music licensing
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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