TikTok has walked away from licensing negotiations with Merlin, the digital music licensing organisation, saying that it would prefer to strike direct deals with the indie labels which use the Merlin deal, claiming that there’s a history of copyright legitimacy problems, and music that is “not quality controlled for copyright”, coming via Merlin members.
Whether that is people deliberately uploading music they don’t have the rights to as part of an attempt to fraudulently collect royalties, or whether it’s people uploading sped up/slowed down or otherwise manipulated tracks in a misguided belief that they can do so without permission of the original copyright holder, is not clear.
However, no one is pretending that there are not widespread problems across the whole industry to do with “copyright legitimacy”. What is important is that key stakeholders in the value chain - like Merlin, and like the Music Fights Fraud alliance - are taking significant steps to address those problems.
A TikTok spokesperson told CMU, “We know that our community of over a billion music fans value the diversity and richness that independent music brings to our platform. We are committed to entering into direct deals with Merlin members in order to keep their music on TikTok”.
The company is keen to stress that its motivation for ditching Merlin, and going after its members to get them to sign direct deals, is the “big burden” of “quality control for copyright”, adding that direct deals will give them “better control” over that process.
As the story broke yesterday, TikTok’s music licensing honcho Ole Obermann told MBW’s Murray Stassen that the spat is “not about bad blood with Merlin” but rather that “by doing direct deals, if we detect any kinds of content copyright issues, we can address it directly”, adding “it’s that simple”.
It is the supposed “simplicity” of tackling the problem that many in the independent label community have said is “disingenuous”. Over the course of a number of conversations with senior executives and licensing specialists from the independent sector, a different message is coming across: TikTok wants to divide and conquer, and is using smoke and mirrors to put forward an argument that doesn’t stand up to scrutiny.
In fact, some sources who spoke to CMU said that rather than addressing a “simple” issue, TikTok’s approach - circumventing Merlin and striking direct deals - was likely to offer little in the way of a solution to content legitimacy issues, and could in fact cause a bigger problem for the industry and the digital supply chain by allowing bad actors to fly under the radar, making it easier for widescale fraud to go unnoticed.
With Merlin being alerted by platforms of suspected fraudulent activity coming from Merlin members, it gives the rights organisation a birds eye view of problems, enabling it to track and ultimately take action against offenders.
Industry insiders who spoke to CMU today highlighted the inherent paradox in TikTok’s stance, pointing out that the company will likely have to agree, administer and police deals with hundreds of different delivery partners - adding to the already “big burden” that TikTok claims it faces on this front.
Adding to that burden will be the need to respond to queries from rightsholders whose content has been flagged as problematic - a “mammoth task”, and something that could leave legitimate content flagged as suspect, and no simple route to resolve. One manager who spoke to CMU said “when something goes wrong with Facebook or Instagram it’s often just luck if you can reach a human rather than an automated response, so I can’t see why it would be any different with TikTok”.
One digital licensing professional who spoke to CMU on condition of anonymity said that they believed it was “disingenuous” for TikTok to “pretend this is about content integrity”, adding that labels and distributors signing the “take it or leave it boilerplate deal” being presented by TikTok almost certainly stood to lose out financially, with TikTok being able to squeeze rates.
That person added “the one thing that doesn’t change with this is delivery - the content, the actual audio files, is still coming from the same place. Merlin doesn’t have oversight on the actual wav files, so I can’t see why TikTok thinks that cutting Merlin out of the equation is going to do anything to help with content issues”.
In a letter to its members, Merlin said that it believed that the “most likely reason” that TikTok is seeking to go round Merlin and license directly is that “TikTok does not want to pay a fair rate for the music that powers their platform”.
In a statement issued yesterday, TikTok says it “would like to offer all of the world’s music to our users” and that it is “committed to working with the independent sector”.
More than one person that CMU spoke to noted the timing of the announcement, coming just a few months after Universal Music settled its licensing dispute with TikTok. At the time, in a statement, the two companies said that they would “deliver improved remuneration for UMG’s songwriters and artists”. Shortly before that happened, Robert Kyncl, CEO of Warner Music Group told analysts “we like our TikTok deal and it continues to be a driver of growth”.
The three major music companies, Universal Music, Warner Music and Sony Music, all agreed previous deals with TikTok around the same time in 2020. With Universal renewing its deal earlier this year, and Warner in July 2023, it’s likely that Sony has either concluded its own renegotiated deal, or is close to doing so - meaning that “improved remuneration for UMG’s songwriters and artists” needs to come either out of TikTok’s pocket, or from squeezing the indies.
That is something that the independent sector has seen happen repeatedly recently, with both Spotify and Deezer changing their rules of engagement at the behest of Universal Music, and Apple Music offering a “spatial audio bonus” that favoured major labels at the expense of indies.
While TikTok could likely improve the rates it pays everyone in the music industry - having sold $16 billion of ads in the US alone in 2023 - the company clearly sees music as part of its overall content landscape, rather than a core focus of its business. This was starkly highlighted by the sudden and unexpected shuttering of TikTok Music last week, but was also reinforced by Universal’s humiliating back-down after going to war with TikTok.
After much hooting and name-calling, the resolution of that negotiation was a whimper rather than a bang, and throughout the dispute it became clear that, although many TikTok creators value music as part of the content they create on the platform, they do not necessarily value any specific music.
And indeed, if TikTok’s parent company Bytedance is paying attention to Spotify’s recent history, which has seen the streaming giant aggressively slash costs in an attempt to find a route to profit - and head off looming debt repayments - it would be no surprise if TikTok was unwilling to end up in a situation where the majority of its revenue goes straight back out the door to cover the costs of music.
TikTok has given indie labels until 25 Oct to “review and sign” agreements if they want their content to remain on the platform. How many of them do so remains to be seen - but of far bigger concern is the onward consequences of TikTok’s circumvention of a key participant in the digital supply chain.
CMU has reached out to Merlin for a comment.
