Music labels are spending a little too much time on TikTok

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TikTok is known for creating trends. A new one has appeared recently. It’s not a viral dance or a challenge, however.

A number of popular artists, including Halsey and Trevor Daniel, have complained that their record labels are holding back releases until the artists’ songs go viral on TikTok.

For the big three – Universal, Sony and Warner Music, which together account for around two-thirds of music industry revenue – the new focus on TikTok probably seems like a good business strategy that keeps them from investing in songs or albums that might struggle to gain traction.

But pressuring artists to prove themselves on TikTok could easily backfire on labels, especially with established artists like Halsey. If more artists realize they can thrive on their own, they might wonder what value big labels bring to the table. (The artists’ labels did not respond to requests for comment. Astralwerks-Capitol, which represents Halsey, told Variety that the label’s belief in Halsey “as a singular and important artist is total and unwavering.”)

Many artists have already discovered the power of TikTok. Rapper L’il Nas X used the short video app to propel ‘Old Town Road’ to the top of the Billboard charts in 2019[4] [5] . Since then, TikTok has helped many artists achieve hugely popular hits.

With over a billion users, TikTok has become a marketing engine for the music industry. It’s a stark departure from the publicity machine of yore, when labels promoted new music by putting singles in radio station rotations or placing music videos on MTV. Their dedicated Artists and Repertoire, or A&R, teams provided a full range of artist services, including distribution, publishing, and fan outreach.

But as music historian Ted Gioia observes, artists can now easily manage many of these functions on their own:

“Musicians can upload songs to a non-label streaming platform. If they still want to sell physical albums, Bandcamp has made it super easy – no label required. They can deal directly with fans, journalists, promoters, booking agents, etc. without label. They can create a publishing house with almost no problem. Get royalties from [the American Society of Composers, Authors and Publishers]is simply a matter of filling out a few forms.

And while some artists object to having to prove themselves on TikTok, many artists have found they are able to survive without major label support.

An indicator of declining label influence: Major labels have seen their share of music streams on Spotify decline relative to independent and self-released artists every year since 2017, according to a recent analysis by Vox.

Labels are also losing their bargaining power. Vox analysis found that among a group of 367 emerging artists, major labels are now striking deals entitling them to 50% of future royalties, down sharply from the industry’s traditional 85% share.

If labels are shrewd, they’ll leverage TikTok to help emerging artists, without alienating them in the process. In particular, labels could help by identifying trends such as dances or memes that artists can remix. Another is to contact TikTok influencers who might publicize the songs. And labels can work with artists to create the actual videos, which tend to follow a template.

Still, music labels may not want to rely too heavily on an app that could soon become a competitor. In March, TikTok, owned by Chinese internet giant ByteDance, launched a song distribution platform called SoundOn. Meanwhile, TikTok has “A&R Manager” job openings in London and Los Angeles to help “identify, sign and develop new artists across all genres”.

With access to internal tools and data, TikTok could have an edge over record labels when it comes to finding the next big act on the platform.

It’s a TikTok trend the Big Three might not want to see.

More writers at Bloomberg Opinion:

TikTok is just the platform Russian dissidents need: Parmy Olson

Spotify’s Joe Rogan drama looks like a Facebook moment: Lionel Laurent

Facebook and Spotify face similar nightmares: Leonid Bershidsky

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Trung Phan is co-host of the Not Investment Advice podcast and writes the SatPost newsletter. He was previously the senior editor of Hustle, a tech newsletter.

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