TikTok is launching a music streaming platform

Sascha: [00:00:02] Welcome to The Dive, the podcast that asks Who said business news needs to be old business? I start every day with Spotify as Daily Drive, but this week, after waking up and starting playlist, I got a push notification that maybe you did as well that let me know that the price I pay for my premium plan is increasing. Yes, it's only by a dollar, but I thought maybe it's time to look around, take a lay of the land and see what other options are out there. After all, there's YouTube, Apple, Amazon, and as of the last few weeks. TikTok. That's right. The addictive video hosting giant has launched a beta, basically a subscription only music streaming service that you can access if you live in Australia, Mexico, Singapore, Indonesia and Brazil. But music is a really expensive playground to join, and when so many of the incumbents are already losing money. Why is TikTok pursuing this line of thinking? It's Friday, the 4th of August, and today I want to know what is the vision for TikTok music and what stands in its way. I'm joined by Jessica Weatherhead, who's a news writer for The Verge, who's been covering this topic. Jessica Tik Tok music is rolling out to Australia, Mexico and Singapore for testing. The video hosting giant has decided to put its toe in the water in a subscription only music streaming service. Can you tell me a little bit about what this service is going to be and how long this has been in the works?

Jessica: [00:01:36] Yeah, absolutely. So TikTok music, as they're actually describing it, is a very, very recent thing. They've had kind of like other ventures in music that have not really gone global, so people don't really recognise them. They had an application called Réseau, which was a very similar application. It was a music streaming platform, but I don't believe that ever hit the U.S. and it didn't roll out to many countries. So since they've introduced it on music, they've actually started phasing that out. I have no idea what the long term plans are for that, because as much as I thought there'd be a massive buzz about this, Tik Tok has actually been quite silent on what it is doing in the music industry at the moment. We know that they introduced it to Indonesia and Brazil on July 6th. That was the first time that as far as I can see, that they actually announced it was a thing. They're probably going to start focusing mostly on this new Tik Tok music streaming service rather than having all these different like offshoots and little subbrands that they've been launching because they've started pulling their music from. 

Sascha: [00:02:38] So now you've spoken a little bit about how Tik Tok and how embedded it is with a musical experience. Do you have any information or can you shed any light on how Tik Tok has had an influence on the music industry? 

Jessica: [00:02:50] Absolutely. There's a lot of evidence at the minute to say that a lot of the music discovery process that goes through with young people is now happening on platforms like TikTok and YouTube. So people are like depending left on the radio to discover music or just word of mouth. And then now literally just stumbling across artists willy nilly by chance and online platforms. And Tik Tok makes up quite a substantial portion of that. 

Audio Clip: [00:03:11] I feel like Tik Tok is one of the main platforms where people actually leave the app to go and add music to their library. That's all great. Whose song, Steven Universe has been used in more than 10 million video posts? Whenever one of my videos went viral. Most of the comments were people begging me to release it. That's kind of the culture on TikTok. When they hear something they really want to go listen to. So I pretty much went from having, like, I don't know, just like a few thousand monthly listeners to just a rapid incline for like a year or two straight where it was just steady going up. [00:03:44][32.6]

Jessica: [00:03:44] There was one study that was done by Media research. It's a UK based research firm, but they basically said that Tik Tok is the second most common source of music discovery for 16 to 19 year olds, and that it seems like a very small metric. But when you consider that most of music discovery is happening by young people anyway, that's quite a significant portion. They also published their first U.S. Music report. Interestingly, I think that was last year, sometime in December. We could see anecdotally those songs that blew up and went viral on TikTok and then suddenly, like just appeared on the charts. But there was nothing to intrinsically linked the two. But it's now they've said that 70 artists that broke onto the main platform platform in 2022 went on to sign major label deals like it's now a platform not just for people that want to discover music, people that want to get their music out there as well. 176 different songs surpassed a billion video views on Tik Tok like sounds in 2020 as well. So this is a massive place retrospectively for music to be discovered and not. 

Sascha: [00:04:49] Just new artists. There's so much I'm thinking of, just like film soundtracks and older classical pieces, and it's just because of that particular trend to sort. Odds are that that's the most appropriate music to go with the trend, whether it be in or day in the life or get ready with me or something that has much more of a message. It's so interesting how those things are so linked.

Jessica: [00:05:12] It could be old, it could be a commercial jingle, it could be, as you say, like some kind of like classical or something. The way it's almost played into meme culture on the platforms really kind of cemented it so that people find that repetition in their head and they it goes viral. They want to rediscover the music that they may not have listened to ages. So it's a very strange blend of like visuals and music that's benefited it in a way that hasn't really happened with YouTube. YouTube's the far more serious platform in the sense that you go down and you discover very specific things that you're looking for. With Tiktok's algorithm, you have no idea what you're going to get and you have no idea what's going to be what you're going to get fixated on next, effectively, whatever music comes across your feed so that they're really playing into that. But it's working for them. It's really hard to kind of argue that it isn't. There was another metric that was saying that 90 of the songs that trended in 2020 on the US charts were from TikTok in the top 100 times beta. Everything is the Betamax boom, and 15 of those reached the number one spot, and those were things that are intrinsically linked to finding their popularity on TikTok as a platform. 

Sascha: [00:06:21] I'll be back with more from Jessica in a moment. When I put to her on Spotify is still yet to be profitable and so many content and streaming services find the climate at the moment tough. Why is TikTok pursuing this new avenue? Welcome back to the Dive. I'm joined by Jessica Weatherhead, who's a news writer for The Verge, who's been covering this topic. So I think the natural question for me is that we know that Spotify is a profitable and Apple doesn't split out Apple Music's revenue independently. And we know that there's also Amazon music. But it does lead to the natural question. For me, it seems like music streaming is really hard to get right. Why is Tick Tock going after this space?

Jessica: [00:07:14] As much as Spotify is kind of revenues have been all over the place for the past few years, but their spending and with what they're bringing in, like there is still so much money in this industry. And Tick Tock is kind of in a very strangely unique position where it's almost not unintentionally stumbled into being like kind of a semi music app anyway. But back in the day when they were first rolling out that the parent company Bytedance purchased a like a lip syncing app basically called Musical.ly, which ended up being kind of absorbed into TikTok as we know it now. It was just a lip syncing platform and music was kind of like the backbone of that. And as a result, it's kind of like from the get go and one of these platforms where music is just baked into the user experience, people have been using it to discover new artists. And I feel like a Tik Tok by dance, like just immediately paid attention to that effectively and went, okay, we've got all of got over a billion global users when they discover new music on that platform, the first thing they do is they actually want to keep listening to that is they immediately jump to a rival streaming service to listen to that. So we're losing all sorts of revenue that way. But it also it's not very intuitive. The people that myself included, are a bit lazy, don't want to have to jump through hoops to figure out like, who is this artist, what is this song called? And the platform at the minute isn't really built out. So I think like them creating a completely dedicated music app to focus on, they're one of the few brands that could probably do it, just like as is with again over a billion global users speculated to have. It's just such a strange opportunity. You're saying Spotify is revenue. I think for the 12 months preceding March 31st, 2023, it was 12.6 billion in revenue and that was like a 6.7% increase on the previous year. So Spotify is just accumulating money as much as its shareholders might be less impressed with the various earning calls because of how much they're spending elsewhere. But that is a big slice of pie. That sector has an opportunity to kind of pilfer at this point. 

Sascha: [00:09:11] Crucially, you said, you know, that Spotify is spending elsewhere, and one of those big expenses is, of course, record companies and the rights to play this music. I've got the stats in front of me. TikTok have licensing deals with Sony Universal and one other Big three. And the latest stat I could find said that those three record companies currently control almost 70% of the global market for recorded music, and they also own the three music publishers that control almost 60% of songwriters. I have said that Tick Tock has relationships with all of them. Can you talk a little bit about how important these relationships are and how that relationship works as well? 

Jessica: [00:09:52] In a sense, you're right. They control such a massive proportion of the music industry as a whole, but it's tick tock kind of has the the revenue to bankroll that frankly at the minute and it forms is almost kind of like a safety net backbone as to what this streaming service could become. And tick tock has like advantages outside of that I think that it wants to focus on. So it's the expensive overhead for a safety net, I guess for streaming company. But if you're going to be going up against Apple Music, Amazon music, as you say, all companies that already have agreements in place with these huge music organisations, you have to be on an equal platform with them before you can try and dismantle them effectively. 

Sascha: [00:10:38] So off mic, we were having a little chat because I've been trying to get on to the beta testing and obviously I don't use Tik Tok enough to be seen as someone who, you know, Tik Tok wants to have on the platform. I know you as that you're based in the UK, so obviously not one of those three countries, Australia, Mexico and Singapore that's testing. But you have been talking to people who are getting their hands on the product. What do we know so far? It's been notoriously secret, as you said. 

Jessica: [00:11:06] It's very surprising that they haven't made more of a song and dance about it. Honestly, given what kind of like the size of Tiktok's platform as is anyway. And as we've obviously said, music is such a core experience of being on Tik Tok anyway. It's formed part of the culture of the app memes over the past few years since it's grown up like it's part and major experience for it. It's without sounding cheesy, it's kind of it's exactly what you would picture. A TikTok founded music streaming service would be the entire thing. It's been optimised to kind of me make the most of music discovery effectively. So all of the experiences where we sit there and think that's not very intuitive, I wish that there was just some way that I could discover this artist. That's kind of the point. I think it's not music, even though it's going to be on, is like a completely separate app to TikTok itself. The idea is that the two platforms interlink so that when you find new music or you stumble across a song by chance on the main application, it makes it far easier to discover these new artists on the main takes up. And it's got all kind of like the features that a lot of the rival streaming services didn't launch with initially. With lyrics you've got the ability to do like not karaoke but kind of like sing along with your favourite tracks, downloading them so you can listen to them offline. They've designed it kind of like almost in the perfect way to be like, right, this is the, the exact amount of competitiveness we need to be taken seriously when we bring this to a wider market. It's just such a shame that they haven't discussed more about it in public. It's quite it's very, very hard to see these features kind of actually being tested in the wild upscaled like through YouTube videos and things like that. And it does seem like a very small and exclusive group. They're actually beta testing the process at the moment. 

Sascha: [00:12:54] I mean, I shouldn't feel too offended that I've been excluded, but it is interesting that it has been one of those things that's so hard to get our hands on. I know that your job is to report and find the facts, but I am curious about your thoughts on the crystal ball. Do you think that Tik Tok is going to be able to compete with Spotify, Amazon music and Apple Music? What do you think the future of this might look like? 

Jessica: [00:13:16] Again, this answer is going to sound like a bit of a copout. They have such an uphill battle ahead of them, just off the base of how much of a market share these companies already have, like Spotify, This might be a very American specific metric, so I do apologise. I lost count. They had like 31, 30% of the entire music streaming industry. Apple Music is behind that. So you're not going to be as much as like even if you don't like the most popular app that got equivalent services, you're not going to appear on the market and just take all of that competition overnight. We've seen that proved quite extensively in the last few months. With Twitter, you can launch as many different vertical ends as you like. You're not going to convince people to just up and jump over to the platform. But that said, again, Tiktok's, in this very strangely unique position to be like one of the only platforms that might be able to do it, the user base is so incredibly vast and so like already kind of like pre-programmed to be music focussed anyway, that is again, a match made in heaven at this point. You're serving up TikTok users on a on a silver platter. Carving a space out of the existing market is going to be the difficult thing, but I don't think that Tik Tok is going to struggle in any way with finding the market appeal for what it's offering. The only other issue I think they're going to find is the ice. You mentioned when you introduced this, it's TikTok is offering a subscription only, they're not going to have a free to air option. And I think Spotify's biggest thing is the fact that if you really don't want to pay for a subscription and you can handle listening with ads, you can do that. You don't need to pay for the service. TikTok music isn't going to have an equivalent of that yet. They haven't mentioned. They do keep pressing that this is a subscription only service. That may change with how it's being tested at the minute, as much as it's being tested by what appears to be kind of like quite small and limited groups. The countries where they've selected to do the initial testing do make sense, particularly, I think they said, I think Brazil is like TikTok, second biggest market. Indonesia I think might be behind that or Singapore. But these are very significant markets. I will confess I haven't checked Australia. My suspicion is that Australia is being kind of used as a litmus test for how this is going to do with an English speaking country in a big enough capacity that they don't have to quite roll that out to the UK or the US just yet. But for everything else, these are places where TikTok was already got a very, very firm footing. If these are if it's going to go down well anywhere, it's going to go down well here. 

Sascha: [00:15:48] And we're going to leave it there for today. Have you been successful in getting into the beta test? Please let me know if you are. How to get in touch is in the show notes below. Thank you so much for joining me. I'll be back on Monday with more of The Dive. Until next time.