NEAR TRUTHS: PROMOTIONAL VALUE AND THE F-YOU PHASE
TOK IS CHEAP: UMG is in a full-on war against TikTok. Relations quickly transitioned from contentious negotiation to what some insiders call the “fuck-you phase” as UMG pulled its music from the platform. An array of music companies and organizations (including Primary Wave, Hipgnosis, Downtown, NMPA, AIMP, A2IM, Artist Rights Alliance and NSAI) are loudly supporting House Grainge in its campaign against the Chinese giant, which has sought a lower royalty rate based on spurious claims of its promotional value to artists.
WMG did its deal with TikTok a year ago; chief Robert Kyncl touched on this during the company’s earnings call this week, during which he threaded the needle of affirming Warner Music’s present relationship with the platform while making supportive noises with respect to UMG’s position. He acknowledged that the terrain had shifted since its deal had closed. Kyncl, whose tech background informs the nuance of his comments, noted that big music companies are “exponentially more relevant” now, underscored the need to respect copyright (including around AI) and expressed hope for a fair deal between UMG and TikTok.
We’re hearing from people closest to the process that this thing could drag on for months. To understand the intensity and determination of the label side, it’s helpful to review a bit of biz history.
FOOL ME ONCE: First it was radio, in an era when Tin Pan Alley and song pluggers were the most prominent features on the music-biz landscape. Broadcast was a great opportunity to create awareness about their songs. The publishers went to Congress and ultimately hammered out a deal whereby rightsholders on the composition side would be compensated. An empire was subsequently built on music, with untold billions in advertising revenue, some of which flowed to the publishers, which were the dominant music companies in the early days, but which—in the U.S., unlike everywhere else in the world—did not flow to recording artists or labels. The labels have been fighting this for decades but have been unable to overcome the might of the broadcasters’ lobby, which repped media giants like Paramount and Disney.
The same premise—you give us your content and we don’t pay you—informed the launch of MTV, which happened to have been developed by radio people. Music videos subsequently became a fabulous vehicle for establishing and branding acts that made the network massively successful. The rights to the content had been given away for a song, but at first the biz was happy. Then the video company got bigger than the music companies on whose backs it was built, and that was a bitter pill to swallow. The industry’s been on guard ever since.
As the millennium dawned, the ability to share files of unlicensed music briefly became entertainment’s biggest black market. Napster led the way, with Limewire, Kazaa, Grokster and others requiring the biz to play nonstop whack-a-mole. Litigation and flame wars ensued. Exponents of the sites argued that this was the future of music—and a great promotional opportunity, of course—while copyright minimalists claimed that online content “wants to be free.” Huge judgments were made against the P2P companies and individual users for copyright infringement.
The biz went in the toilet, piracy was rampant—not only online but in counterfeit product—and the majors won court victories that laid the groundwork for what followed. Attempts to figure out a licensing solution floundered and the bigger file-swapperies (notably Napster and MP3.com) flirted with legitimacy before going the way of the dodo.
After the iTunes download model offered a way forward for a properly remunerative online marketplace, the business inched ahead in what would be the last chapter of retail’s dominance. As more new digital ventures licensed the majors’ catalogs, small advances and royalties were taken in hopes of building something larger and more profitable down the road.
Subscriptions clearly represented the future of the biz, despite the concerted efforts of Steve Jobs to kill that model and maintain the preeminence of downloads. But first a protracted new battle had to be fought to achieve proper compensation—starting with the diminution of Spotify’s free tier and intense skirmishes, both legal and tactical, to establish an acceptable royalty. The Spot, like so many tech companies, had disdained the majors as dinosaurs even as it sought the licensing agreements that were essential for its U.S. launch. Sir Grainge was new to the job when he entered that tug-of-war, but his shrewd assessment of the landscape and steely approach to negotiation were crucial in setting the stage for the prosperity to follow.
Ultimately, Spotify aligned its objectives more closely with those of the entities that supplied its content, and subscriptions took off. Apple Music’s sub service expanded the marketplace, with Amazon Music, Deezer, Tidal and others rounding it out. In the end, Spotify became the largest vendor for the rightsholders. Its recent subscription-rate increases and artist-friendly initiatives about reducing noise on the platform have the Spot and artists on the same side of the agenda regarding TikTok. Indeed, the streamery has skin in the game as the war heats up with TikTok, which is challenging it for world domination (thus potentially damaging its valuation). As Daniel Ek proclaimed when announcing Spotify’s strong numbers this week, “We feel really good about our relationship with our music partners—it’s the best it’s been.”
THIS SOUND ISN’T AVAILABLE: Now the battle is joined with TikTok, yet another tech company with an enormous user base that has built its success on music’s back—and arrogantly assumes it doesn’t need the music biz as a partner. But UMG isn’t backing down, and it’s expected that Sony will strike a similarly tough stance and Warner may also be in the bullpen, their recent deal notwithstanding. TikTok users seeking UMG music are greeted with a stark message: This sound isn’t available. Given that the ByteDance-owned firm wanted a 15% reduction on an already small fee, the label group’s action should draw full-throated support from artists.
A line has been drawn in the sand. Music may have come to resemble a utility now that you can turn on a streaming tap and listen to virtually anything, but that doesn’t mean it’s a free commodity. If you want to use the music of Taylor Swift or Billie Eilish or Beyoncé or the Beatles or whomever, everybody needs to get paid. And those who don’t pay will face the wrath of the industry’s most powerful figures. Team TikTok may want to consider the trail of bones leading to this moment as it trumpets its defiance.
ONE LAST TROPHY: Jack Sussman’s final Grammy telecast as a CBS exec—overseen in tandem with Ben Winston—was a highly engaging affair, for the most part, energized by smartly conceived, demo-friendly segments like the moving Luke Combs-Tracy Chapman duet, the return of Billy Joel and the Grammy performance debut of Joni Mitchell, not to mention the oxygen-commandeering antics of Taylor Swift, whose every move is news. All this paid off with spectacular ratings, up about 35% over the previous year.
As for the awards, we saw the expected elevation of Taylor and Billie and the long-overdue admission of Miley into the club. On the downside, there was widespread upset throughout the community that SZA (despite her three wins) wasn’t rewarded with Album of the Year, which she richly deserved. That this happened right after JAY-Z’s speech about hip-hop boycotts and how Beyoncé—the winningest artist of all time, overall—has perpetually been passed over for AOTY was not a great look. But the Academy gave the big prize to Taylor, whom they desperately needed on the show. There was discontent as well about the ongoing elitism of the Nashville branch, which has kept some of the most important acts in music out of the winners’ circle.
In any case, it was a great year for women, as is also reflected in the Coachella lineup and could also, if the fates are kind, manifest in the vengeful destruction of Donald Trump at the ballot box. Meanwhile, Harvey Mason Jr.’s speech expressing anguish and outrage about the violence at music festivals over the past few years, most recently the Supernova Sukkot Gathering in Israel, was meaningful and well received.
