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Thunder Only Happens When It’s Raining: How Social Media and UGC Could Decide the Future of the Music Industry

The music business is set to earn $6b in revenues from user-generated social content by 2022, according to a new report. But are rightsholders, technology systems and licensing infrastructures prepared, investigates Ben Gilbert.

David Bowie died at the start of 2016 and everything went downhill from there. It was, wrote The New Yorker, The Worst Year Ever, Until Next Year. We might now suggest they were 36 months out with the story, which was illustrated by the apocalyptic spectre of a crashed, crestfallen Statue of Liberty from the end of Planet of the Apes. It’s actually an image that seems emblematic of 2020 but there is a more empowering vision to reflect recent months: a skateboarder swigging Ocean Spray while singing along to ‘Dreams’ by Fleetwood Mac.

At least Nathan Apodaca had a good year. When his car broke down on an Idaho Falls freeway, @420Doggface208, as he is known on TikTok, probably didn’t expect to close out 2020 as a de facto viral sensation boasting some jaw-dropping social media numbers, alongside a new house, new truck and props from Mick Fleetwood and Stevie Nicks. Moreover, in a barren year for most, including many of those working in the entertainment industries, this clip points towards happier, brighter days ahead.

Apodaca’s digital freestyling ignited interest around ‘Dreams’, which registered 36m global streams in the two weeks after his post. With a direct correlation to The Song Economy, it provided a dramatic amplification of how legacy tracks such as this can be “hits over and over again”. It also underlined how the array of social platforms and destinations that expand many of our lives, and those of consumers, are increasingly powered by user-generated content (UGC) soundtracked by music.

We stand on the brink of a “new golden age of music”

The potential here is frightening. It’s one that Steve Cooper, CEO of Warner Music Group, clearly understands. In a recent financial update, where we might note the word “social” was used 11 times, he explained: “With an expanding number of partnerships including Facebook, TikTok, and Snap, among others, social media is already a meaningful nine-figure revenue stream for us and is growing at a faster rate than subscription streaming.”

This is a big claim and one that has the potential to justify Cooper’s bold prediction that we stand on the brink of a “new golden age of music”. Such excitable noise is being heard across the music industry right now. In a recent piece, Midem’s Music Industry Insights blog detailed the “startling” reach powering this movement, highlighting findings that suggest nine out of 10 social media users currently engage in some kind of music-related activity.

Meanwhile, The Rising Power of UGC, a report by MIDiA Research in association with Audible Magic, found that the music business could benefit from $6b in revenues from social content by 2022. While this would amount to approximately 10% of total industry revenues, they describe such lucrative possibilities as “just the tip of the iceberg”. Highlighting the emergent fields of gaming and live streaming, MIDiA cite Chinese social entertainment giants Tencent Music (TME) and their realisation that “rather than being the destination, music is in fact part of the journey that is fandom”.

Naturally, rightsholders are keen to get onboard but many platforms remain unlicensed and hugely complicated processes and infrastructures surround this field. Perhaps that’s why there has been such excitement and speculation about the $25m deal between Pex and the music rights platform Dubset in March. The technology behind Pex monitors global social networks and, at the time of the news, had tracked more than 20b videos and songs to identify the intrinsic role music plays on social platforms.

Assessing the major social players legal and tactical positions

In an interview with Synchtank, Pex’s Bob Barbiere revealed: “We analysed Ed Sheeran’s ‘Shape Of You’, the most streamed song on Spotify, and we found that it had about 800% more streams across social platforms and UGC sites than it did on Spotify.” Of course, analytically identifying this market and physically harnessing its economic scope are two different things. But there has been a flurry of activity around social platforms in recent months, deals are being done and ambitions for a coherent, fully realised system seem self-evident. So where do the major players currently sit legally and tactically within the music business?

“We analysed Ed Sheeran’s ‘Shape Of You’, the most streamed song on Spotify, and we found that it had about 800% more streams across social platforms and UGC sites than it did on Spotify.”
– Bob Barbiere, Pex

Facebook launched a channel dedicated to music videos in July, after reaching agreements with the three major labels and an array of publishers, licensing bodies and collection societies. Live in the US, India and Thailand, the new feature is available on Facebook Watch and confirms a renewed commitment “to help music lovers share, discover and connect around music”. In September, the company also extended various UGC licensing deals to allow gamers to livestream music while they play. A month earlier, Instagram, which they own, rolled out their new Reels feature to 50 countries, allowing users to create short videos with audio.

Snapchat is also seeking to cement its musical functionality and has signed multiple licensing deals, not only with Warner and Universal but also hundreds of members of the National Music Publishers Association (NMPA) and indie digital rights agency Merlin. In conjunction, a pair of new features – Spotlight and Sounds – have been introduced globally to further the integration of technology and audio. “We’re constantly building on our relationships within the music industry, and making sure the entire music ecosystem…are seeing value in our partnerships,” explained a spokesperson for Snap, Inc.

But while there is evidence of progress, tangible division remains. This is perhaps best seen on Twitch, which continues to maintain a testing relationship with both the music industry and the norms of copyright. The company recently issued an apology to its users after being hit by “thousands” of DMCA infringement notifications over music featured on the channel. The platform, owned by Amazon, has promised “we’ll do better”. However, it was then widely castigated after following this with the launch of its Music Directory, “a discoverability experiment” shorn of official licenses.

TikTok “an indispensable part of the industry’s hitmaking machine”

Elsewhere, TikTok has been facing down not just an industry but an entire country. Although US President Donald Trump currently seems more concerned with his ailing administration, fears remain in political quarters about connections between the platform, its users and China. But, again, there are signs the company is eager to legitimise their content and stitch together the existing “patchwork quilt of licensing deals”. Recently called “an indispensable part of the industry’s hitmaking machine” by Music Week, TikTok agreed deals with Sony and pan-European licensing hub ICE in November.

There are a multitude of other players, of course. Some, like Triller, may be comparatively low-profile but that didn’t stop them launching a lawsuit against TikTok this summer, claiming patent infringement over the social features and musical functionality of their rival. The two companies remain in dispute and although Triller is also being sued for copyright infringement by Wixen Music Publishing for $50m, alleging improper use of more than 1,000 songs, they too have agreed deals with ICE and digital music firm 7digital.

It remains a complex landscape and one split across borders, territories and dialects. But while the likes of Douyin and DouYu in China and Roposo, Zili and Moj in India continue to excel in non-Western areas, YouTube is perhaps the example for all others to replicate. With a global reach, the platform recently hit two billion music users, achieving 47% active user penetration, ahead of Spotify at 29%. It is, as Jennifer Cary, EVP Rights & Royalties Division, Ingrooves, states, the undoubted “behemoth” of UGC.

How can the music industry maximise UGC’s potential?

She is in an ideal position to assess the operations of social media companies when it comes to processing royalties, while also explaining how the music industry can maximise this aforementioned potential. “Without a good plan in place a royalty administrator could end up with a massive amount of data that is really difficult to associate with an identifiable asset and if you can’t identify it no one gets paid. There is no standard for dealing with this issue.

“Without a good plan in place a royalty administrator could end up with a massive amount of data that is really difficult to associate with an identifiable asset and if you can’t identify it no one gets paid.”
– Jennifer Cary, Ingrooves

“A smart approach to creating assets in YouTube’s rights management system is a good place to start for higher quality reporting. But you’ll need some more tools in your toolbox to prevent income from building up in suspense. Everyone has developed their own ad hoc approach. Like so many administrators we have created macros to help match data, but it is still a lot of work,” she commented.

Turning to TikTok, Cary explained why they were experiencing less problems. “The UGC they are reporting comes through very neatly. Yet it’s equally unsettling to process a nominal amount of income from such a successful platform, even if they make it easy for us. Clearly not all revenue is flowing through. When it does we will certainly have new data issues to deal with, but it will be a problem we are happy to tackle,” she told Synchtank.

It seems clear that new tech and fresh solutions are required to facilitate licensing at these unprecedented scales across a myriad of platforms. As discussions continue around the knotty issue of copyright in the US and UK, most notably the “safe harbour system” that currently restricts compensation for UGC, it had been hoped that this could act as a catalyst for change. Whilst the EU’s Article 17 signals some progress in legislation, there is little sign of change elsewhere as British and American governments are both currently mired in complex political machinations, alongside COVID-19.

Pandemic prompts an explosion of new content

Industry analysts such as MIDiA Research have called for a more efficient relationship between the key sectors at the centre of this debate. “To unlock the monetisation of UGC, the content and technology industries need to work better together. When it comes to the music industry, the complexity and cumbersome nature of licensing frameworks has been a frustration for technology platforms since the digital age began,” they stated.

Speaking to Synchtank, Vickie Nauman of CrossBorderWorks, confirmed that the plethora of deals behind licensed UCG presents an unenviable challenge. This has been heightened by factors within broader society, most notably an explosion of new content during the pandemic. “Music rights are inherently complicated because of the split ownership between the master recording and the underlying composition and then publishing is further fragmented by songwriter splits of ownership and performing rights societies,” explained Nauman, who emphasised how important it was to educate tech companies in this space.

“However, UGC has become a powerful part of our music landscape and there is no putting this creative genie back in the bottle. So it is incumbent upon the industry to accommodate this phenomenon and scale licensing appropriately. While very large platforms such as YouTube and TikTok have resources and infrastructure to do broad based licensing, for smaller platforms or individual creators, there is a tremendous amount of innovation happening in sync platforms,” she commented.

“It is incumbent upon the industry to accommodate this phenomenon and scale licensing appropriately.”
– Vickie Nauman, CrossBorderWorks

Although such “problem solving” might not be quite as rampant across the industry as UGC is within digital environments, it is happening. While production and library music currently provide the most straightforward option for content creators, new platforms such as Lickd are emerging to facilitate more dynamic experiences, sourcing commercial music from labels. The UK-based music-licensing startup raised £1.7m from angel investors, including Pink Floyd drummer Nick Mason, last year.

An opportunity for everyone to “think differently”

In a statement, he said: “Lickd has identified a very real problem in music licensing and has created an opportunity which both enables online video creators to legally use great music while simultaneously creating a new, fair and legitimate revenue stream for artists and writers.” Meanwhile, rights holders are seeing new opportunities by providing pre-cleared material from their catalogs as linked collections, a process facilitated by Synchtank’s front-facing web portals, such as the NFL Music Library and Uzer Music.

Not only are companies like Pex and Audible Magic providing the technology for change when it comes to issues around licensing, identification and monetisation but they also see this as an opportunity for the music industry to “think differently”. “Traditionally many people look at UGC as a promotional tool used to generate demand for music. But it’s really a new form of content with big potential for platforms and content owners…people go to TikTok, not for the music, but for the creativity and creation opportunity,” explained Audible Magic founder and CEO Vance Ikezoye.

Indeed, MIDiA suggest a complete rethink is required when it comes to social media. Not only do they believe that the existing frameworks are “not flexible and agile enough” to cope with the sheer volume of material produced by UGC creators. But they point most intently to the concept of “monetising fandom” on these platforms. “They enable creators to build loyal fanbases of which they can monetise the loyal core to build sustainable careers,” they wrote, insisting that “the dynamics of social platforms have made this a realistic possibility for any creator.”

Dylan Pasqua, Partnerships and Marketing Executive at Fanbytes, agrees “100%” that such online destinations are integral when it comes to driving an artist’s fanbase. On the topic of TikTok, he told Synchtank: “As the platform has grown over the past year, artists themselves have actually started growing their own account with some smaller/independent actually building their initial followings from TikTok. These artists are now seeing the benefits of growing a fanbase on a social media platform with an estimated 800m monthly active users with many of them going from TikTok to streaming platforms as well as their other social media accounts.

“Within the music industry I think they [these platforms] will become an integral part of everything from discovering new artists to breaking a record.”
– Dylan Pasqua, Fanbytes

“Managing/running a TikTok account isn’t for every artist but if you can show a little personality and creativity in your posts there is definitely scope to drive long term activity and engagement,” said Pasqua, who added: “These platforms are here to stay and especially TikTok which seems to be able to weather any storm. Within the music industry I think they will become an integral part of everything from discovering new artists to breaking a record.”

Dua Lipa’s Studio 2054 show predicted to make up to $20m

But how do you go about “monetising fandom”? The example provided by TME, which reportedly makes more than twice as much money from social entertainment as it does music, cuts through this discussion. Micropayments to artists as donations or in exchange for exclusive items contribute a huge chunk to the company’s profits, which hit $664m in 2019. As seen during the pandemic, livestreaming presents another revenue stream. This was most spectacularly demonstrated by Dua Lipa’s recent Studio 2054 show, which sold 284,000 tickets across an array of price points and levels of access. It’s said to have grossed up to $20m.

“These are sprawling, multi-faceted opportunities,” observed Rolling Stone in a piece titled Social Media, Not Streaming, Is the Music Industry’s Future. Whether it’s innovation in video games – Little Nas X’s virtual performance on Roblox – fitness – the VR game Supernatural, which allows Facebook users to work out in “some of the most beautiful places on earth” – even karaoke – currently being explored by Spotify and Roxi, a licensed British music streaming startup backed by Kylie Minogue and Robbie Williams – these opportunities seem endless. At last, 2020 is ending. It’s time to look to the future.