Not a great week for TikTok, the Chinese-owned social video app with suspected ties to the Chinese Communist Party and 170 million users in the U.S. On Thursday, a bill that would force TikTok’s Chinese parent ByteDance to sell the platform to a non-Chinese entity or face a permanent ban in the U.S., passed the House Energy and Commerce Committee on a bipartisan 50-0 vote, putting it on a fast track to a vote by the full House, perhaps as soon as next week. Also this week, the European Union’s Digital Markets Act went into full effect formally designating TikTok as one of six internet “gatekeeper” platforms — and the only non-U.S. owned one — now subject to strict new regulations on its operations within the 27-member bloc.
ByteDance’s bid to forestall TikTok’s “gatekeeper” designation was rejected by the EU General Court last month (it has since appealed). In the U.S. the company tried to avoid the ban by prompting users to call their congresspersons to urge them to vote “no” on the bill, leading to committee members’ offices to be inundated with calls. But even if TikTok manages, somehow, to avoid the nuclear option of national banishment it faces another growing ban that could prove nearly as damaging to its business in the long run.
This week the National Music Publishers Association announced it does not expect renew its licensing deal with the platform when it expires at the end of April. “Recently, the press has highlighted concerns around TikTok’s licensing practices, concerns that NMPA has heard directly from many of our members,” it said in a letter publishers. “At this time, we do not anticipate that there will be an option to renew or extend the current NMPA licenses or participate in a new license with TikTok through NMPA.”
The reason the press has highlighted those concerns is because Universal Music Group, the world’s largest record label and music publisher, has gone to war with TikTok over those licensing practices, forcing it to remove all UMG artists’ recordings from the platform and any tracks on which an UMG-signed songwriter has a writing or publishing credit.
TikTok tried to put on a defiant face in response, issuing a statement reading, “It is sad and disappointing that Universal Music Group has put their own greed above the interests of their artists and songwriters… TikTok has been able to reach 'artist-first' agreements with every other label and publisher. Clearly, Universal's self-serving actions are not in the best interests of artists, songwriters and fans.”
Now, it’s at risk of losing many of those other labels and publishers as well. The NMPA’s deal covers a large number of publishers, mostly independents too small to negotiate and administer direct deals with TikTok. If that deal is not renewed, many of those publishers could be left with no leverage to bargain with.
NMPA helpfully offered to advise any of those left without a TikTok deal on pursuing legal action against the platform if it continues to make their music available.
Music is critical to TikTok. Its business was built in no small degree on short videos of people performing their self-choreographed dances to snippets of songs. Even today, more than 80% of the videos uploaded to the platform contain music.
By the same token, TikTok has become critical to the music business. It is the dominant platform today for discovering and breaking new artists and marketing new releases, all at little cost to labels and publishers.
If more music continues to be unavailable to its users traffic to the site could suffer. But a long-term TikTok boycott could force labels and publishers to wean themselves off their reliance (some say over-reliance) on free TikTok virality to promote their artists. And that diminished importance could make them even less eager to license their music on TikTok’s terms.
ICYMI
As I was saying…
A few more data points to support Monday’s post:
On Paramount Global’s earning call Wednesday CEO Bob Bakish said reducing programming spend is now job No. 1 for the studio. “As we move into 2024, we’re focused on producing content more efficiently and magnifying the impact of our slate,” Bakish told analysts. In film, “we’re improving ROI by lowering the average cost per title… improving the financial return on the overall slate,” he said. Meanwhile, Canadian vendors and location managers who support many U.S. film and TV productions are getting worried that AI could effectively wipe out location work north of the 49th parallel. “[I]f it suddenly becomes cheaper to stay in L.A. and use AI to create your location, rather than physically move to a ‘stand-in’ location, our film and TV industry will dry up almost instantly,” Canadian Gord Hotchkiss wrote on MediaInsider. And on Disney’s earnings call this week, CEO Bob Iger confirmed the Mouse is still chasing after Netflix.
Making AI Play by Aussie Rules
Three years ago, Australia passed the News Media Bargaining Code, requiring social media companies like Google and Facebook (now Meta) to negotiate licenses with news publishers to display news content on their platforms or face a government-imposed fee schedule. While Google and Facebook initially negotiated direct deals with publishers, Meta announced last week that it would not renew its deals to display news content in its Facebook News hub and would remove the dedicated tab from the platform Down Under. Now is facing calls to be designated under the code for its use of online news sources to train its generative AI models without first securing deals with publishers. “In the case of AI, the news businesses have the option of turning off AI crawlers, in OpenAI’s case at least,” Prof. Monica Attard and Dr. Michael Davis of the University of Technology’s Centre for Media Transition, said. “Still, the code doesn’t specify which platforms might be designated, or even which services. So an AI service could feasibly be brought within the auspices of the code.” Of course, Australian news sources probably aren’t critical for AI training and Meta would likely just filter them out of its datasets.