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Penny Fractions: Is There Gold at the End of the TikTok Rainbow?

Hello! First off, thank you to everyone that participated in my reader survey. I decided to leave it
Penny Fractions
Penny Fractions: Is There Gold at the End of the TikTok Rainbow?
By David Turner • Issue #76 • View online
Hello! First off, thank you to everyone that participated in my reader survey. I decided to leave it up a couple more weeks in case people didn’t get to it last week. I know a lot of news is flying right now about Warner Music Group suing Spotify in India, and part of the reason I made a Patreon page was to cover more breaking news without upending my entire newsletter, so my immediate thoughts on that topic are on my Patreon page for $3-and-up subscribers. I also made a couple of changes to my Patreon that I detail below, but now let’s get to talking about the emerging video world of TikTok.

Musical.ly to TikTok
Back in 2013 when Vine was first created, I immediately hopped onto the app. I was fairly indifferent towards Instagram and honestly preferred Snapchat’s ephemeral nature after a half-decade of Facebook towering over all social interactions. Even though I found Vine amusing, I quickly learned that I couldn’t pass as a Vine creator and so I let most of my Vine consumption happen via platforms I was more comfortable with: Twitter, YouTube, or even club remixes of popular memes.
Post-Vine, other apps attempted to fill the same niche: Dubsmash, Musical.ly, and Triller being the most well-known. In only a couple of years time, Musical.ly broke away from the pack and presented itself as the future of music discovery in a fully post-YouTube digital world. Initially, Musical.ly’s unique selling point appeared to be that most creators and users on it were barely out of their teenage years (if even that old). Even industry reporters and watchers that make careers out of “keeping up with what the kids are doing” might’ve felt a slight unease following an app dominated by children.
The app’s popularity continued to grow and in late 2017 it was purchased by the Chinese company Bytedance for $800 million, according to Recode. Within the next year, Bytedance merged Musical.ly with its own highly popular Chinese video app Douyin and rebranded as “TikTik” for non-Chinese markets. Maybe it was something about my particular New York neighborhood but I constantly saw ads for the rebranded app all over the place. If I was too old to be the initial target demographic of Musical.ly, the company made a clear break with the past to appeal to a broader demographic. Earlier this week, Kerry Flynn of Digiday reported that TikTok currently has over 26.5 million monthly active users in the United States and that the average user spends 46 minutes on the app. In other words, there’s definitely some momentum building.
Musical.ly Grows Into a Music Company
Less than a year after its launch in 2014, Musical.ly debuted its first major partnership: the #ShareACoke campaign with Coca-Cola. In 2017, when describing the app, Forbes bluntly highlighted the business opportunities that could be found in the burgeoning app:
Musical.ly itself is not currently generating sizeable revenue, but has been experimenting with in-app brand, movie and music advertising campaigns in the last year. Its huge, young audience makes it an appealing marketing tool for advertisers seeking youngsters who don’t watch TV or listen to the radio.
A couple of years later, Musical.ly entered its first major press push, where the company revealed a partnership with Warner Music Group. Billboard’s June 2016 piece didn’t mention any original content by creators and instead focused on the platform’s marketing campaigns made for established artists like Ariana Grande, Jason Derulo, and Meghan Trainor. Stories about Musical.ly birthing stars like Baby Ariel and Jacob Sartorius arrived to provide a narrative for culture-based publications like W, claiming that Musical.ly was creating a new exciting world of stars to discover, while business publications wrote about how to use the app to market to the forever-desirable youth demographic. Even Google trends show that Musical.ly’s peak search moment was during this flurry of targeted summer news stories.
The central story around Musical.ly (and eventually TikTok) became focused on the incredibly young audience for advertisers, rather than on the app’s ability to provide a sustainable platform for creators and for individuals who license music to see a healthy return. The rosey business tale glosses over creator centered issues that lead to YouTubers expressing concern with advertising revenues or Vine’s top creators banding together with demands for the platform and threats to leave if demands aren’t met. That underlying tension between creators, who feel that they need to be properly compensated for helping make these apps worth millions (if not billions) of dollars, is hard to ignore.
Last week, Adweek reported that biddable ads are coming to TikTok, which for a small cluster of readers might be exciting news. Yet again, this piece of news points to the broader point that TikTok isn’t interested in single individual content creators but rather in the sheer size of the young audience on the platform. This is ultimately no different than Vine, YouTube, or Facebook—TikTok isn’t a company for creators, it’s one for advertisers.
What Does TikTok Owe Creators?
Earlier this month, Duncan Cooper wrote a piece in Pitchfork titled “How TikTok Gets Rich While Paying Artists Pennies” about multiple creator side issues found within TikTok. The story is again reminiscent of the early days of YouTube, where creators are happy to see their content get shared and gain notoriety, but start to wonder why they aren’t getting paid more when the app they’re posting on is worth over a billion dollars. 
The story initially centers on two creators, Xeno Carr and Smokehijabi, whose quasi-viral song “Mia Khalifa” skyrocketed in popularity due to TikTok. Cooper lays out the step-by-step development that brought the song to such fame and in the process helps unknot just how many individual creators are needed, and are often overlooked, when it comes to creating a “viral” hit. Yet it was this part of the article that really stuck out to me (emphasis mine):
Not long after, TikTok finally got in touch with their manager, who tells me he worked out a deal that grants TikTok continued, free use of “Mia Khalifa” in exchange for the promotion of iLOVEFRiDAY’s future releases. “At the end of the day, the relationship with TikTok is more important than asking them to pay me for a record,” he adds. “It’s giving us exposure, and that’s what we need to push the brand forward.
There’s that word. That singular word that has defined so much of this decade’s conceptualization of social media fame in lieu of actual money: Exposure.
TikTok, like Musical.ly before it, is an app mostly for kids and by kids. The business choice of relying on advertising pushes apps away from fully supporting creators on their platforms because that isn’t how these companies ultimately look to make money. That’s why I found Pitchfork’s article a bit odd; not because I think artists shouldn’t get compensated for their labor on these platforms, but rather because these are platforms built explicitly to exploit that labor. Even for artists who see their music flourish on TikTok, the deal signed by a major label like Warner leads to payouts much closer to Instagram’s than Spotify’s, as Cooper writes:
In 2016, Warner was the first label to announce they were sharing music with Musical.ly, and as is typical of early arrangements with tech companies, they did a blanket license, also known as a buyout: The royalty-holder grants access to a bundle of songs, with a payment up front to distribute however they see fit.
The story does highlight that the duo behind “Mia Khalifa” did find monetary success on other platforms, but that just obscures the fact that the platform where one finds an audience isn’t built to support them. If one can’t make money off TikTok, there can be a boost of streams from YouTube or Spotify; if one can’t make money from YouTube, then create a Patreon. Even if an obscure song by an artist goes viral on TikTok, one must hope that the interest generated can jump across to a platform that will properly compensate them. Not exactly the best system for building a career.
Now I do think TikTok is a neat app and certainly creates a lot of fun content to watch. But Cooper effectively shows that striving for career sustainability on one of these platforms at this point feels misguided. A small step would be for labels to sign better deals with these entertainment platforms, but most of these companies don’t want to end up like Spotify, where the money generated just funnels back to the same cluster of music companies. Ultimately, TikTok may birth new artists, but the platform isn’t interested in building talent, much in the same way as it doesn’t want to pay artists properly. The demands of creators are viewed not as workers demanding their rightful piece of the pie, but rather as a burden placed on the platform.
Patreon Update:
I wanted to give a little update to my Patreon. I received feedback about adding a $1 tier, which you know sounded fine to me. However, if I did that, I figured I’d have to change how I set up the $3 tier. I also updated the goals on the page, but I’ll be discussing more of that in my March Patreon update, which will come out on Friday for $3 up subscribers. So here are the updated Penny Fractions Patreon tiers:   
Tip-Jar ($1 or more a month)
Receive the satisfaction of knowing you’re helping support a newsletter you hopefully enjoy. (Dear gawd, I hope you enjoy it if you’re willing to press this button)
Supporters ($3 or more a month)
Access to monthly previews of upcoming Penny Fractions newsletters and the occasional—read: like once or twice a month—news commentary post.  
Stans ($6 or more a month)
Access to Patreon-only commentary that’ll range from reactions to news stories, book reviews, and answering reader questions.
6 Links 2 Read
I mentioned Dubsmash earlier but can the app find a new home drilling down on this particular niche? I highly doubt it with the genuine popularity of TikTok rising and there only being so much time for short-form video content. 
I’m not sure when will be the time to really unpack my thoughts on the Fortnite dance lawsuits but I really should get around to doing that someday.
This is a pure press release that’s essentially just upselling K-Pop and while I have nothing, repeat, nothing to prove this, I increasingly wonder how much online traffic driven by K-Pop fans isn’t in some way either formed by bots or outright manipulated. Again, I have nothing to prove this, but just observing the last few years of online behavior makes me a bit dubious of high-level digital engagement on platforms like Twitter.
Sports Lead, Spotify Studios - Spotify’s Job Postings
I can argue another day that job listings are often much more newsworthy than many actual news stories that come out of most companies. This feels like a good example because I’ll be interested to see what kind of sports play Spotify attempts to make within the podcast context.
This piece raises many of the same questions about the future of music and artists that I’ve asked in the last few weeks. I do wish the author was a bit more assertive in his own thoughts on how to improve the situation, but I can only ask so much of writers.
Cherie Hu invited me onto her new podcast to talk about the marketing/release strategy of Ariana Grande’s last two albums. The chat was a blast and I’m certainly always down to appear on other podcasts!
The Penny Fractions newsletter arrives every Wednesday morning (EST). If you’d like to support it, check out this Patreon page. The artwork is by graphic designer Kurt Woerpel whose work can be found here. The newsletter is copy edited by Mariana Carvalho. My personal website is davidturner.work. Any comments or concerns can be sent to pennyfractions@gmail.com.
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