TikTok Scores New Deal With Sony — Home of Beyonce and Travis Scott

(Bloomberg) -- TikTok has secured the rights to recordings from thousands of artists, including Beyonce and Travis Scott, under a new deal with Sony Music Entertainment that will deepen ties between the world’s second-largest record-label group and the popular video app.

The deal ensures that TikTok customers will continue to be able to use songs from Sony Music’s record labels, which include Columbia Records and RCA, the companies said. The pact also calls for the app to collaborate with Sony Music’s labels on programs to market its artists and identify emerging talent.

TikTok is paying Sony Music a significant increase over the previous deal for the rights, according to a person familiar with the pact who asked not to be identified because the terms aren’t public. The two companies declined to comment on the contract in any detail.

“We believe that we should share value with the music industry,” said Ole Obermann, TikTok’s head of global music. “As we grow, the value of the industry should grow.”

Sony Music and TikTok have been negotiating a contract renewal for months, a period marked by President Donald Trump’s threat to ban the app in the U.S., where it has more than 100 million users. But the threat has receded in recent weeks. On Friday, a federal judge in Pennsylvania blocked a broad set of government restrictions designed to curb the use of TikTok in the U.S. TikTok’s Chinese owner, ByteDance Ltd, also forged a deal to sell a stake in the app to Oracle Corp. and Walmart Inc.

The deal with Sony Music is a vote of confidence from the music industry that the app is a vital part of their business going forward.

TikTok has attracted about 700 million users worldwide by offering an addictive loop of videos set to music, and the app lets record companies put their songs in front of a young, influential music listener. For Sony Music, TikTok has boosted both older songs, like Matthew Wilder’s “Break My Stride,” and newer ones, like Doja Cat’s “Say So” and 24kGoldn’s “Mood.”

“If you think about the number of artists who’ve blown up on TikTok over the last 12 months for Sony, it’s a really big list,” Obermann said.

Obermann joined TikTok last December after more than a decade working at major music companies. TikTok had already proven its ability to make a song go viral with “Old Town Road,” the earworm from a neophyte rapper named Lil Nas X that spent 19 weeks at the top of the Billboard charts.

Yet many major powerbrokers in the music industry felt TikTok wasn’t compensating them enough for their rights. As the popularity of TikTok pushed the valuation of ByteDance north of $100 billion, it was paying musicians as if it were still a scrappy startup.

Record labels were reluctant to take their music off of TikTok, which has become one of the most important promotional platforms for artists all over the world. “These guys now are a partner and platform that every creative unit is thinking about,” said Dennis Kooker, the president of Sony Music’s global digital business.

Since joining TikTok, Obermann has built up the group that works directly with music companies and artists, and struck accords with Merlin, a large group of independent labels. Obermann and his team have offered case studies to their labels partners showing a direct link between a song going viral in videos on TikTok and its appearance on charts across Spotify and Apple Music, the two largest music-streaming services.

The music industry has embraced TikTok as it has recognized its star-making potential. Sony Music’s labels create marketing campaigns built around TikTok for new releases. TikTok now sits alongside YouTube, Facebook, Spotify, Apple and Amazon as one of the music industry’s most important promotional platforms, said Kooker, who oversees his company’s deals with all major internet companies.

A song being used on TikTok doesn’t suppress listenership on paying platforms. If anything, it increases it.

“Our relationship with all of the majors, Sony included, is getting better and better,” Obermann said. “There’s a lot more emphasis on marketing and promoting and discovering songs and artists together.”

©2020 Bloomberg L.P.