DIGITAL AND MOBILE TikTok Now Has Short-Term Licensing Deals With the Major Labels

The popular app now has agreements with Universal, Sony and Warner, but some publishers are discussing a lawsuit.

TikTok has struck short-term licensing deals with Universal Music Group, Sony Music and Warner Music Group, multiple sources tell Billboard, as the rapidly growing video-making app continues to establish itself in the music industry. This means there won’t be any disruptions from the major labels pulling content in the near future, which is crucial for its growth at a time when more people are looking for ways to pass the time while the coronavirus pandemic has much of the world staying home. But in the long-term TikTok still has a ways to go.

Sources close to the situation say the deals with major labels are notably shorter than the 18-24 month agreements that labels usually strike with technology companies -- in part so that the rapidly developing social network and the major labels can continue to negotiate the finer points of longer-term deals. The deals give TikTok the rights to use 30-second clips of any of the record labels' songs. Record label executives are also eager to watch how the platform develops before making long-term commitments, sources say.

The startup -- which is owned by China’s Bytedance and counted 26.5 million users in the U.S. as of 2019 and a reported 500 million users globally -- has also landed deals with Kobalt and BMG’s recording and publishing entities, sources confirmed. Earlier this year it secured a deal with Merlin, which was announced in January.

This is an improvement from nearly a year ago, when TikTok was running on expired deal extensions that were grandfathered in when it acquired Musical.ly in late 2017. As the company was growing in popularity and value, helping rise Lil Nas X’s “Old Town Road” to record-breaking success atop the Billboard Hot 100 chart, it was also in the unusual position of renegotiating with all the major labels at about the same time.

While those parties have come to agreements for the time being, TikTok’s business model is still a key concern: labels want the company to find ways to offer greater revenue for music rights holders. The company generates revenue through in-app purchases and advertising, but most of its revenue has been generated in China, according to analytics firm Sensor Tower. TikTok pulled in over $176 million in revenue in 2019, according to Sensor Tower, with China-based iOS users spending $122.9 million compared to only $36 million coming from U.S.-based users. TikTok does not release revenue information. In comparison, Twitter, which has 152 million daily active users pulled in $3.46 billion in revenue in 2019.

These deals are separate from the agreements labels have struck with Bytedance’s streaming service, Resso, which launched in India earlier this month. Resso has deals in place with Sony and WMG, but not UMG -- the world’s largest record company. Unlike traditional streaming services like Spotify and Apple Music, Resso is more social. It allows users to comment on songs, and focuses more on lyrics, which automatically show up when a song is playing and can be shared between users.

On the publishing side, TikTok has deals with Sony's Sony/ATV and WMG's Warner Chappell, as well as more than 8,000 independent companies administered through Music Reports, the company confirmed to Billboard, but sources say many of those deals were passed down from the Musical.ly acquisition. As well as Kobalt and BMG, other publishers with deals include eOne and Secretly Publishing. Pulse Music also has a deal but its expiration date is “rapidly approaching,” according to a source.

Notably, Universal Music Group Publishing does not have a deal with TikTok and the deal that was grandfathered in via Musical.ly expired more than a year ago. TikTok also does not have deals with leading independents including Big Machine and Big Deal Music, and some publishers have accused the company of copyright infringement.

“My understanding, based on input from several music publishers, is that there is a mass amount of music on TikTok that is not properly licensed,” National Music Publishers' Association CEO David Israelite tells Billboard. “I understand that they may have some licenses with some music publishers, but it seems clear that they are using music well beyond the licenses that they have, which is completely unacceptable.”

For unlicensed music, TikTok deals with user-uploaded music under the Digital Millennium Copyright Act’s “safe harbor” protection, which requires it to promptly respond to takedown requests from rightsholders.

In a statement to Billboard, a TikTok spokesperson said, "TikTok is a platform for artists and creators and we are proud to support the music industry. We work closely with rights holders to build and protect a sound library."

UPDATE: This story was corrected April 1 at 9:10 p.m. EST to note that Universal Music Group Publishing does not have a deal with TikTok.