Universal Music Group (UMG) has taken the unusual step of publishing details of its contract negotiations with the online platform TikTok. In an open letter published on its website, UMG has stated that the contract between UMG and TikTok expired on 31st January 2024 and that UMG had been “pressing” TikTok on three “critical issues.” The music publisher stated that the three issues are:

1. Appropriate compensation for artists;
2. Protecting human artists from the harmful effects of AI; and
3. Online safety for TikTok’s users.

In response, TikTok issued a short statement which called UMG’s stance as “sad” and “disappointing” and alleged that UMG had provided a “false narrative and rhetoric” and TikTok said that they had ‘artist-first’ agreements with every other label.

It’s unclear why UMG have taken this step, whether it is to communicate to music listeners why UMG artists music might disappear from TikTok or whether it is as a tactic to help the parties reach agreement is anyone’s guess. Social Media can be utilised in many ways to canvas opinion but also to create a narrative that can become accepted as fact. Stories can be planted that are anticipated to come to the attention of interested parties so as to influence the value of the properties concerned and promote a market that might not otherwise exist.

The music industry isn’t the only industry that has been campaigning against AI, actors in the US took strike action to make a stand against the use of AI.

The Intellectual Property Office announced on 31 January 2024 that it has introduced a voluntary Code of Good Practice on Transparency in Music Streaming which will come into effect on 31 July 2024.

What is likely to be included in an agreement between a record label and a platform such as TikTok?

As a starting point, not every artist will be powerful enough to individually negotiate with a streaming platform. Collective bargaining is a commonly used means to negotiate on a level playing field where individual artists would simply be met with a standard response of these are our terms and are non negotiable. An artist would then have to weigh up whether the exposure may assist them in other ways by for example increasing awareness off their music thereby driving live ticket sales or even bringing their music to the attention of potential commercial opportunities wishing to acquire what is known as ‘sync’ rights i.e for use in commercials, films or Tv programming. UMG is one of the biggest labels in the world, with some of the biggest artists in the world such as Taylor Swift and Harry Styles and a platform would acknowledge a gap in their offering without such heavy hitters .

Duration

In addition to a start and end date break points allowing a party to terminate will need to be considered as well as anticipating circumstances in which key commercial terms are to be renegotiated in good faith. The technology is constantly evolving and therefore musicians and their label might wish to review terms on a frequent basis, as appears to be the case here. Any agreement may also contain termination provisions to allow for circumstances such as insolvency, refusal to pay or adverse publicity.

Licence

In order for music to be available on social media platforms or streaming platforms the record label would usually licence the music to the platform. The licence would make it clear that the platform does not own the work, but it would allow the platform to stream the music on a non-exclusive basis for the contractual or licenced period.

Royalties / Payment

It is sensible that any agreement between a label and a streaming platform will contain information about how the artist is to be paid and when the artist will be paid. There’s no exact science about how a label would negotiate the compensation or payment to the artist, however, it should be clear how and when payment is to be made. For example, the streaming platform Spotify, has implemented what it calls the ‘streamshare’ model. The streamshare model works out the number of streams in any given country during that month, then the proportion of people listening to the artist stream is worked out and the artist is paid accordingly. The crucial element within that calculation is how much money a platform is willing to pay per stream.

There may be a provision in any agreement for the artist to have full disclosure of the number of streams.

Intellectual Property

Even though streaming platforms make artists music available to be streamed and downloaded, the publisher of the music will wish to retain copyright in the work, mechanical copyright and other intellectual property rights such as trade marks and image where relevant. The label will require the platform to be obliged to include certain mandatory provisions as to the use of the music by platform customers, an obligation to enforce and damages/indemnities for breach

AI

Technology moves on and whether artists like it or not, AI is here to stay. The real skill is to protect artists from having their voices synthesised, this is something that the actors union Equity has been championing so that artists can protect their voice and image.

A contractual agreement might set out clear parameters of how the artists work, voice and image may be used including express provisions regarding the artist being portrayed in a false light and their image/reputation being adversely affected.

Jurisdiction clause

It is crucial to have a jurisdiction clause in the agreement, that any dispute that arises would be resolved within the jurisdiction that is most convenient for the party wishing to enforce their rights . TikTok is a Chinese company, other streaming platforms are domiciled in US and therefore it could be a messy business without absolute clarity where disputes are to be resolved.

Elephant in the room

The third demand that UMG is reportedly making, which is to keep TikTok users safe online is not strictly a contractual matter. This appears to be more a political statement than one that would form part of a contractual negotiation.

New legislation is in the process of being implemented here in the UK to protect online users – you can read about that here.

JMW specialises in the drafting of agreements in the media, entertainment and sports sectors.