Report: Record Labels Reap Billion-Dollar Bonanza

After years of railing against technology giants for exploiting music to attract customers, record companies have embraced social media as their new cash machine, reports Bloomberg.

In the latest example, Warner Music Group Corp. has signed a deal with TikTok that will boost its fees for song rights and increase collaboration with the popular social-media app. The contract covers recordings from the company’s labels, as well as songs from its publishing division.

In the past year, major music companies have signed licensing agreements with Facebook Inc., TikTok and Snap Inc., three of the largest social-media platforms, creating a new, billion-dollar business. Warner Music alone now generates hundreds of millions of dollars a year from such deals, Chief Executive Officer Steve Cooper said last month. Terms of the TikTok pact weren’t disclosed.

Social-media dollars have helped music companies replace sales lost to the pandemic, which has shuttered stores, suppressed radio listening and halted touring. The Covid era also has accelerated music companies’ experimentation and dealmaking with a new generation of partners, including video-game companies and fitness apps.

“It feels like we’ve seen years’ worth of change and evolution in the course of a handful of months,” said Oana Ruxandra, Warner Music’s chief digital officer. “We want to ensure there’s value for our artists across the board, and the goal is to ensure that they make money to live their lives.”

Ruxandra joined Warner Music two years ago and is changing the way the company approaches new technology. Record labels have blamed the internet and technology companies like Google and Apple Inc. for 15 years of decline as piracy and online listening decimated CD sales, once the industry’s cash cow.

As social-media companies devised new products to compete for users, they saw benefits in developing closer ties with the music industry.

Now that social-media companies have all committed to paying for music, record labels are attempting to mine new industries, including video games and fitness. A number of high-profile artists, such as Travis Scott and Anderson .Paak, have hosted virtual concerts within video games. Scott’s single, “The Scotts,” topped the charts after he introduced it in Fortnite, the popular battle-royale game.