Universal Music Group's three-month hiatus from TikTok ended this week after the companies reached a new, multi-faceted licensing deal. On Thursday, UMG executives explained why the wait was worth it.
The bottom line: UMG believes its new licensing deal with TikTok is an improvement over the deal that expired in late January. UMG has “materially improved the overall value we will derive from this relationship,” CFO Boyd Muir he said. Michael Nashexecutive vp/chief digital officer, said the new TikTok deal is “definitely paying off[s] a fair level of value relative to other short social platform partners,” which includes Instagram Reels, YouTube Shorts, and Snap.
On Thursday's earnings call and CEO Lucian Graingeinternal memo received from Advertising sign On the same day, Grainge, Muir and Nash mentioned several elements of the new agreement that can be divided into two camps: revenue and non-revenue features and arrangements.
As for revenue, there will be more of that under the new deal — though neither executive shared specific points of a deal, such as ad revenue sharing percentages. Nash said that “revenues under this new agreement are significantly improved over our last agreement.” The previous deal was worth about 1% of UMG's annual revenue, which amounts to about $120 million based on 2023 revenue. That's not much for a platform that requires an average of 58 minutes a day in the US, according to eMarketer — almost as much as Netflix and more than YouTube.
But UMG is getting more value than TikTok in ways other than royalties. Many of these non-revenue elements typically cost labels money: e-commerce tools, marketing and promotion campaigns, and ad credits. Other aspects of the deal have value that is hard to quantify: data, artist knowledge, intelligence, and new programs and new collaboration opportunities.
An interesting aspect of the new deal is what Nash called “content management and performance.” When TikTok users post videos with speed-up and slow-motion recordings, the attribution for the UMG recording is credited “no [to] some infringing third parties, but the artists,” Nash said. “And that content ties in better with their official presence on the platform.”
As Grainge described in an internal memo to staff Thursday, the deal also met the nonprofit's two criteria: protecting against the harmful effects of artificial intelligence and prioritizing online safety for both TikTok's users and artists. UMG.
TikTok has made “a series of commitments” that respect UMG artists' works and publicity rights, and supports UMG's principles of training AI models without the consent of rights holders. UMG wants to protect its artists from deep fakes, like Ghostwriter's “Heart on My Sleeve,” which used AI-generated sounds from Drake and Kendrick Lamar (both UMG artists). The new agreement ensures that such fake content will be removed, both Grainge and Nash said.
Nash also described these efforts to combat infringing content as “increased requirements” that detect and avoid infringing content,” including leaks, unauthorized remixes, and unauthorized AI versions. The agreement also includes requirements for improved filtering and flow manipulation detection.
In addition, TikTok has agreed to improve online security and strive to mitigate the harmful effects of social media, including hate speech, bullying, responsible use of artificial intelligence, and addressing infringing content and algorithmic manipulation, he wrote. Grainge in his note.
Income from social media may not be much today, but “it's an increasingly important income for artists, songwriters, record companies and publishers,” Grainge said during Thursday's earnings call , “that's why we've pushed so hard and will continue to push to protect and develop it.”
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