Simon Goodbody discusses the fallout between UMG and TikTok in an article published by the Law360

UMG-TikTok IP Rift Highlights Effective Rights Control Issues
By Simon Goodbody (March 14, 2024)

Universal Music Group NV, the world’s largest music rights holder, seems on the brink of a dramatic legal dispute with TikTok Inc., the
short-form video streaming platform with an estimated 1.5 billion users worldwide, following the breakdown of the renegotiation of
licensing terms in January.

At the heart of the rift between one of the world’s biggest social media platforms and the preeminent music company is the question
of the value to be ascribed to UMG’s intellectual property rights: What is the music controlled by UMG really worth to TikTok?

But the matter has also highlighted the inherent tension between creative freedom and effective rights control when a popular social media platform actively encourages its users to participate in the creation and reproduction of content, which often incorporates third party
copyright material, especially music.

In an open letter to the artist and songwriting community on Jan. 30, UMG explained that it had been unable to reach terms with TikTok and would be withdrawing rights to its repertoire from the platform. This meant that, from Feb. 1, UMG’s vast recorded music catalog could not be exploited legally on TikTok, with the rights to its music publishing catalog withdrawn from March 1.

Using deliberately blunt language in its public statement, UMG sent shockwaves through the music business when it suggested that TikTok had taken advantage of the power of its platform to “hurt vulnerable artists and try to intimidate us into conceding to a bad deal that
undervalues music and short changes artists and songwriters as well as their fans.”

This was, on its face, remarkable considering the reach and popularity of TikTok. According to the International Federation of the Phonographic Industry, in 2023, 82% of people between the ages of 16 and 24 in 26 major countries consumed music via short-form video
platforms compared to only 48% who were listening to the radio.[1]

As such, TikTok has become the key promotional tool for many musicians. Despite this influence, the music industry generally considers that music is not sufficiently monetized by TikTok. This may help to explain why UMG felt that, despite the furor, it could walk away.

But this wasn’t just about what UMG was walking away from. It was also about the way it went about it. Brinkmanship and posturing in commercial negotiations are nothing new. Ordinarily, though, these are matters that are kept private, with one side eventually backing
away and quietly accepting that they were less intransigent than they first appeared.

In this case, UMG has very publicly called out what it described as TikTok’s attempt to bully it “into accepting a deal worth less than the previous deal, far less than fair market value and not reflective of [TikTok’s] exponential growth.”

The effect of UMG withdrawing its rights from TikTok was dramatic, and almost instantaneously felt. UMG is home to globally renowned, superstar artists, such as Taylor Swift, Drake, Adele, Coldplay, Harry Styles and Elton John, with a recorded music catalog
that reportedly includes more than three million tracks and publishing rights extending to more than four million songs.

None of these works, including viral trending hits, are now legally available to the platform’s users. However, even though TikTok took steps to remove access to UMG’s official recorded music after Feb. 1, and to remove the sound from any video that featured it, it was not the
end of the matter.

Unwilling to accept the removal of such a vast library of hit music, many of its users took action — perhaps speaking to the value that they attribute to UMG’s repertoire — and found ways to avoid the platform’s automated takedowns of UMG’s tracks. They did so by uploading their own versions of the recordings captured from third-party streaming platforms, and reproducing new versions of the tracks that had been sped up, often adopting the #spedup hashtag, which is searchable using the platform’s basic apparatus.

These unofficial copies of UMG’s tracks are then made available for other users to copy and reuse for their own videos. In fact, multiple videos hosted on TikTok — although created by users rather than the platform — even teach people how to dodge the copyright filter and to
find workarounds to avoid their own content being taken down.

Unwittingly, the creative cunning of younger social media users, who have grown up in an age in which all music is instantly accessible online, might have precipitated a battle that UMG hopes will demonstrate the value of its artists and writers’ IP, as advances in artificial
intelligence, such as deepfake videos, further threaten long-accepted principles of copyright protection.

In some ways, the creative freedom that has driven the popularity of TikTok among its users may now, ultimately, prove its downfall. TikTok will point to the fact that it has taken steps to remove UMG’s music from the platform, and that its users are in breach of the
terms of a user policy or equivalent document, which the majority of them have probably never read.

But that misses the point. TikTok, it seems, cannot control the actions of its users, and it has created a platform that facilitates, on a large scale, the infringement of copyright in sound recordings, musical works and lyrics where it does not have the appropriate licenses in place.

That is not lost on TikTok, with it, until recently, by and large successfully licensing from major rightsholders. Although TikTok may say its users must seek the permission of rights holders when replicating third-party copyright material, it faces a significant struggle if it is to effectively police all of those uploading and copying material on its platform.

Most users will probably be completely unaware of any licensing restrictions for music that they appropriate for their own short videos, and are unlikely to heed warnings, especially given the widespread availability of videos explaining how to circumvent IP rules.

TikTok had a short grace period in which to take further steps to address the prospective infringement of UMG’s publishing rights. That grace period expired on March 1. It will become apparent very quickly if the further significant changes that TikTok was required to implement by March 1 have been at all effective.

However, the continued absence of an agreement, coupled with the proliferation of unofficial copies of UMG recordings and compositions in which it has an interest on the platform, leads to the inescapable conclusion that a claim asserting the flagrant infringement of rights on a
vast scale will almost certainly follow.

But it is important to note that UMG’s open letter to the artist and songwriting community suggested that it was not just concerned with the value ascribed by TikTok to the rights in music. In addition to the issue of proper compensation for their artists and songwriters,
UMG has said that it believes TikTok is, in effect, favoring AI over human artistry by allowing the platform to be flooded with AI-generated recordings, such that the total sum of royalties paid out is being diluted. This could have far-reaching implications for the value of IP rights and, specifically, the integrity of current music licensing arrangements.

Music rights holders will expect social media companies to closely monitor the creation and dissemination of AI-generated content either removing recordings that go beyond the terms of their license agreements — and infringe their intellectual property rights — or putting in place sensible and robust revenue policies that provide for adequate compensation where their rights are being exploited directly or indirectly by AI content.

Furthermore, UMG is concerned that TikTok is not only not dealing properly with infringing content, but also hate speech, bigotry, bullying and harassment. Since these matters have now been called out so publicly by the world’s largest music rights holder, TikTok is unlikely
to be able to simply sweep these concerns under the carpet, even if it is ultimately prepared to agree to UMG’s demands that it pay more for the music rights that are exploited so widely by its platform.

Without a doubt, UMG has set the hare running. Other major record labels and publishing companies will now be watching closely to see how they should position themselves in future licensing negotiations — and if they too should join arms and demand more from the
video-streaming giant. Equally, recording artists and songwriters will be looking on with interest to see if TikTok will continue to be an effective source of income and promotional tool, or whether their attention should now be focused elsewhere.

Music has, so far, been integral to TikTok, whose parent company ByteDance Ltd. has invested into initiatives like its SoundOn music distribution service and its TikTok Music streaming service. TikTok must now decide the importance of music to its platform — and what they are willing to pay for it.

The hosting giant may instead decide to focus on non-music content and its online retail business, which is growing exponentially. As far as music-related content is concerned, the problem is snowballing, and it will not dissipate while users continue to be afforded the creative freedom to create and upload their own sounds, which potentially infringe copyright, to the platform.

If TikTok does not agree to a deal with UMG, a massive copyright claim in England and Wales and/or the U.S., which will be both costly and extremely high profile, seems almost inevitable. There will likely be complex arguments raised in relation to various so-called safe harbor laws around the world, which can provide some protection for platforms whose users upload infringing content.

Nonetheless, if proceedings are filed, we can expect UMG to ask the court for an additional sum of damages in recognition of the flagrancy of the infringement, since there can be no sensible argument that it does not require a license to exploit UMG’s repertoire. UMG may
also seek an account of profits, compelling TikTok to disclose its valuable data, including the revenue that they generate from the platform.

Whatever happens next, this matter illustrates the difficulty of effective rights control in the age of social media. UMG may well argue that the absence of a license is an existential threat to TikTok since, unless the creative freedom afforded to users is restricted, it is
inevitable that TikTok will be responsible for the infringement of UMG’s rights on a massive scale.

TikTok, on the other hand, might seek to diminish the value of the UMG repertoire by suggesting that AI-generated works — in which UMG has no interest — represent the future of the platform, and exploitation of music by short-video clips more broadly. The resolution of the dispute — however that should come about — will be of great interest to music lovers and practitioners alike.

Simon Goodbody is a partner at Bray & Krais Solicitors.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of their employer, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

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