What TikTok Tells Us about the Future of Music Business

And what the trajectory of the music business says about the future of media and digital creativity

Richard Yao
IPG Media Lab

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Photo by Spencer Imbrock on Unsplash

For nearly a decade, the rise of music streaming services has transformed the music business, and the algorithms they employ have forever altered the way we discover and consume music. Now, the meteoric rise of TikTok is set to usher in a new collaborative vision for the future of music. Furthermore, the changes we are witnessing in the music industry today may be harbingers for the future of other media sectors as well.

Algorithmic Consumption Commodifies Music

To fully understand TikTok’s impact on the music industry, we have to start with where the industry stands today. Now that the music industry is nearly a decade into the streaming era, the growing influence of the streaming services’ algorithms over music discovery and consumption has been a subject of increasing interest and study. Similar to the way news consumption has been reshaped by the algorithmic feeds that Facebook and Twitter employ to maximize engagement, the overwhelming decision paralysis of choosing what to listen to, a side effect of suddenly having unlimited access to millions of songs at our fingertips, is mostly mitigated by entrusting our music discovery to curated playlists and algorithmic recommendations.

As a result, an intriguing paradox emerges: as our playlists become more individually customized than ever, our music taste somehow evolves to feel less personal. Prior to the streaming era, music discovery predicated on mass media (i.e. radio and MTV) and word-of-mouth recommendations wereas conducive to producing monocultural hits while also emphasizing personal agency in curating music collections, as demanded by the cost of purchasing physical and digital copies.

As our playlists become more individually customized than ever, our music taste somehow evolves to feel less personal.

In the streaming era, however, ownership of music has given way to subscription-based access, which dramatically decreases the upfront costs and efforts required to build a personal music collection. Effectively, nearly all recorded music in the world has become the default music library for everyone, which inherently encourages exploration and casual listening. We own nothing but our playlists, which are ostensibly tailor-made for us, yet heavily influenced by algorithms. This erosion of personal stakes and agency in music consumption has made music less a part of our personal identities and more of a digital commodity, for better and for worse.

The commodification of music is a direct result of democratized access to recorded music led by the streaming model, which, in turn, shifted the point of monetization to accessing live music. Touring has become the main revenue stream for the music industry, for concerts and music festivals provide an in-person experience that has yet to be commodified by digital distribution.

The commodification of music is a direct result of democratized access to recorded music, which, in turn, shifted the point of monetization to accessing live music.

That being said, with COVID-19 putting the experiential economy on pause, the music industry now has more incentive than ever to work out a way to digitally distribute live performances. Spotify, for example, is reportedly developing a “virtual event” feature to alert fans of upcoming virtual shows and enable them to book tickets. In addition, some indie musicians turned to live streaming as a way to recreate live performances and generate income. Recognizing this growing market demand, Twitch, in collaboration with SoundCloud and Bandsintown, is courting musicians by expediting their path to achieve “Affiliate” status on Twitch, which unlocks monetization tools such as subscriptions and the ability to receive tips. SoundCloud is also launching its own slate of original live programming on Twitch. Some musicians have turned to platforms like Patreon to provide fans with exclusive content for a monthly subscription. While such forms of direct monetization are still in nascent stages of development, they offer a glimpse into the future where a hybrid model for selling live music is possible.

Marked by a high level of differentiation, live performances demand a much higher level of personal interest and engagement from listeners than commodified consumption via streaming. This means a sense of personal agency needs to be reintroduced into music consumption to form distinguished affinity with artists that underscores the value of attending their live performances. In other words, most people would only consider paying to see the music acts that they care a lot about. When most music consumption is driven by nebulous algorithmic recommendations, it becomes harder for the music industry to monetize through live performance.

Democratized Co-Creation of Music

Through this lens, the rise of TikTok and its impact on the music industry point to an interesting direction where music creation also becomes democratized. As a key ingredient in most TikTok videos, music underpins many memes that originate from TikTok and spread across the internet. After all, TikTok started as a lip-syncing app. Much has been written on the hit-making power of TikTok — one reporter aptly dubbed it “guerrilla radio for the smartphone generation.” Yet, one oft-overlooked aspect of its growing influence on music is the involvement of user participation at a mass scale, which injects a much-needed sense of personal agency back into music consumption without truly undermining algorithm’s influence.

One aspect of TikTok’s influence on music is the involvement of user participation at scale, which injects a sense of personal agency back into music consumption.

While there is a sense of agency in creating personal playlists on streaming services despite the influence of algorithmic recommendations, TikTok is granting listeners a higher level of agency by giving them a platform to express their interpretations of any given song, Through TikTok, music creation becomes a living process, as published tracks get constantly remixed and repurposed to create a myriad of iterations, mostly only differing in visuals but different enough to be entertaining. Some digital-savvy musicians have leveraged TikTok to directly involve fans in their music creation. For example, Charlie Puth has repeatedly challenged fans to come up with lyrics for melodies he composed by using TikTok’s “duet” feature.

In TikTok’s universe, the key metric for measuring a song’s popularity is no longer how many times people have streamed it, but rather how many users have used it to create their own videos. On TikTok, memes are the new pop stars, and labels have little say in which ones will break out. Users are simultaneously consumers and co-creators, contributing to TikTok’s music hype machine as they consume and create content.

The rise of streaming transferred the hit-making power from mass media to algorithms; now TikTok is ushering in a new era where listeners get to directly participate in the creation of hit songs. Although the influence of algorithms looms large in this type of crowdsourced discovery, given that the main feed on TikTok is purely algorithmic, the determining factor has shifted back to consumers. Some savvy artists have caught onto this trend and intend to capitalize on it by incorporating TikTik-friendly dances or music cues into their songs and music videos, although that is no guarantee for scoring an organic viral hit — it’s one thing for content creators to game search algorithms for clicks, and quite another to engineer a meme in order to promote a song.

One interesting side-effect of this shift is that TikTok has turned music into signals of social cachet through its co-creative nature. Music tends to spread socially, as people typically discover music at events and parties or receive peer recommendations via social media or word-of-mouth. Many music platforms have attempted to incorporate this social component into their music discovery mechanism, but from Apple’s failed attempts (remember Ping or Apple Music Connect?) to Spotify’s underutilized social elements, few have successfully replicated the social spread of music. By contrast, TikTok has come closest to making music consumption social again, and it does so by going beyond real-life social graphs to algorithmically match different sounds to targeted audiences based on aggregated listener data. After all, memes are inherently social, and on TikTok, music is both the muse and the vessel for memes.

TikTok has turned music into signals of social cachet through its co-creative nature.

In response, record labels are moving quickly to sign artists with breakout tracks on TikTok, betting that their popularity will transfer to other platforms. Recognizing the promotional value of its platform, TikTok has begun to position itself as a music discovery platform and court emerging artists. Last week, it announced a new partnership with UnitedMasters, a company that allows independent musicians to pay a competitive distribution rate to get access to Spotify, YouTube, SoundCloud, Apple Music, and other platforms. By partnering with UnitedMasters, music creators on TikTok can distribute their songs directly to streaming services and other partners, therefore helping them better capture the buzz and profit directly from their songs going viral on TikTok. It is a smart move for UnitedMasters too, as the digital-native distribution company now directly benefits from TikTok’s growing influence ahead of any major label. Through this deal, TikTok starts to build out an ecosystem for creators who wish to capitalize on its co-creative, meme-driven vision for music consumption. If that rumored TikTok-branded music streaming service were to come true, TikTok would grow into a full-fledged music platform.

Herald of the Digital Creative Revolution

Music was the first media sector to be disrupted by the internet. Long before the rise of Netflix and the remaking of the entertainment and news landscape by digital publications, the popularity of music piracy network Napster, and the resulting tug-of-war between Apple and record labels over the iTunes Store, ushered the music industry into a digital economy quicker than other types of media businesses. Music also entered the mobile streaming era earlier than video content and pioneered the all-access flat subscription model that dominates the media industry today. Because music has historically been ahead of the curve, emerging trends in the music industry may offer helpful indicators to where other sectors of the media business may be heading.

The shift from physical copies to digital purchases unbundled albums into individual tracks, and the streaming model re-bundled the entire music catalog into monthly subscriptions. Now with TikTok, songs are further broken down into short clips of drops and hooks, designed to convey a certain mood and provide audio cues for visuals. Similar to how sports fans sharing highlights from a game or TV fans making gifs out of their favorite moments, meme culture strips songs out of their original context and contextualizes them in easily digestible, bite-sized clips. Music arguably has the strongest repeat value of all media products, and the TikTok model exploits that by pairing the same music clip with different user-generated visuals to enhance its repeat value.

Following the co-creative trend championed by TikTok, music is becoming a part of digital creative toolkits for everyone to play with. For instance, everyone can now easily add any song available for streaming as the background music for their Instagram or Snapchat stories. As the attention economy peaks, music not only has to compete with other forms of media for attention, it is also converging with other creative formats. Established musicians are hosting podcasts, teaming up with live streamers to play video games, as well as partnering with gaming companies to create in-game music experiences. Similar to Disney’s strategy of monetizing its hero IPs across various business sectors, digital-native music brands such as Genius, COLORS, Lyrical Lemonade, and Kobalt Music are embracing diversification of revenue streams and format-blending in media creation.

As the attention economy peaks, music not only has to compete with other forms of media for attention, it is also converging with other creative formats.

The democratization of digital creativity is accelerating thanks to the unique circumstances created by COVID-19. More people are becoming digital content creators to show off their professional knowledge and creative talent, be it cooking, teaching, or painting, as they hunker down at home and lose conventional venues to monetize their skills. As an evocative and complementary component, music has long been a versatile storytelling tool that lends itself well to various multimedia creations. In a future of participatory content creation, the value of a media product will be judged by the amount of user content it inspires. The death of the author cannot be reversed, but a better attribution and payment system will need to be devised to credit and compensate the original creators. In principle, the aforementioned UnitedMasters and TikTok deal is a right step in this direction.

As digital creative tools continue to spread, music, along with other forms of media, will become more collaborative and fluid, and the media industry will be better off embracing this trend than resisting it. For instance, Lady Gaga recently partnered with Adobe to launch an artwork competition with a $10,000 cash prize to promote its latest album Chromatica, providing fans with a set of visual assets to create new artworks using Adobe apps like Photoshop and Spark. As we settle into a new stage of the digital economy, expect to see more participatory campaigns that tap into crowdsourced creativity as a way to generate creative ideas, maximize audience engagement, and encourage organic social sharing.

In a future of participatory content creation, the value of a media product will be judged by the amount of user content it inspires.

The same principle will also be prominently featured in the burgeoning “metaverse,” where participatory creativity is embedded in its world-building DNA. The “Party Royale” island in Fortnite as well as games like Roblox and Minecraft offer an early-stage glimpse into what a virtual world, mostly built upon user-generated creation in various forms of digital media, could look like. In a metaverse, all media assets, even branded ones, will become raw ingredients that contribute to a larger ecosystem of digital creation.

To bring things full-circle, Napster, the piracy site that kicked off the digital transformation of the music business over twenty years ago, has recently been acquired by VR experience company MelodyVR, which aims to be the “destination for music in virtual reality.” So far, it has been focusing on distributing live music performances in VR, but if MelodyVR is still around when VR-enabled metaverses eventually start to take shape, they might just have a shot at becoming the LiveNation for metaverses — if someone one else doesn’t get there first.

At the end of the day, TikTok is just one manifestation of the larger trends in digital creativity as it becomes increasingly democratized and participatory. Even if TikTok were to be banned in the U.S. tomorrow, it has left its indelible mark on the music industry, demonstrated a new viable model for music creation and promotion, and by extension, pushed forward the evolution of all forms of media.

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