TikTok is on course to lose about 4 million songs from many of the most popular artists in the world including Taylor Swift, The Weeknd, Billie Eilish, and Drake. It may still save its music library but its licensing partner Universal Music Group (UMG), the largest record label in the world, is threatening to pull its music off of the platform following heated contract disputes.

UMG stated on Wednesday that it will cease providing its expansive catalog to TikTok once the company’s current contract expires on Wednesday, January 31st, potentially deleting millions of hugely popular tracks from the app used by over 1 billion people monthly.

Why Is UMG Pulling Out?

The move came after TikTok purportedly tried to strong-arm UMG into accepting reduced royalty rates that fail to adequately compensate artists, according to an incendiary open letter in which Universal accused TikTok of “trying to build a music-based business, without paying fair value for the music”.

“With respect to the issue of artist and songwriter compensation, TikTok proposed paying our artists and songwriters at a rate that is a fraction of the rate that similarly situated major social platforms pay”, UMG highlighted in the press release.

TikTok swiftly returned fire in its own blistering statement, blasting Universal for prioritizing “greed” over artists’ interests by walking away from the platform’s “powerful support” as a promotional tool providing global reach.

Also read: 100+ TikTok Statistics Updated for January 2024

The hostile public exchange shed light on the rising hostility between the two companies. The soon-to-be-due licensing agreement allows TikTok’s creators to embed UMG’s copyrighted music in their videos, a major attraction for TikTok users who follow just about any of the most popular music artists in the world.

As TikTok grows into a cultural juggernaut while struggling to achieve regular profitability, Universal’s willingness to cut ties signals a lack of progress around issues like payment standards, content moderation, and AI ethics. This may still be a negotiation tactic and UMG may eventually come back to the table but no one can be sure yet.

How Could Artists and Fans Be Impacted?

If Universal makes good on pulling its catalog, the fallout may significantly impact creators and fans depending on TikTok’s ubiquity as a discovery and engagement channel. With UMG labels owning the music of many of the most popular artists in the world including Drake, Taylor Swift, The Weeknd, Olivia Rodrigo, Justin Bieber, Ariana Grande, and Post Malone, TikTok experts estimate that over 60% of current videos feature one Universal artist or a song from their catalog.

The loss of key tracks could inhibit everything from dance trends to creative remixes. However, TikTok stressed that it has the ability to strike deals with other major and independent labels that should minimize the potential impact on users.

Also read: TikTok Aims to Quadruple Its Revenue in Merchandise Sales in 2023 to $20 Billion

Industry observers say that TikTok holds the upper hand given the fact that most users prioritize visual content over specific songs. However, there is doubt regarding how videos that have been created thus far will be affected.

For example, if TikTok no longer has the right to display musical content from UMG, millions of existing videos could be muted (or even removed entirely) until their respective creators change the audio to a song to which TikTok has lawful access at the time. If TikTok doesn’t do this, it will likely be hit with a massive lawsuit from UMG for copyright infringement.

Still, Universal framed the situation as an ethical stand on behalf of vulnerable artists against TikTok’s alleged intimidation tactics and inadequate compensation. Beyond reduced royalties, UMG slammed the platform’s lackluster protections against copyright infringement, hate speech moderation, and emerging issues around AI-generated content.

One particular issue that has been concerning music labels lately is the so-called “content adjacency” problem. This involves the indiscriminate use of songs from Universal artists on content that is deemed harmful – meaning that it contains racial prejudice, hate speech, misinformation, or deepfakes.

UMG alleges that TikTok has done very little to address this situation and stressed that their technique to get rid of this type of content is an “inefficient process which equates to the digital equivalent of “Whack-a-Mole”.

Value Exchange Remains Contentious

At the core of this conflict lies an argument over proportional value exchange — Universal contends that TikTok relies extensively on music to drive engagement but doesn’t pay its fair share back to creators. Of course, UMG also stands to profit from a better deal with TikTok so the disagreement likely comes down to both companies fighting to better their own bottom lines.

In its letter, UMG revealed TikTok only accounts for 1% of its total revenues despite music featuring prominently in over 60% of the platform’s videos.

This notion outraged TikTok executives, who maintain that the platform provides a “free promotional service” reaching over a billion monthly active users. Similar debates have brewed across streaming and social media, where music powers experiences while business models often provide minimal payouts per stream or view.

Renegotiation Efforts Took a Hostile Turn – Here’s Why

Universal’s letter indicated that negotiations started amicably before relations curdled when TikTok supposedly insisted on reducing royalty rates. According to UMG, TikTok then turned to mafia-style intimidation: threatening to remove songs from developing artists while retaining tracks from big stars in order to coerce acceptance of an inferior deal.

If accurate, such behavior validates the long-standing music industry’s unease about the bargaining tactics and ethics of big tech counterparts. Along with slinging accusations over negotiations, TikTok and Universal are essentially campaigning for public sentiment as fans and creators await the final outcome.

Implications to the Relationship Between Labels and Social Media Platforms

TikTok seems to be downplaying the potential fallout of losing access to UMG’s gargantuan library. The music label’s drastic stance may embolden other music companies to drive harder bargains leveraging their licensing influence.

The Warner Music Group signed a deal last year with ByteDance (the parent company of TikTok) while Sony Music reached its agreement with the Chinese company back in 2020. It is unclear when the Sony deal will expire. However, it seems that all of these contracts are set to expire in three years. This would mean that Sony’s agreement could be renegotiated soon.

Meanwhile, Meta Platforms and other social platforms whose content also relies on music licenses are probably monitoring the conflict closely. If TikTok makes concessions, it could raise expectations across the licensing landscape at a precarious moment for tech firms given that they are already spending billions on this type of content. For better or worse, Universal’s scorched earth tactics have once again stirred up tensions between the tech and musical industry.