Universal Music warns it'll pull songs off TikTok after licensing deal expires Wednesday

By Mike Murphy

Universal Music Group, which represents megastars such as Taylor Swift, Bad Bunny and Drake, is warning it will pull its songs from TikTok after failing to agree to new licensing terms.

In a brief statement late Tuesday, UMG (NL:UMG) said it "will cease licensing content to TikTok and TikTok Music services" after the current contract expires Wednesday.

Universal Music shares slipped 2% in early trade in Amsterdam.

Analysts at Citi say while only 1% of sales are at risk, the Wall Street consensus was for that contribution to increase. "To the extent it signals a less emphatic recovery in streaming revenues in 2024E we expect a cautious reaction," they said.

In an open letter to artists and songwriters, UMG claimed TikTok "is trying to build a music-based business, without paying fair value for the music."

The massively popular video-sharing platform, owned by China-based Bytedance, is a huge influencer in the music world and UMG said its analysis found "a majority of content on TikTok" contains music, more so than other social networks.

TikTok differs from music-streaming platforms such as Spotify (SPOT) in that its short-video format only allows for 60-second snippets, not full songs.

In a statement late Tuesday, TikTok said, "It is sad and disappointing that Universal Music Group has put their own greed above the interests of their artists and songwriters," and claimed that UMG has "chosen to walk away from the powerful support of a platform with well over a billion users that serves as a free promotional and discovery vehicle for their talent."

UMG, which is one of the world's largest music companies, said in its letter that it has been unable to reach an agreement with TikTok over three key issues: compensation for artists, protecting human artists from the "harmful effects" of AI, and online safety of TikTok's users.

"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 said, adding that TikTok "is allowing the platform to be flooded with AI-generated recordings ... in a move that is nothing short of sponsoring artist replacement by AI."

UMG claimed TikTok was indifferent to its concerns, and tried to "bully" the company into accepting a deal worth less than the current one.

Other UMG artists include Ariana Grande, Billie Eilish, Kendrick Lamar, Harry Styles, U2, Pearl Jam, Justin Bieber, Adele, Elton John and Bob Dylan.

-Mike Murphy

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01-31-24 0350ET

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