Over the weekend, I finally finished All The Rave: The Rise and Fall of Shawn Fanning’s Napster by Joseph Menn, which chronicles the history of Napster only a couple of years after the company’s collapse. A number of details stood out to me (like the sheer incompetence of investors), but one specific question never left my mind: What exactly was Napster’s business? The company was a failed money pit that never held a clear path towards profitability. That’s why the book can often struggle to explain why anyone would’ve thought to keep throwing money at a project that was going nowhere. When executives at Napster understood the reality of endless record industry legal battles, the company put any business model on the table just to keep afloat. Advertising, selling merchandise, subscriptions, anything sounded good if it allowed the business to eventually hit its big payday. If its business model was that fluid, what did the company really hold? Tens of millions of committed users, in other words: an audience.
That ephemeral output resulted in executives at Bertelsmann Music Group sparring with Thomas Middelhoff, then CEO of Bertelsmann, over the company’s investment in Napster. The music executives didn’t see value in an audience that wasn’t paying money and would be difficult to convert into paying users. Middelhoff disagreed. Ultimately, even with Middelhoff’s support, Napster failed to make good on an audience-first, business forty-third strategy but the model would eventually be fulfilled by Spotify and YouTube. Those companies followed Napster’s path and turned their rapidly-growing audiences into an advertising platform. Nearly two decades later, TikTok, a short-form video app, is primed to feed the same system.
TikTok is massively popular. The app reportedly got 315 million downloads
in the first quarter, which put its total download number at 2 billion. Even if cumulative downloads inflate the sense of people actively using an app, other metrics are still looking good for TikTok. Its parent company, Bytedance, made over $17 billion in revenue in 2019, which Music Business Worldwide notes
inched it over YouTube by nearly a couple billion. Anna Nicolaou at the Financial Times pointed out on Twitter
that TikTok’s 2019 revenue of $200 to $300 million isn’t much better than that of a number of struggling media companies. TikTok, like YouTube and Amazon media platforms, as only one part of a massive firm, could lose money for years without much concern as it still holds onto an audience. The value of providing a mass advertising platform, at least for those funding the company, provides enough reason to keep it afloat, as long as advertisers can find an audience.
Casey Newton at The Verge also noted that many fears
he held about TikTok in regards to American regulators appear, for the moment, to be subsided as the company has stepped up its Washington D.C. lobbying efforts and has appeared to have seen a boost in activity during the coronavirus pandemic. The company also bought over 200k square feet
of office spaces in Times Square for a ten-year deal, just to solidify its physical footprint. If the business side of TikTok appears to be stabilizing, the cultural impact of the app only continues to expand.
An evolution from the early days of YouTube, and to a lesser extent Vine, popular TikTok stars are quickly absorbed into the influencer economy. In January, the most popular TikTok star Charli D’Amelio (and the rest of her family) signed with United Talent Agency
. New York Times
reporter Taylor Lorenz chronicled that there’s a fairly straight line
between amassing TikTok fame, moving out to Los Angeles, and suddenly being in endless meetings with brands and talent scouts. Even though there are lottery-like success stories, many more TikTok creators will see their lives mirror a Vice story
about creators that achieve major social fame but little monetary compensation. The singular focus on advertising and brand collaborations is what makes music’s role within TikTok oddly familiar.