Universal Publishing Joins TikTok Takedown

I'm on Universal's side on this. TikTok should pay rightsholders more.

But we've seen this movie before. As documented in the book "Hit Men," CBS Records wanted to eliminate the underworld of independent radio promotion. Therefore, it refused to pay. End result, the radio stations played music by acts on the other five major labels and eventually CBS caved and started paying the indie promo fees once again.

Of course now there are only three major label groups. And the facts are not an exact fit. But TikTok is the new radio, even worse, that's not only where records blow up, but where the labels find their new acts.

And the labels only have themselves to blame. Ever since the near monopoly of MTV the labels have been pissed that they had little control over what was played and were left out of the financial action. Their goal ever since has been to establish competitors, so they could play one off the other.

This is not the case with TikTok. The me-too product Instagram Reels has some traction, but it's a sideline venture compared to TikTok, which skews younger, where the creators have time to make the videos and the early adopters surf and get addicted to songs. And today's youngsters watch TikTok much more than they used to listen to the radio.

So TikTok has power.

And then there's the recent Spotify announcement that $4.5 billion of their royalty payouts, half of what they paid in total, went to indies. Now the devil is in the details here, because a lot of these indies are actually distributed by major labels. But, the indie part of the pie is growing. And the need for major distribution is falling. You can go nearly direct to DSPs and get almost all of the money. The advantages of major distribution keep eroding, this is not the physical retail of yore.

In other words, TikTok can survive without Universal's recordings and publishing assets. It will be hobbled, but not put out of business. This is not like Spotify losing Universal's music, as a matter of fact, Spotify refused to launch in America, its launch was delayed in America, until all major label groups signed on. Funny how feet were dragged and then Spotify and streaming saved the labels' bottom lines. If you're looking for foresight, don't look to record labels.

So what will happen here, and what has been happening is...

Nature abhors a vacuum. So users are adjusting, and employing music from the other two major label groups and independents. And those signed to Universal are pissed. Just like they were at CBS thirty five years ago. You see removing content may be good for the label overall, but for the individual artist? It can be a serious impediment. Forget the royalties, they want the exposure, their career only involves them, Universal needs some act to hit, not necessarily theirs.

The loss of major label market share is the story of the streaming era. Hits are smaller, the total of indie streams and payouts keeps growing. Turns out not everybody wants the same music. And you can do quite well financially flying under the radar. One of the great things about TikTok is it's free promotion. Independent artists are kept off terrestrial radio to this day, TikTok is a field day. Never mind the ability to expose your music elsewhere online, and to even make it cheaply on your computer.

It's not like this evidence was hidden, anybody observing the sphere knew that the indie piece of the puzzle was growing. But the majors keep focusing on fewer and fewer acts, in most cases poached from TikTok. They are responsible for this mess.

Now in truth the majors will never die. Because of their catalogs. It's not just about new music, but all the recordings of the past. And now, with Universal Publishing involved, even more recordings of the past. Believe me, that's why TikTok will eventually settle. It's hard to do business in the music world without the assets of Universal, or Sony or Warner. But the number? Once again, sans music Spotify is out of business, but not TikTok.

So what we've got here is a mess. A backward looking Universal throwing its weight around based on history and a bunch of newbies creating out of thin air to put their music on TikTok, a site that didn't even exist when the major labels froze their hit paradigm back in the last century. Furthermore, not all material on TikTok is based on music. TikTok could survive quite well without music!

So the majors are slowly losing control. It equates with the film business. Remember when the heads of studios were household names? Not anymore. Other than the hated Zaslav, most people don't know those in control of old school entertainment powerhouses. But Reed Hastings? Everybody knows him, he disrupted the landscape with Netflix. He's not holding on to the past, he's jetting into the future. HBO might dribble out product week to week, but Netflix which drops it all at once is winning the war, hell, Zaslav is now licensing to Netflix once again!

Will we have a similar situation in music?

Well, the landscape is not the same, but... If you want to have a gigantic worldwide hit you really need the major, it can grease the skids in exposure, i.e. radio, press, television... Then again, terrestrial radio, traditional press and network/late night/cable TV now have dwindling returns. The public is in charge online, and all oldsters can do is pooh-pooh this. Never forget, the internet is high school on steroids. And you remember how fast information spread in high school.

Now TikTok and Universal will settle. But pull back the lens, look at the big picture. The majors continue to lose market share and influence. It's a long evolution, but...

And the real money is on the road, so entrepreneurs are not focused on recordings.

But when you look at the music world at large... Hell, a lot of acts grossing a ton of dough live are not signed to majors, no way.

And when it comes to creation, when it comes to content, expect this trend to grow. Believe me, hits are nothing compared with the aggregate. That's the essence of TikTok, of all social media, they cover all the niches, they're quite broad.

Universal used to cover all the niches in the old days. But instead of putting out the red carpet, it's pulling up the drawbridge, it wants low-streaming indies not to be paid. And most of these indies are not making beaucoup bucks, but in the aggregate it's a serious number.

They thought Ukraine couldn't stand up to Mother Russia. But it turns out hearts and minds are powerful. Didn't we learn that in Vietnam? That America couldn't triumph over guerilla warfare?

Then again, the three majors are all publicly traded companies, everybody's on salary, no one's an owner, so there's short term thinking involved. It's outsiders, with a personal investment, who disrupt the landscape. Isn't that the story of the past twenty five years?

Don't expect the major labels to be concerned with this, to even know this, to even care about this... Because they want their money now, so the execs can get their bonuses!


--
Visit the archive: http://lefsetz.com/wordpress/
--
Listen to the podcast:
-iHeart: https://ihr.fm/2Gi5PFj
-Apple: https://apple.co/2ndmpvp
--
http://www.twitter.com/lefsetz
--
If you would like to subscribe to the LefsetzLetter,
http://www.lefsetz.com/lists/?p=subscribe&id=1

If you do not want to receive any more LefsetzLetters, http://lefsetz.com/lists/?p=unsubscribe&uid=0eecea7b60b461717065cbde887c8e25

To change your email address http://lefsetz.com/lists/?p=preferences&uid=0eecea7b60b461717065cbde887c8e25