and consumption. It’s proven to be a powerful tool, connecting bands with their fans, and giving artists the ability to reach new audiences. As a result, it has disrupted the traditional music industry model and has emerged as a leading force in shaping the future of the industry.
TikTok originally began as two different apps. The first was an app called “Musical.ly” which was launched in Shanghai in 2014. It already had strong business ties with the United States, alongside a sizable audience in their key market. In 2016, Chinese big tech ByteDance, an internet firm, launched a similar service in their home country under the name “Douyin”. In the first year after conception, it attracted more than 100 million users in China and Thailand combined. ByteDance concluded that there was something big and wanted to diversify under a different brand — TikTok. In 2018 it bought Musical.ly, added them together, and set in motion TikTok’s worldwide distribution (Tidy & Galer, 2020). In 2021, TikTok had approximately 656 million global users, with projections to increase by roughly 15 percent year-over-year, reaching 755 million users in 2022 (Ceci, 2022). The app uses a powerful algorithm that was designed by their parent company, ByteDance, which is an artificial intelligence company. Using the combination of hashtags, anticipating user preferences, location data, interaction, device, and account settings (TikTok 2021) an innovative virality is born. What sets the app apart from any other short form platform is that TikTok’s algorithm tracks how long a user lingers, or rewatches a video, even if there is no interaction. By integrating an artificial intelligence company with an internet company TikTok was built on a strong foundation at its inception.
The big three labels are aware of the strength behind the algorithm and the relationship that stands between the short-form videos and the music it promotes. Universal Music Group, Sony Music Entertainment and Warner Music Group have informed TikTok that they want a portion of the ad revenue and higher royalty rates, according to a recent report. The music labels argue that TikTok’s current arrangement of paying them a lump sum every two years for the use of their music is outdated. The labels have been in negotiation throughout the majority of 2022 and hope to come to an agreement before their individual contracts expire. Their argument is that music is the focal point of all their content (Business insider n.d.). Analysts estimate that TikTok paid the music industry $179 million, which is a payment rate of 4.5%, from its $4 billion revenue in 2021, and want it to be increased threefold (Eliezer, 2022). Data says that TikTok is where most people are heading, to discover new music. The comradery that it promotes is a base human need that we have to connect with one another. When brands, artists and the average user all participate in trends, it brings a whole new personal element to the marketing industry (Strassen, 2021). The statistics speak for themselves. Data gathered in the U.S. shows that TikTok has 800 million monthly active users and 75% of them, or 600 million users, discover new artists through the platform, according to an MRC Data study. Additionally, 63% of TikTok users have found new music they’ve never heard before on the platform. Compared to Spotify’s 356 million active users, even if 100% of Spotify users discovered new music on the streaming service, TikTok would still be 168% more powerful for artist and music discovery (Houghton, 2021). Since music is so important to the platform, it isn’t surprising that the labels are insisting on more favourable terms.
Warner Music Group has benefited from its multi-billion-dollar licensing deal with TikTok, as Fleetwood Mac’s song “Dreams” was used in over one hundred thousand videos, contributing to a 17.5% increase in the label’s share price (McCall, 2022). To effectively promote a new song, the formula is said to be that you enlist 20 bloggers to create content; and have the artist stream teaser clips beforehand to generate user interest. It’s crucial to keep an eye on TikTok’s trending topics and user behaviour and encourage the artist to engage with fans when possible. Some music companies aim for a viral hit at the production stage by using popular remixes, simple lyrics, and fast-paced dance tracks for easy user-generated content. “TikTok hit songs” can emerge within 2 hours. However, the apps use algorithms can limit user choice and lower artistic standards. There is a plethora of evidence supporting the significant advantages that TikTok can offer artists, particularly for those who are relatively unknown. Going viral on the platform can be a crucial steppingstone towards achieving career success, a prospect that many musicians would undoubtedly welcome. However, the pressure to create a “viral hit” can come with significant constraints, as artists must navigate the platforms algorithmic limitations and aesthetic standards. These constraints were highlighted recently when popular singer Halsey revealed that her record label, Astralwerks, had prevented her from releasing a new song. The label insisted on creating a simulated viral moment on TikTok before its official release, which prevented her from sharing her work with her fans (Clark, 2022). In 2020, Dennis Kooker, president of Global Digital Business and U.S. Sales at Sony Music Entertainment, “Short form video clips have developed into an exciting new part of the music ecosystem that contribute to the overall growth of music and the way fans experience it” (2020). While streaming is the future of music and a potential income source for artists, it isn’t as profitable as other revenue streams (Delfino, 2018). Zach Bellas, SMB Records founder and professional musician informed Business Insider that, “artists have always made the bulk of their money from live performances and touring”. In 2021 Billboard’s U.S. Money Makers article stated that Rolling Stones made $44.5 million in box office sales, but only $3.1 million in streaming royalties (Christman, 2022).
That doesn’t have to be the case as new concepts are introduced to the music landscape. In February 2023, TikTok launched SoundOn in Australia. It’s an independent distribution and marketing service for music creators. The all-in-one platform provides promotional tools and support for new and undiscovered artists, paying out 100% of royalties. The service aims to empower music creators of all stages in their music careers. If you combine that with TikTok’s end-of-year recap — which revealed that 13 out of the 14 Billboard Hot 100 number 1 songs in 2022 were fueled by viral trends on the platform — the music industry doesn’t appear to be too far from a major overhaul (Strassen, 2023). In 2023, by leveraging Web 3.0, artists earned $83 million from NFT sales with 70% going directly to them (Gardner, 2022). NFTs offer a promising financial opportunity for independent musicians, as they can earn more from their music compared to digital streaming platforms. Web 3.0 presents new markets for artists to sell audio files as non-fungible tokens, providing higher payouts and direct access, which can be more accessible to emerging artists than other revenue streams such as touring and merchandise, because those options require capital to succeed. TikTok has also partnered with UnitedMasters, an indie music distributor to provide artists with the ability to distribute their music directly to other streaming services such as Spotify, Apple Music, SoundCloud and YouTube. This partnership allows artists to expand their reach and increase their opportunity for exposure (Perez, 2020).
It’s imperative for brands to stay informed about the latest developments in the metaverse and Web3, and to explore marketing opportunities in these spaces. However in the context of social media platforms that are redefining the future of online interaction, TikTok cannot be overlooked. The mounting evidence speaks for itself particularly when acknowledging the platforms evolution from a mere pastime to something far more significant. Therefore, TikTok represents a vital space for brands to cultivate a presence and connect with audiences in impactful ways.
The music industry has undergone a profound shift in recent years, with TikTok at the forefront of this transformation. As industry experts have noted, the app has altered music creation, consumption, and discovery. “TikTok is not just a fad; it’s a signal of the next wave of music culture,” (Cherie Hu 2020).
By Brenna Richter
