Mar 22, 2023
TikTok Lost Customers When It Took Away Music in Australia
(Bloomberg) -- The number of people using TikTok in Australia fell after the company limited the music some people could put in their posts, results that suggest the company is still dependent on its access to popular songs.
TikTok has been running a test in the country to see how important music is to users of its app, the fastest-growing social media service in the world. Some couldn’t access most music distributed by the three major record labels, while others were only missing smaller amounts, according to people familiar with the tests who asked not to be identified because the results aren’t public.
The number of people using TikTok in Australia declined for three consecutive weeks after the rollout of the test, and the amount of time people spent with the app fell as well, according to numbers from the research firm Data.ai, formerly known as App Annie. The number of users and sessions rebounded a bit in the fourth week, but remained below pre-test levels.
While it’s impossible to say definitively that the lack of music was the reason, a comparison with other countries and apps indicates it likely had an impact. The number of people using TikTok increased in most markets during that same period. The number using competitors Instagram and YouTube in Australia either didn’t fall or fell less.
TikTok declined to comment on the results. Data.ai declined to say more about its findings.
The music industry sees the test in Australia as an effort to undercut the value of their work, but the early results may have done the opposite, reinforcing that music is key to the app’s appeal.
Music has always been central to the appeal of TikTok. The app began as a lip-syncing service called musical.ly, which teens used to make videos set to popular songs. Record labels licensed their work to the company, which they saw as good promotion for their work.
Chinese tech firm ByteDance bought musical.ly in 2017 and overhauled the app, later reintroducing it as TikTok. The app has since become one of the most powerful forces in the music industry and pop culture. The Biden administration is considering banning its use by US consumers out of national security concerns if the company isn’t sold. TikTok Chief Executive Officer Shou Chew is scheduled to testify before Congress on Thursday.
The company’s growing power has also prompted a dispute with major music rights holders, which say TikTok has not compensated them enough. TikTok is projected to generate billions of dollars in advertising sales this year while ByteDance is now worth hundreds of billions of dollars, in large part thanks to TikTok.
TikTok currently pays music rights holders a flat fee, but the record labels are pushing the company to now share a percentage of its revenue, as Spotify and YouTube do.
TikTok argues it is a vital promotional tool and shouldn’t have to pay the record labels like a music service. Most of the top songs being played on the radio begin their ascent by trending on TikTok and record labels have signed dozens of artists just because they had a song go viral on the platform.
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