Now may be the "toughest" game and choice moment for the global music industry.
On the one hand, this difficulty comes from the direction of the game between TikTok and mainstream record companies, which will eventually affect the revenue scale of music content companies; Another pressure comes from oversaturated content competition, with the rapid growth of new song content and the growth of the artist community diluting the market share of rights owners on streaming platforms.
Of course, from a platform perspective, the skyrocketing content pool has also reduced its reliance on big rights holders, for example, TikTok is trying to prove that it doesn't need music from big labels, while the eyes of the entire industry are on its every move.
At the same time, in order to cope with the danger of diluting the market share of content pool growth, the recording industry has had to choose the strategy of signing a large number of musicians to reduce the negative impact of market share loss.
01
The game between TikTok and the Big Three
Recently, Australia is brewing a big event that could have a profound impact on the relationship between the global music industry and short video giant TikTok.
Bloomberg first reported and confirmed by multiple sources that some TikTok users in Australia are unable to use music licensed by the three major record labels in their video creation. In other words: TikTok has removed music from the three major labels from its service for a subset of users in Australia.
Why? Industry media sources say TikTok aims to use the results of the takedown experiment in the next round of label licensing negotiations. TikTok hopes that removing music from the three major labels will not affect user behavior and add bargaining chips to the revenue sharing agreements of the three major record companies.
During Grammy Week this year, in Los Angeles, TikTok veterans entered the offices of the three major record labels, and the two sides are in talks about the future use of music on the platform.
A TikTok spokesperson confirmed: "At the moment, some of our communities in Australia have lost access to our complete TikTok music library. At the same time, if there is a previous video that uses music that is now restricted, the video will also be muted. This will only affect certain music, and TikTok will analyze how the music is accessed and added to the video."
Three months ago, another Bloomberg report said that Warner Music Group, Sony Music Entertainment and Universal Music Group were negotiating with TikTok for advertising revenue share throughout 2022, hoping to share advertising revenue with TikTok and increase royalty sharing. (Review: Which is better, prepaid or split mode?) TikTok doesn't want to share the money behind | Streaming Media Watch)
TikTok's current licensing agreement with Universal Music Group was signed in February 2021, Warner Music Group in January 2021, and Sony Music in November 2020, according to the report. The Big Three have reached a so-called "buyout" agreement with TikTok, in which the platform pays a one-time fee to the record company to use licensed music from the label's library for a two-year period.
Bloomberg reported in November that major music companies were trying to reach an agreement before their contracts expired in the coming months, but there was no update yet.
Some in the music industry argue that copyright holders only license TikTok to play videos under 30 seconds to promote music on subscription platforms like Spotify or Apple Music and also make it profitable.
Others believe that TikTok's global monthly active users, with more than 1 billion monthly active users, is due to the popularity of music on its platform, so it should share some of the revenue with music rights holders, just as YouTube has chosen, it is really serving content creators.
In negotiations, most people tend to choose the "I win and you lose" strategy, but this may not be a long-term solution, but it is not a wise move, and the real wisdom lies in how to design a "win-win" pattern of benefit distribution.
02
Music companies sign up a lot
In recent years, record labels have been signing artists at a whirlwind pace, but the increase in the number of new signings has not led to the "rising up" of more future stars.
According to Billboard, from 2001 to 2004, the music industry continued to produce a steady stream of successful new artists: at least 30 newcomers entered the top 10 of the Billboard Hot 100 singles chart every year. But in 2022, only 12 new artists have achieved this feat (plus two songs from the Encanto anime).
This shows that although new artists are coming out every day, it is more difficult than ever for new artists to become popular and successful.
In the era of the new crown epidemic, every label seems to have chosen the strategy of over-signing. But if the size of the staff can't keep up with the growth in the number of signed artists, artists won't necessarily get more care and service, and the company doesn't have enough qualified agents, and everyone may face the challenge of "exhaustion" or "dragged down" together.
In an interview with Billboard, one agent said: "It is impossible for an agent to market 20 artists efficiently and creatively at the same time. He used to be a broker for a big label and now runs Eighth & Groove's copyright agency. Record labels often "don't reach the full potential of their employees because they stuff all the artists, even those they don't have the opportunity to get to know, onto their agents." ”
Of course, in the past few years, all the major labels have released new artists, whether it's Olivia Rodrigo of Universal Music Group, Steve Lacy of Sony Music, or Zach Bryan of Warner Music Group.
In a letter to employees in January, Lucian Grainge, chairman and CEO of Universal Music, reiterated the company's commitment to this mission, writing: "We work hard day in and day out to make breakthroughs for our artists and songwriters. (Review:
Universal Music has partnered with Tidal to explore a new model of music streaming centered on "artists"
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Speaking to investors last year, Sony Music chairman Rob Stringer said that "creatives," including A&R, marketers, agents and artist relations, have grown faster than signed artists, helping to launch new artists on the streaming charts. (Review:
Sony Music: The musicians have withdrawn $50 million in expected proceeds through the Artist Portal
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While the exact number of artists signed by major music companies is hard to come by, a study organized by the RIA in 2017 found that mainstream music companies signed 658 artists that year, up from 589 in 2014. While the RIAA has yet to release a follow-up report, many lawyers and executives say sign-up rates have risen since that report was issued.
Previously, Sony Music had told investors that between 2017 and 2021, the number of new signings increased by 32.4%.
However, the reason why the wave of industry signings is driven may be that streaming is now becoming a "by-product" of the main source of revenue for major music companies. Streaming platforms pay rights owners based on their total share of playback, and as a large amount of music content is squeezed into the streaming plate, more people come to get a piece of the pie, and the market share of mainstream companies decreases, so does the revenue they can get.
As Lucian Grainge said in a recent employee memo, low-cost releases have brought a flood of low-quality songs into the music ecosystem, and streaming services for these songs have crowded out the market share of major record labels. "If thousands of new songs are coming to streaming services every day, the market share of major record labels will be diluted by default."
So, it turns out that the multi-signing strategy may be a way for record labels to fight back. Andreas Katsambas, former senior vice president of BMG, said: "The most important thing for major labels, independent labels and distributors now is the number of signings. ”
Major labels need to sign and release more to maintain market share, but it also makes it harder for each artist signed to get the attention they need to make a breakthrough.
In fact, for contracted musicians, they no longer rely on the international distribution networks of large music companies or ultra-luxuriously matched studio equipment environments. Now every musician can make music in his or her bedroom, but brokerage and publicity are important, and visibility is one of the things musicians care about the most right now, followed by the durability of influence.
However, in the context of the rapid expansion of the number of musicians, for professional companies, the challenge of the strategy of signing a large number of contracts is that it is difficult to match a long-term career development plan for everyone, and if it is only to cater to the rules of the game of platform traffic distribution, everyone is likely to lose in the end.
According to a new report from MIDiA Research, the most common platform for consumers to find music is YouTube, followed by radio, and for Gen Z consumers, TikTok replaces radio in second place.
It's worth noting that strategies to update music discovery are especially important when we consider how the industry can attract the next generation of music fans. The MIDiA Research Consumer Survey Q3 2022 found that Gen Z consumers have a slight difficulty discovering music: 18% strongly believe they struggle to discover new music.
Although they are more attentive listeners and are more likely than the average consumer to know the name of the musician they're listening to, they are still less likely to dig deeper into the musicians they find.
This is not surprising, as Gen Z consumers grew up in the most crowded musical environment ever, where it seems that songs are starting to take precedence over musicians.
Older millennials have a chance to get acquainted with music and musicians before the streaming era, when everything had not yet become so crowded and song-centric. But this generation has to connect with musicians, not just songs.
This means that helping consumers "discover" quality music content and musicians is something that requires long-term effort, not a fleeting moment.
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