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TikTok is upending the music industry and Spotify could also be next

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Benee performs on the Bonnaroo Music & Arts Festival on June 18, 2022 in Manchester, Tennessee.

Josh Brasted | Wireimage | Getty Images

Zoi Lerma was working at a Los Angeles bagel shop in early 2020 when she first heard the song “Supalonely” by Benee. 

She liked it a lot that she choreographed a dance to the tune and posted it on TikTok. Her video has since amassed greater than 45 million views, turning her right into a TikTok celebrity and helping to make Benee a world sensation.

As of Sept. 2, “Supalonely” has appeared in greater than 5.7 million videos from 1000’s of TikTok users. Benee performed two sold-out arena shows in Recent Zealand in October 2020, and he or she was nominated for brand new artist of 2020 on the People’s Selection Awards. Her hit song has gone platinum, meaning it’s sold the equivalent of 1 million copies, in eight countries, and has greater than 2.1 billion streams across all platforms.

“When it began trending on TikTok and picking up on TikTok, I’d hear it on the radio or, , hear it in stores,” Lerma, who’s now 20, said in an interview with CNBC. “I’d hear it in all places.”

Removed from her days in a hot Southern California kitchen, Lerma now has 6 million followers on TikTok and makes a living by promoting music on the app and using her influence to partner with brands. She’s also a part of the TikTok Creator Fund, which pays popular contributors when their videos take off.

TikTok, owned by China’s ByteDance, is popping the music business on its head by increasingly becoming a hit-making machine. Artists can go from obscurity to global superstardom, due to a viral video that may very well be posted by a whole stranger. Even Fleetwood Mac’s “Dreams” reentered the charts in 2020 after a clip of a person drinking cranberry juice on a skateboard exploded on the app. 

Record labels, artists and creators are all attempting to determine methods to profit in the brand new TikTok-dominated world and to be certain they are not getting left behind.

While ByteDance is best known for its viral social media app TikTok, the Beijing-based company is now bolstering its ability in semiconductor design. ByteDance won’t be manufacturing chips to sell to others, but it can be designing semiconductors that it requires for specific applications internally.

Artur Widak | Nurphoto | Getty Images

“If a song goes viral on TikTok, and the artist is unsigned, and in consequence, it’s getting one million streams on Spotify, the labels are scrambling to sign that song or that artist,” said Tatiana Cirisano, a music industry analyst and consultant at Midia Research. “They’re obsessive about expanding their market share and ensuring they do not lose any market share to independent artists.”

TikTok’s importance is undeniable. A yr ago, the app topped 1 billion monthly users. Last month, a Pew Research Center survey found that 67% of teens within the U.S. use TikTok, and 16% said they’re on it almost continuously.

The remaining of the social media industry has been attempting to play catch-up. Facebook and Instagram parent Meta, for instance, has been pumping money into its short video feature called Reels.

While TikTok’s financials are still confidential because ByteDance is private, industry analysts say the app is winning an even bigger piece of the net ad market, as brands follow eyeballs.

No. 1 stream driver

In 2021, over 175 songs that trended on TikTok charted on the Billboard Hot 100, twice as many because the prior yr, based on TikTok’s annual music report. 

“It is a household name and it’s really effective,” said Mary Rahmani, a former TikTok executive who last yr founded the agency and record label Moon Projects. “It’s still the No. 1 platform that drives to streams.”

By way of the present flow of dollars within the music industry, TikTok’s primary influence lies in its ability to push listeners to services like Apple Music and Spotify.

In 2021, Spotify paid out over $7 billion in royalties, based on a company report. The corporate pays record labels, artists and other rights holders based on their “streamshare,” which is calculated monthly. An artist who receives one out of each 1,000 streams within the U.S. for the month would usher in $1 of each $1,000 paid to rights holders from the U.S. royalty pool. 

TikTok is positioned to money in on its role as music industry tastemaker, but the corporate hasn’t disclosed its plans. But there are some hints to the parent company’s considering.

In May, ByteDance, filed a trademark application for “TikTok Music” with the U.S. Patent and Trademark Office. The service would allow users to play, share, purchase and download music, based on the filing. A TikTok spokesperson didn’t provide any additional details and sent CNBC a general statement concerning the company’s role within the music industry.

“With lots of of songs generating over 1 billion video views and dozens of artists signing record deals in consequence of success on the platform, TikTok starts trends that reverberate throughout the culture, the industry, and the charts,” the statement said.

TikTok currently has partnerships and licensing agreements with major labels like Universal Music Group, Warner Music Group and Sony Music Entertainment, all deals that were signed between 2020 and 2021. Cirisano of Midia Research said artists aren’t paid directly based on how often their music is viewed or used.

Music is not a latest marketplace for TikTok. In 2017, ByteDance acquired a startup called Musical.ly, which was a preferred app that allowed users to create videos using other people’s music. ByteDance merged the service with its homegrown TikTok app the next yr.

‘Brand-new fan base’

Singer-songwriter Jay Sean, whose hit single “Down” topped the Billboard charts in 2009, began posting on TikTok in 2019 as a fun technique to express himself and be creative. He now has greater than 460,000 followers on the app and said it’s exposed him to the younger generation.

“I’m reaching a brand-new fan base,” Sean said in an interview. “I have been doing music for 20 years, so a few of them were just kids when my music got here out and so they’re beginning to discover my back catalog through this. So it really is sort of an enchanting tool for that.”

Like many major labels and managers, Sean also has used TikTok as a tool to find latest artists. He signed the singer Véyah after finding her on TikTok, where she has greater than 470,000 followers.

“Now she’s going from this girl who was singing in her bedroom on TikTok to being in LA, working on an album and dealing with mainstream massive producers who’ve produced megahits for therefore many big artists,” Sean said.

Jeremy Skaller, co-founder of the management, media and production company The Heavy Group, warned of the risks of skyrocketing to fame that may include TikTok’s virality. Not everyone seems to be prepared for what comes next, he said.

“Once a label signs you for $1 million, the pressure to perform trumps the art, which is why getting a deal too soon can mess up what otherwise might need been a fantastic, long profession,” Skaller said. 

Even established artists are facing challenges on TikTok.

The artist Halsey complained recently concerning the pressure to post on the app, writing in a TikTok video, “My record company is saying that i can not release [new music] unless they’ll fake a viral moment on tiktok.”

Halsey’s label, Capitol Music, later released a statement on Twitter pledging support for the singer. 

Cirisano said artists used to depend on their label for marketing. But with TikTok fame, they’re now doing much of their promotion themselves.

“It’s only a hugely demanding thing for artists,” Cirisano said, “along with the whole lot else that they are already doing,” which is frustrating for a number of them.

But there are advantages as well. Some artists can parlay their TikTok following into greater riches without the assistance of a label, a path that was almost unattainable before social media.

Loren Medina, owner of Guerrera PR, said music marketing is a “different world” than it was 10 years ago. Medina, who worked at Sony from 2005 through 2009, now represents avant-garde Latin artists like Jessie Reyez and Omar Apollo. Historically, she said, for artists to make it, they needed to be a priority for a label that might be willing to back them financially.

Short-form video is here to stay, says Bernstein's Shmulik

“It was just so different,” she said. “We had to really hire street teams to exit on the road and provides people flyers, give people CDs. There was rather more head to head, hand at hand.” 

Labels are still very vital within the industry, but they “are usually not the tip all be all,” she said. Artists at the moment are using the large audiences they reach on TikTok to create a dedicated fan base that may find yourself buying a number of merchandise and filling up bars and concert halls.

Certainly one of Medina’s clients is Kali Uchis, whose song “telepatía” blew up on TikTok and now has over 700 million streams on Spotify. Though Uchis had a longtime profession before going viral, Medina said the exposure on the app was what ultimately pushed her to global stardom. She won top Latin song for “telepatía” and top Latin female artist on the 2022 Billboard Music Awards.

“Her profession blossomed, really, really, really blossomed due to one song on TikTok,” she said. “That wasn’t going to be a single, and so we needed to pivot and form of just restructure the whole lot and make that song the main target since it exploded.”

Services like Zebr have popped as much as try to streamline the work that comes with TikTok celebrity. Record labels and artists can use Zebr to pay creators to make use of a bit of music of their content. The app allows creators to decide on which campaigns they need to work on and handles the payment process.

Zebr CEO Josh Deal, who was named to Forbes’ 30 Under 30 in Europe for entertainment this yr, said labels and artists have gotten much smarter with their approach to marketing on TikTok.

“A number of the time they were just form of throwing money at agencies and hoping for them to put it with their influencers,” he said. “Now, the strategy is becoming quite a bit more refined. They’re understanding why tracks are breaking and the way they’re breaking. And it’s really just form of reverse engineering that.” 

Since choreographing the hit video to “Supalonely,” Lerma has partnered with artists and labels to advertise music. She gets hired to work on particular songs, but keeps a number of creative control over what she posts.

“They do not really inform you what dance to make, or like how they need it to look,” Lerma said. “You form of just get to have your individual freedom with what you wish to make.”

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