bad blood

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Hey! Udio, the latest generative AI music platform to raise its seed round, has gotten considerable buzz. But there are questions on whether it was trained on copyrighted music, similar to Suno and other platforms.

I believe there’s a world where tech innovation can push this industry forward, and all the rightsholders can be compensated fairly for their work. Both can be true. Let’s hope that each of these platforms can get to the right place.

​This week’s episode dives into Taylor Swift’s move to put her music back on TikTok despite the ongoing dispute with her record label, Universal Music Group, and its removal of its songs from the short-form video platform. It’s a great case study on industry power, misaligned incentives, and a dash of spicy drama.

You should listen to the Trapital episode I recorded with Tati Cirisano from MIDiA Research where we broke this all down in depth. Here are a few highlights below.

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why Taylor and UMG don’t see eye-to-eye

Taylor Swift’s eleventh studio album, The Tortured Poets Department, is here, and her music is back on TikTok despite Universal Music Group’s wishes otherwise.

Universal asked Taylor to reconsider her decision to put her music back on TikTok. UMG even offered Taylor additional money to keep her music off TikTok, but Taylor’s team didn’t budge. Taylor exercised her right to do a direct deal with TikTok.

Yes, this is the same Taylor Swift who stood up for artist rights and called out Apple Music and Spotify over royalty payments. But this is also the same Taylor Swift who dominated 2023 thanks to the promotional power of TikTok. Her 2019 song, “Cruel Summer” wouldn’t have become a mega hit in 2023 without TikTok. The Eras Tour became a phenomenon, especially for younger generations, because of TikTok.

Sure, Taylor is likely aligned with Universal’s push on TikTok for higher royalties and concerns over its AI training model, but not at the expense of the platform’s promotional power. That power, and the additional reach and revenue that comes from it, far exceeds the additional check that Universal offered Taylor as a concession.

This is yet another case of misaligned incentives between artists and their record labels.

Universal Music Group and its shareholders have an interest in a share of Taylor’s revenue from recorded music and merchandise. But according to Billboard, those two revenue streams combined account for just 33% of the $1.82 billion that Taylor generated in 2023. Plus, Universal Music Group shares a stake in that recorded music revenue with Shamrock Capital, which currently owns the original versions of Taylor’s first six albums.

Nearly 50% of Taylor’s 2023 generated revenue came from The Eras Tour. Yes, touring has higher expenses than recorded music, but Taylor also generated another 14% of her revenue from The Eras Tour’s concert film. The final 4% of revenue generated is from her publishing deal with EMI.

This dynamic isn’t unique to Taylor. Most artists today generate more revenue from live performances than from royalties. It creates tension in situations like Universal’s dispute with TikTok. The major record label’s decision to pull its catalog can impact an artist in a variety of ways.

You can listen to the episode here or read below for more highlights.

the tortured record label department

To my understanding, Universal Music Group and TikTok had tentatively agreed on terms at the end of 2023, but it came to a halt when Bill Ackman, the activist investor who owns around 10% of the major record label, saw the tentative deal and pushed on CEO Lucian Grainge to ask for more.

Ever since UMG went public in September 2021, and Ackman entered the business, UMG has pushed for a wide range of changes: increased monthly rates for paid subscribers, 1,000 stream thresholds for payment on Spotify, an attack on ‘whale sounds,’ artist-centric payouts, company layoffs, a major company re-org, a continued push for superfan monetization, a strong stance against generative AI models, and this dispute with TikTok and the removal of its catalog from the platform.

If you’re curious who the most powerful person in the music industry really is, it’s not the superstar artist who can do her own direct deals. It’s not the major record label CEO who takes these strong public stances. It’s the activist investor who called the shots that led them all to this point.

For Universal, Taylor’s direct deal weakens the record label’s power against TikTok. This is a superstar-driven industry, and the most commercially successful superstar went around the label. The other UMG superstars likely saw Taylor’s deal and are either calling TikTok directly to try and do the same or pushing on the record label for a resolution.

I wouldn’t be surprised if Ariana Grande, who just released an album last month, and was the fifth-most popular artist on TikTok in the U.S., was frustrated to see Taylor’s direct deal.

I wouldn’t be surprised if UMG artists like Billie Eilish, who has an album coming out on May 17, or Olivia Rodrigo, who’s in the middle of her first arena tour, or Drake and The Weeknd, who both may drop new music in 2024, are wondering what a direct artist deal could look like for them too.

I also wouldn’t be surprised if a UMG-TikTok deal now happens sooner rather than later.

If you liked these highlights, listen to the rest of our episode for more on:

• should TikTok be viewed as a consumption or promotional platform?
• examples in other industries of people who “pulled a Taylor Swift”
• other companies Taylor may do a direct deal with

Chartmetric stat of the week

Taylor Swift's most popular song on TikTok is the late bloomer, 2019's "Cruel Summer." Back in April 2023, there were around 2,000 posts on the platform that included that song. By September 2023, the song had crossed 2 million posts. It was one of the biggest songs of the summer, and the stats back it up.

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money moves

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• the future of Diddy’s business portfolio​
• bifurcation theory. how today’s music business becomes two​

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