The New Universal Music Group-TikTok Deal Explained
Written by djfrosty on May 3, 2024
Universal Music Group’s three-month hiatus from TikTok ended this week after the companies reached a new, multi-faceted licensing agreement. On Thursday, UMG executives explained why it was worth the wait.
The bottom line: UMG believes its new licensing deal with TikTok is an improvement over the deal that expired at the end of January. UMG has “substantially improved the total value we’ll derive from this relationship,” CFO Boyd Muir said. Michael Nash, executive vp/chief digital officer, said the new TikTok deal “definitely deliver[s] a fair level of value relative to other short form social platform partners,” which includes Instagram Reels, YouTube Shorts and Snap.
In Thursday’s earnings call and CEO Lucian Grainge’s internal memo obtained by Billboard the same day, Grainge, Muir and Nash mentioned numerous components of the new deal that can be broken into two camps: revenue and non-revenue features and arrangements.
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As for revenue, there will be more of it under the new deal — although none of the executives shared specific deal points such as advertising revenue sharing rates. Nash said that “revenue under this new deal does markedly improve over our last deal.” The previous deal amounted to about 1% of UMG’s annual revenues, which works out to about $120 million euros based on 2023 revenue. That’s not much for a platform that commands an average of 58 minutes per day in the U.S., according to eMarketer — almost as much as Netflix and more than YouTube.
But UMG is getting more value out of TikTok in forms other than royalties. Many of those non-revenue components typically cost money to labels: e-commerce tools, marketing and promotion campaigns and ad credits. Other aspects of the deal have value that’s hard to pin down: data, artist insights, intelligence and new programs and new collaboration opportunities.
One interesting aspect of the new deal is what Nash called “content management and attribution.” When TikTok users post videos with sped-up and slowed-down recordings, attribution for the UMG recording is credited “not [to] some infringing third party, but the artists,” said Nash. “And that content is better connected with their official presence on the platform.”
As Grainge outlined in an internal memo to staff on Thursday, the deal also met the two non-revenue criteria: protection against the harmful effects of AI and prioritizing online safety for both TikTok users and UMG’s artists.
TikTok made “a number of commitments” that respect UMG artists’ works and rights of publicity and supports UMG’s principles on training AI models without consent from rights holders. UMG wants to protect its artists against deepfakes such as “Heart on My Sleeve” by Ghostwriter, which used AI-generated soundalikes of Drake and Kendrick Lamar (both UMG artists). The new deal ensures such fake content will be removed, both Grainge and Nash said.
Nash also described these efforts to combat infringing content as “elevated requirements” that detect and avoid infringing content,” including leaks, unauthorized remixes and unauthorized AI versions. The deal also contains requirements for improved filtering and stream manipulation detection.
In addition, TikTok agreed to improve online safety and attempt to mitigate the harmful effects of social media, including hate speech, bullying, responsible use of AI, and addressing infringing content and algorithmic manipulation, Grainge wrote in his memo.
Social media income might not amount to much today, but it “is increasingly important income to artists, songwriters, labels and publishers,” said Grainge during Thursday’s earnings call, “which is why we’ve pushed so hard and we will continue to push to protect and to develop it.”