UMG says TikTok is not a “material part” of global music promotion

Chairman/CEO of Universal Music Group Lucian Grainge addressed the company's ongoing licensing dispute with TikTok in its latest earnings call on Wednesday (February 28), saying: “There should be no free rides for massive global platforms like TikTok that refuse to address substantive issues around platform security AI or pay a fair share for the work of our artists and songwriters.”

Boyd MuirUMG's CFO and executive vice president, also revealed during the earnings call that UMG will “focus on accelerating [its] partnerships” with Meta, Snap, YouTube and more competing social media platforms, and that it will make more announcements about it “in the coming weeks.”

In late January, UMG, the world's largest music company, opted to let its licensing deal with TikTok lapse, citing the short-form video app's refusal to pay “fair value” for the music. He also cited other concerns about artificial intelligence. “TikTok has proposed to pay our artists and songwriters at a rate that is a fraction of the rate paid by major social media platforms of a similar location,” UMG wrote in a letter to its artists. Within hours, TikTok responded to UMG, saying the music giant had “put its own greed above the interests of its artists and songwriters.”

Since then, the companies' negotiations have seemingly been deadlocked, and millions of recordings controlled by UMG have been removed from the platform. As of Tuesday (February 27), the takedowns went even further, including the removal of any recording featuring one or more Universal Music Publishing Group songwriters for the first time. This affects major artists like Beyoncé, Harry Styles and Bad Bunny, even though they don't record for UMG.

In response to the post takedowns, TikTok said in a statement on Wednesday, “[UMG’s] The actions not only affect songwriters and the artists they represent, but now also affect many artists and songwriters not signed to Universal. We remain committed to reaching a fair agreement with Universal Music Group.”

UMG's earnings call on Wednesday focused heavily on TikTok during the Q&A segment, as well as other key developments for the company, such as its new deal with partners Chord Music.

While UMG has previously said that TikTok makes up only about 1% of the company's total revenue, the chief digital officer and executive vice president Michael Nash he said he thinks that's not necessarily a loss amid the negotiating standoff. “Overall, if consumption shifts from TikTok to other short video platforms like Reels or YouTube Shorts, we think we can, in fact, recoup some lost revenue,” he said during the call. “Consider that more than half of TikTok's monthly active users already use other short video services. In some markets, this percentage reaches 70%. These are services that generate engagement revenue at a much higher rate, so the positive migration of consumers to revenue is easily predictable.”

Nash also said that UMG “has been providing notices to mute millions of videos every day for the past two weeks” on TikTok to help with the takedown process, which began earlier this month. “And that's the recorded music content. Please note that our publishing copyright is just now starting to be enforced on the platform.” He noted that the company has seen “no appreciable negative impact” on its “broader digital business” by leaving TikTok to date, but added that “this is justified by the fact that we're very early in the process… We've actually seen a little bit of a drop in frontline consumption and catalog consumption in that short period of time.”

In response to a question about TikTok, Grainge replied: “I'm also not willing to risk the future of social genealogy by doing something that completely undermines the finances for us and for everyone else.” One of UMG's key concerns amid the licensing discussions was that if it accepted reduced royalties from TikTok, then other social media platforms could ask for the same.

But Grainge vowed that UMG likes to “be friendly”. He said, “We are friendly. My phone is open, unfortunately, 24 hours a day. Hopefully we can find a solution… we like win-win situations. We've given what's important to us and I think is important to our industry.”

When an investor asked if this remark indicated that UMG was waiting for TikTok to call them and repeat a deal structure [UMG has] presented previously,” Nash said. “We're not going to comment on the status of discussions with TikTok for obvious reasons.”

At the end of the call, Grainge downplayed TikTok's impact on music marketing: “I mean, let's put it in perspective,” he said. “Apple, Amazon, Spotify, YouTube, all the social categories, the fitness categories, digital radio, Sirius, Pandora, iHeart… [TikTok is] first, it is not a material part of the multidisciplinary puzzle where we promote and advertise our music worldwide.”