music licensing
Five years ago, fitness companies looked like the next big thing for music rights owners as the onset of the COVID-19 lockdown turned Peloton, the maker of high-tech stationary bicycles and treadmills, into a household name and the leader in a suddenly hot connected fitness market.
Peloton’s founder, John Foley, had created an online version of music-driven, brick-and-mortar studios such as SoulCycle. Unlike the staid strength and cardio products of earlier years, the new breed of bikes and treadmills manufactured by the company were internet-ready and could stream live or pre-recorded workouts. Other startups took notice, with competitors like Tonal and Hydrow vying for market share.
“There were fitness companies who saw what Peloton was doing, which was really putting music at the center of their workouts,” says Vickie Nauman, a licensing expert and founder/CEO of CrossBorderWorks. Instructors, some of whom would become small-time celebrities, used music to create identities and build communities. “This was the original founder’s vision,” she says.
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Flush with investment capital, fitness companies followed Peloton into expensive licensing agreements with rights holders to infuse music into their at-home products. Royalties from connected fitness companies, as well as social media and other new revenue streams, went from about 3% of the average catalog’s revenue in 2021 to “something like 7%” in 2023, according to Jake Devries, a director in Citrin Cooperman’s music and entertainment valuation services practice.
As it turned out, 2020 and 2021 were peak at-home fitness. The financial impact of the post-pandemic fitness bubble was seen in Universal Music Group’s results for the fourth quarter of 2024: A decline in its fitness business accounted for a nearly one percentage-point decline in its subscription growth rate, equal to approximately $12.5 million. And during its most recent earnings call on April 29, the company noted that fitness revenue was flat in the first quarter.
After pandemic restrictions ended, the stay-at-home fitness business ran into competition from gyms and fitness studios as people returned to public life. As a result, according to numerous people who spoke with Billboard, connected fitness companies had less cash to put into music licensing and, realizing they didn’t need massive catalogs and didn’t have the expertise to properly manage the rights and issue royalty payments, looked for more affordable, less arduous options.
Peloton, founded in 2012, was a trailblazer in at-home fitness. Its studio-quality bikes, which currently cost between $1,445 and $2,495, are outfitted with touchscreens that stream live and on-demand content for an additional $44 per month. Music is a focal point for the online classes, just as brick-and-mortar studios like SoulCycle incorporate popular songs into their workouts. Despite the high prices of Peloton’s bikes, online content has a greater financial impact: In its latest fiscal year, subscriptions accounted for 63% of the company’s $2.7 billion of revenue and 96% of its $1.2 billion of gross profit.
Music enhances online workouts in the same way it makes going to a fitness studio or a gym more enjoyable. But building cycle workouts around setlists of specific songs isn’t straightforward. Unlike brick-and-mortar locations that require only blanket licenses from performance rights organizations such as ASCAP and BMI, Peloton required more expensive direct licenses to incorporate music into its streaming content. After being sued by music publishers for copyright infringement in 2019, Peloton settled the following year and began negotiating the proper licenses.
Such a license had never been done for a fitness company, so major labels and publishers modeled custom licenses for Peloton based on their deals with Spotify and other on-demand music platforms, according to a licensing executive familiar with the negotiations. The agreements called for Peloton to pay rights holders based on a monthly per-subscriber fee, and the pool of royalties would then be proportionally divided based on usage, according to this person.
Peloton had built a name for itself in the fitness community by 2019, but it was supercharged the following year by the COVID-19 pandemic. As people stayed away from public places such as gyms and fitness studios, Peloton’s revenue jumped from $384 million in fiscal 2019 to $1.45 billion two years later, and its share price climbed from $27 following its September 2019 initial public offering to $171 in January 2021.
The enthusiasm for at-home fitness also benefited Peloton’s competitors. Hydrow, which offers rowing machines with Peloton-like streaming content, raised $25 million in June 2020 and another $55 million in March 2022. Tonal, a connected strength training platform, had raised a total of $90 million by 2019, before the pandemic piqued interest, then raised $110 million in September 2020 and $380 million in two funding rounds in 2021 and 2023 — the latter at a lower valuation.
As other connected fitness companies quickly sought music licenses to replicate Peloton’s success, rights holders offered them a version of the Peloton license, which provided them rights to large catalogs. (Peloton, the lone publicly traded company of the bunch, revealed in its 2021 annual report that it had a catalog of 2.6 million tracks.) “Once there was a model, it was always going to be easier to replicate a model you think is working than create a new licensing deal,” says the licensing executive.
But these fitness startups, desperate to corner share in a fast-growing market, initially made some missteps. “Because it was such a race, I think that many online fitness companies saw this as an existential opportunity, and they did not take the time to investigate what they were getting into,” says Nauman. “And so, they licensed all of this music, and that sent a signal to rights holders all over the world that fitness was going to be an enormous new line of business.”
The Peloton-style licenses weren’t cheap. Record labels and publishers were “aggressive with the rates they were asking for a lot of the services,” says an attorney familiar with the terms of the licensing contracts. An app-based product would likely pay 30% of revenue to music rights holders, according to this person, while hardware-based products with higher overhead and costs would pay approximately 16% of revenue. “That’s a pretty big share of revenue for a company that is not a music company,” the attorney adds.
The Peloton-style sync licenses also came with more complexity than fitness companies could handle. Managing a music catalog requires technology and know-how that fitness companies don’t have. They needed help matching compositions to sound recordings to ensure licenses were acquired from all rights holders, and the reporting required for PROs and making direct payments to record labels and publishers were outside of the fitness companies’ expertise.
As fitness companies dealt with stagnant growth, they laid off staff and tightened their budgets. From February 2022 to May 2024, founder/CEOs at Peloton, Tonal and Hydrow were forced out. When Peloton replaced Foley with former Spotify CFO Barry McCarthy in February 2022 and announced plans to lay off 20% of its corporate staff, its share price was trading under $30, down more than 82% from its high mark just 13 months earlier. Tonal and Hydrow each laid off about 35% of their workforces in 2022, and Hydrow further thinned its staff in 2023.
Sync licenses are crucial to Peloton because classes are often built around playlists, and music is crucial to the indoor cycling experience. But not every connected fitness product needs to integrate music in a way that requires a more expensive, Peloton-style license. For many other companies, a non-interactive, DMCA-compliant radio service with pre-cleared music is more than adequate.
Constrained by tighter budgets, some connected fitness companies started looking for alternatives to their original licenses. Today’s connected fitness CEOs tend to be most concerned about the cost and complexity of music licensing and the likelihood of being sued, says Jeff Yasuda, founder/CEO of Feed.fm, a provider of licensed music to connected fitness companies such as Hydrow, Tonal, Future and Ergatta. Being able to use popular music in their apps isn’t a priority.
“For a fitness company, your job is to make the best jumping jack app on the planet,” says Yasuda. Making a mistake handling music rights would put a company in jeopardy of facing lawsuits brought by music rights holders. “It’s just not worth the risk,” he says.
Feed.fm assures clients that the rights are compatible with various laws in different countries. It provides pre-cleared catalogs from Sony Music, Warner Music Group, Merlin, Insomniac Music Group and A Train Entertainment, and it works with record labels to create thematic stations, including one curated by CYRIL, a recording artist for Warner-owned Spinnin’ Records, and a Brat-inspired station featuring Charlie xcx, Dua Lipa, Chappell Roan and other artists that represent the brat summer of 2024. A rights holder itself, Feed.fm has signed 40 to 50 artists, which its vp of music affairs, Bryn Boughton, says gives it greater flexibility in licensing.
Outsourcing the licensing ultimately saves fitness companies money, says Con Raso, co-founder/managing director of Australia-based Tuned Global. Raso’s pitch to fitness companies is to invest money in marketing and let companies like Tuned Global handle the technology. “We don’t think, unless you’re doing it on a massive scale, you’re going to save money,” he says. Raso estimates that Tuned Global can remove 70% of clients’ costs versus licensing music and managing rights themselves.
Beyond traditional fitness apps, there’s big potential for licensing ambient or mood music for a new wave of mental health-focused apps. In the last six months, Raso has seen an uptick in demand for licensed music from companies more broadly associated with health and medical care. Consumers have a wide choice of apps for yoga, meditation, mindfulness and sleeping that incorporate music. Led by companies such as Calm, the market for spiritual wellness apps hit $2.16 billion in 2024, according to Researchandmarkets.com, and will grow nearly 15% annually to $4.84 billion by 2030. Record labels have already made forays into this space. Universal Music Group, for example, formed a partnership in 2021 with MedRhythms, which uses software and music to restore functions lost to neurological disease or injury.
The COVID-era boom of connected fitness products, though, seems all but over, having failed to live up to lofty expectations. Chalk it up to the chaotic nature of the pandemic and fast-moving startups battling for market share, says Nauman. “I don’t think it’s anybody’s fault,” she says. “I think it was such a lightning-in-a-bottle time that they were in a race to get to market as fast as they possibly could.”
Additional reporting by Liz Dilts Marshall.
Generative AI — the creation of compositions from nothing in seconds — isn’t disrupting music licensing; it’s accelerating the economic impact of a system that was never built to last. Here’s the sick reality: If a generative AI company wanted to ethically license Travis Scott’s “Sicko Mode” to train their models, they’d need approvals from more than 30 rights holders, with that number doubling based on rights resold or reassigned after the track’s release. Finding and engaging with all of those parties? Good luck. No unified music database exists to identify rights holders, and even if it did, outdated information, unanswered emails, and, in some cases, deceased rights holders or a group potentially involved in a rap beef make the process a nonstarter.
The music licensing system, or lack thereof, is so fragmented that most AI companies don’t even try. They steal first and deal with lawsuits later. Clearing “Sicko Mode” isn’t just difficult; it’s impossible — a cold example of the complexity of licensing commercial music for AI training that seems left out of most debates surrounding ethical approaches.
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For those outside the music business, it’s easy to assume that licensing a song is as simple as getting permission from the artist. But in reality, every track is a tangled web of rights, split across songwriters, producers, publishers and administrators, each with their own deals, disputes and gatekeepers. Now multiply the chaos of clearing one track by the millions of tracks needed for an AI training set, and you’ll quickly see why licensing commercial music for AI at scale is a fool’s errand today.
Generative AI is exposing and accelerating the weaknesses in the traditional music revenue model by flooding the market with more music, driving down licensing fees and further complicating ownership rights. As brands and content creators turn to AI-generated compositions, demand for traditional catalogs will decline, impacting synch and licensing revenues once projected to grow over the next decade.
Hard truths don’t wait for permission. The entrance of generative AI has exposed the broken system of copyright management and its outdated black-box monetization methods.
The latest RIAA report shows that while U.S. paid subscriptions have crossed 100 million and revenue hit a record $17.7 billion in 2024, streaming growth has nearly halved — from 8.1% in 2023 to just 3.6% in 2024. The market is plateauing, and the question isn’t if the industry needs a new revenue driver — it’s where that growth will come from. Generative AI is that next wave. If architected ethically, it won’t just create new technological innovation in music; it will create revenue.
Ironically, the very thing being painted as an existential threat to the industry may be the thing capable of saving it. AI is reshaping music faster than anyone expected, yet its ethical foundation remains unwritten. So we need to move fast.
A Change is Gonna Come: Why Music Needs Ethical AI as a Catalyst for Monetization
Let’s start by stopping. Generative AI isn’t our villain. It’s not here to replace artistry. It’s a creative partner, a collaborator, a tool that lets musicians work faster, dream bigger and push boundaries in ways we’ve never seen before. While some still doubt AI’s potential because today’s ethically trained outputs may sound like they’re in their infancy, let me be clear: It’s evolving fast. What feels novel now will be industry-standard tomorrow.
Our problem is, and always has been, a lack of transparency. Many AI platforms have trained on commercial catalogs without permission (first they lied about it, then they came clean), extracting value without compensation. “Sicko Mode” very likely included. That behavior isn’t just unethical; it’s economically destructive, devaluing catalogs as imitation tracks saturate the market while the underlying copyrights earn nothing.
If we’re crying about market flooding right now, we’re missing the point. Because what if rights holders and artists participated in those tracks? Energy needs to go into rethinking how music is valued and monetized across licensing, ad tech and digital distribution. Ethical AI frameworks can ensure proper attribution, dynamic pricing and serious revenue generation for rights holders.
Jen, the ethically-trained generative AI music platform I co-founded, has already set a precedent by training exclusively on 100% licensed music, proving that responsible AI isn’t an abstract concept, it’s a choice. I just avoided Travis’ catalog due to its licensing complexities. Because time is of the essence. We are entering an era of co-creation, where technology can enhance artistry and create new revenue opportunities rather than replace them. Music isn’t just an asset; it’s a cultural force. And it must be treated as such.
Come Together: Why Opt-In is the Only Path Forward and Opt-Out Doesn’t Work
There’s a growing push for AI platforms to adopt opt-out mechanisms, where rights holders must proactively remove their work from AI training datasets. At first glance, this might seem like a fair compromise. In reality, it’s a logistical nightmare destined to fail.
A recent incident in the U.K. highlights these challenges: over 1,000 musicians, including Kate Bush and Damon Albarn, released a silent album titled “Is This What We Want?” to protest proposed changes to copyright laws that would allow AI companies to use artists’ work without explicit permission. This collective action underscores the creative community’s concerns about the impracticality and potential exploitation inherent in opt-out systems.
For opt-out to work, platforms would need to maintain up-to-date global databases tracking every artist, writer, and producer’s opt-out status or rely on a third party to do so. Neither approach is scalable, enforceable, or backed by a viable business model. No third party is incentivized to take on this responsibility. Full stop.
Music, up until now, has been created predominantly by humans, and human dynamics are inherently complex. Consider a band that breaks up — one member might refuse to opt out purely to spite another, preventing consensus on the use of a shared track. Even if opt-out were technically feasible, interpersonal conflicts would create chaos. This is an often overlooked but critical flaw in the system.
Beyond that, opt-out shifts the burden onto artists, forcing them to police AI models instead of making music. This approach doesn’t close a loophole — it widens it. AI companies will scrape music first and deal with removals later, all while benefiting from the data they’ve already extracted. By the time an artist realizes their work was used, it’s too late. The damage is done.
This is why opt-in is the only viable future for ethical AI. The burden should be on AI companies to prove they have permission before using music — not on artists to chase down every violation. Right now, the system has creators in a headlock.
Speaking of, I want to point out another example of entrepreneurs fighting for and building solutions. Perhaps she’s fighting because she’s an artist herself and deeply knows how the wrong choices affect her livelihood. Grammy-winning and Billboard Hot 100-charting artist, producer and music-tech pioneer Imogen Heap has spent over a decade tackling the industry’s toughest challenges. Her non-profit platform, Auracles, is a much-needed missing data layer for music that enables music makers to create a digital ID that holds their rights information and can grant permissions for approved uses of their works — including for generative AI training or product innovation. We need to support these types of solutions. And stop condoning the camps that feel that stealing music is fair game.
Opt-in isn’t just possible, it’s absolutely necessary. By building systems rooted in transparency, fairness and collaboration, we can forge a future where AI and music thrive together, driven by creativity and respect.
The challenge here isn’t in building better AI models — it’s designing the right licensing frameworks from the start. Ethical training isn’t a checkbox; it’s a foundational choice. Crafting these frameworks is an art in itself, just like the music we’re protecting.
Transparent licensing frameworks and artist-first models aren’t just solutions; they’re the guardrails preventing another industry freefall. We’ve seen it before — Napster, TikTok (yes, I know you’re tired of hearing these examples) — where innovation outpaced infrastructure, exposing the cracks in old systems. This time, we have a shot at doing it right. Get it right, and our revenue rises. Get it wrong and… [enter your prompt here].
Shara Senderoff is a well-respected serial entrepreneur and venture capitalist pioneering the future of music creation and monetization through ethically trained generative AI as Co-Founder & CEO of Jen. Senderoff is an industry thought leader with an unwavering commitment to artists and their rights.
Independent music trade bodies have hit out at TikTok for boycotting collective license talks with Merlin by seeking to strike direct deals with its indie label members, accusing the platform of trying to divide the sector and “drive down the value” of music.
Licensing talks between TikTok and Merlin, which negotiates digital licenses for a coalition of more than 30,000 independent labels and music companies, representing 15% of the global recorded music market, abruptly ended late last month when “TikTok walked away before negotiations even began,” according to a letter Merlin sent to its members on Friday (Sept. 27).
The London-headquartered indie rights organization, which counts the labels 4AD, Domino, Matador, Subpop, Partisan, Warp, XL Recordings and Secretly Group among its members, said that TikTok told them that it would not be renewing its license deal, due to expire Oct. 31, and was instead looking to licence its members directly.
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A spokesperson for TikTok confirmed Monday (Oct. 1) that it was “committed to entering into direct deals with Merlin members in order to keep their music on TikTok.”
One of the reasons TikTok has given for not renegotiating its deal with Merlin is its concerns over alleged streaming fraud, which a TikTok spokesperson told Billboard specifically relates to a handful of Merlin members delivering songs or remixes of songs that they don’t own the rights to.
Addressing those allegations, Merlin told members it has worked “productively and collaboratively with TikTok” on streaming manipulation and fraudulent content “and until now, no concerns have been raised.”
Executives and trade bodies from across the independent music sector have also called into question TikTok’s reasoning for not renewing its deal with Merlin, while also slamming its attempts to boycott collective licensing with the company.
Brussels-based independent labels trade body IMPALA, which represents over 6,000 indie music companies in Europe and has previously criticized TikTok for the low returns it pays to rightsholders, said it strongly opposed TikTok’s attempts to boycott Merlin.
“Given the timing, it seems clear that TikTok’s real intention is to fragment the sector and drive down the value of independent music, rather than deal with streaming manipulation,” said Mark Kitcatt, chair of IMPALA’s streaming group, in a statement on Thursday (Oct. 3).
“Record labels have entrusted their rights to Merlin to negotiate on their behalf and by TikTok going directly to rights holders they are disrespecting the licensing agreements that are in place,” added Dan Waite, chair of IMPALA’s digital committee. “Like a supermarket chain negotiating directly with individual farmers for the price of their milk, it’s difficult to see how this can work out in the farmers’ favour.”
Referencing TikTok’s cited concerns around streaming manipulation, IMPALA’s executive chair Helen Smith questioned how seeking direct deals with Merlin members would better address the issue than renewing a collective license. “This feels like a smoke screen for boycotting Merlin given the history and the timing and the fact the whole industry is working hard on this important issue,” said Smith in a statement.
“TikTok’s claim that leaving Merlin would alleviate fraud is technically and effectively incorrect,” Gee Davy, interim CEO of the U.K.-based Association of Independent Music (AIM), tells Billboard. She claims that TikTok can already choose which music catalogs it uploads through the Merlin deal, and stresses it is by the industry working together “and TikTok re-engaging with Merlin that the industry will fight online fraud.”
“The resource required to close deals and manage a large number of independent music relationships, take down unlicensed music, and handle fraud separately across a number of participants would surely outweigh any gains,” says Davy. “And that’s aside from any reputational issues that arise from TikTok claiming to respect independent music while in practice showing that they don’t respect the licensing choices of independent music businesses.
“Many smaller labels and artists will be locked out of any direct licensing, which will sour relations as well as set back many years of work by Merlin, AIM and others in improving equitable access to the market and diversity of music available to consumers. We urge TikTok to speak to us and consider the bigger picture and; most of all, to recognise the inadvertent damage their actions have caused and return to discussions with Merlin.”
Those sentiments were echoed by Dr. Richard Burgess, president of the American Association of Independent Music (A2IM), who earlier this week told Billboard: “TikTok’s refusal to negotiate a deal with Merlin isn’t just a setback — it’s a threat to the whole music ecosystem.” Burgess said the dispute “isn’t just about Merlin; it’s about properly recognizing the value of artists and their music.”
The Brussels-based International Music Publishers Forum (IMPF) has also urged TikTok to reengage and strike a licensing agreement with Merlin, calling its attempts to “circumnavigate” collective licensing “a thinly veiled attempt to divide independent labels and drive down the price of music.”
“Merlin’s members have entrusted their rights to the organisation in order to uphold transparency, efficiency and fair remuneration. That must be respected,” said IMPF in a statement.
Merlin is the third music organization this year, after Universal Music Group (UMG) and the National Music Publishers’ Association (NMPA), to express challenges in renewing music licenses with TikTok. In February, UMG’s failure to reach a deal with TikTok led to the removal of its entire catalog of hits from TikTok for about three months.
In April, after publicly supporting UMG’s position against TikTok, the NMPA allowed its TikTok license, which was used by a number of indie publishers, to lapse as well. It has not been renewed. A spokesperson for TikTok says that many of the indie publishers have now established their own direct licenses with the short-form app.
Unless a swift resolution can be found between TikTok and Merlin — or Merlin’s label members choose to negotiate individual license deals with the ByteDance-owned platform — hit songs from artists like Nirvana, Phoebe Bridgers, Diplo, The Lumineers, Mac Demarco, Madlib, Mitski, Thundercat, Wet Leg and Coolio could start to be removed from TikTok on Nov. 1.
Nick Ditri’s career as a dance music producer got a big boost when Tiesto used a 2013 bootleg remix of Avicii’s “Silhouettes” by his duo, Disco Fries. But like countless other unauthorized remixes, “Silhouettes” isn’t found on most of the popular streaming platforms. “Unfortunately, that doesn’t live anywhere outside of YouTube when Tiesto played it,” Ditri tells Billboard.
That could soon change. Eleven years later, Ditri is trying to give commercial legitimacy to tracks in that commercial gray area. He is a managing partner of ClearBeats, a startup that enables derivative works — remixes, interpolations, mashups and alternate versions — to become properly licensed tracks. ClearBeats’ other managing partner, Bob Barbiere, is a former Dubset executive and veteran in digital technology and rights clearances. Ditri and Barbiere created the company with Suzanne Coffman and Yolanda Ferraloro of veteran music sync company Music Rightz.
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Digital platforms are awash in unauthorized derivative works because “it’s the easiest way to get your foot in the door, especially in dance music and in hip hop,” says Ditri. In a perfect world, those tracks would be licensed for distribution to digital platforms or synchronizations in TV shows, advertisements or movies. “But the problem is it usually ends at SoundCloud where it might get muted or pulled down,” he says. “[Or] it ends at YouTube or a DJ pool.”
ClearBeats wants to address what Barbiere calls the “90/90 irony.” He estimates that 90% of artists who create derivative works want publicity and promotion, not the original artist’s rights or royalties. Additionally, 90% of rights owners would rather make money from a derivative work than take it down from a digital platform. But because the proper infrastructure doesn’t exist, Barbiere estimates that less than 5%, and maybe as little as 1%, of derivative works have proper attribution and are earning money for rights holders.
“Why shouldn’t 90% of that content live in an ecosystem where everybody can distribute into it, consume it, be properly attributed to it, and royalties paid downstream?” asks Barbiere.
The status quo not only prevents original recordings’ ability to generate revenue from derivative uses, but it also limits creators’ ability to build their careers, says Ditri. “If [producers] built a playlist network of five amazing Spotify playlists or Apple music playlists, and that’s their main source of promo and then they go and do a bootleg, that bootleg’s only gonna live wherever they posted — which is not going to be Spotify. So, they can’t even tap into their own networks. And it’s limited on Instagram and other socials as well.”
Currently, ClearBeats is helping labels, distributors and artists with bespoke licenses, working on a few long-term, strategic projects and helping companies identify and collect unpaid or suspended royalties. Barbiere says he has been contacted by distributors who want to help clients get licenses for tracks that incorporate samples as well as streaming platforms that want to license music catalogs to allow their users to create derivative works. A subscription-based registry for licensors and licensees is expected to roll out at the end of 2024 into 2025.
As for Ditri, co-founding ClearBeats provides him an opportunity give Disco Fries’ derivative works like “Silhouettes” a life outside of YouTube. “I’m thankful for the video clip,” he says, “but wouldn’t it be wonderful if this had existed back then?”
If Netflix, HBO, Disney, The CW and others slash their budgets for TV and movie content, as they’ve been suggesting for more than a year, the music industry could take a hit in the steady song-placement business that generates hundreds of millions of dollars annually for rightsholders.
“We’ve been in a boom period. Cutting back on production would cut down on that revenue, for labels and publishers,” says Kier Lehman, a music supervisor who works on Abbott Elementary and Spider-Man: Across the Spider-Verse. “It’s a pretty direct effect.”
After the COVID-19 quarantine ended, the decrease in demand helped create some problems for the streaming business. That has created challenges for the video streaming business: Netflix’ spending on content declined in 2022, after company officials announced a “pulling back”; HBO Max removed dozens of streaming titles last summer to cut costs; and Disney announced $5 billion in cuts two months ago, including 7,000 jobs, although newly returned CEO Bob Iger has emphasized streaming growth. The CW, Showtime and others have also removed content or cut costs.
“We’re trying to be smart about it and prudent in terms of pulling back on some of that spend growth to reflect the realities of the revenue growth,” Spencer Neumann, Netflix’s CFO, said last year.
So far, executives at labels and publishers – which generally split revenue from synch licenses 50-50 – say they haven’t noticed a change in licensing volume or rates, but in a wobbly economy beset with entertainment layoffs, they’re bracing for a harder business. “The idea of less content is always going to be a concern for us,” says a source at a major label. “If there’s going to be a slowdown in content production, it’s going to be a slowdown in music usage — it’s definitely something we’d be keeping an eye on.”
While its impact won’t be felt for a while, the ongoing Writers Guild of America strike has already pushed the pause button on numerous productions, including Stranger Things, Saturday Night Live and Loot.
Synchs have been a remarkably consistent revenue stream for the record business over the last five years, as Netflix, Hulu, HBO and others competed for viewers and created a content boom. Synch revenues for recorded music hit $285.5 million in 2018 and, after a slight dip, rose to $318 million last year. (Publishing revenue has been even more robust in recent years, growing from $696 million in 2018 to more than $1.2 billion in 2021, according to the National Music Publishers Association; synch makes up nearly 26% of that total revenue.) Synch executives at labels and publishers say they’re preparing for more challenging times. “I don’t think anybody’s not going to be affected by cutbacks,” says Oscar Martinez, creative director for film, TV and Hispanic advertising with publisher peermusic. “We expect to feel a little bit of it.”
How will labels and publishers contend with content cuts once they kick in? “We have a plan in place,” Martinez says, predicting a pivot to placing music in games such as Fortnite and FIFA. “There’s still content being made and opportunities to be had.”
Amy Hartman, svp of creative services for film and TV music at Spirit Music Group, adds that the publisher is emphasizing “budget-friendly” moves — remixing classic hits such as Billy Squier’s “The Stroke” for the Air trailer, and encouraging songwriters to create originals that can be licensed more affordably than familiar hits. “That’s one way we can make up loss of synch revenue,” she says.
Sara Torres, sync and licensing supervisor for ASAP Clearances, which works with labels and publishers to clear songs, suggests the number of scripted shows may decline in favor of reality shows — which tend to use more tracks on tighter budgets. A scripted show might blow its budget on one big song, by, say, the Beatles, then try to round out its song lineup with more affordable music by indie artists or “library music.” The reality shows Torres works with have “most favored nations” clauses, so all synchs receive the same fees. “There’s always a whisper of cutbacks with any network, so you just have to be ready,” she says.
For now, label executives say they’re not worried about content cutbacks or more inflexible network demands for lower rates. “It’s business as usual. It’s not doomsday,” says Esther Friedman, Sony Music Publishing’s svp of creative marketing for film and TV, although she adds: “This could be a different conversation in six to nine months.”
Those who work every day with production companies say labels and publishers should prepare for cutbacks. “You might be looking at the same amount of TV shows, but they have less episodes,” says Justin Kamps, music supervisor for Grey’s Anatomy and Bridgerton. “That is rough for everyone involved.”
At least to some extent, any decrease in production would hurt the music business at least somewhat. “If there are fewer shows, there will be fewer places to place music,” says Lindsay Wolfington, a veteran music supervisor whose current shows include Netflix’ Virgin River and Starz’ The Venery of Samantha Bird: “That’s just a fact.”
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