Independent music licensing representative Merlin says that TikTok has “refused to negotiate” a new licensing deal ahead of its expiry on October 31.
Merlin, whose membership includes prominent independent companies such as Because Music, Downtown Music, Mushroom Music, Reservoir Media and more, says that TikTok “walked away before negotiations even began” and with “no warning”.
In a letter issued to Merlin Members last week, seen by MBW, the organization claimed that TikTok intends to license “some” of its members directly instead of negotiating a deal with the org on behalf of its entire membership.
In a statement issued to MBW today (October 1), a TikTok spokesperson confirmed that the platform plans to strike direct deals with Merlin members.
“We are committed to entering into direct deals with Merlin members in order to keep their music on TikTok.”
TikTok spokesperson
“TikTok would like to offer all of the world’s music to our users,” said TikTok’s spokesperson. “We are committed to working with the independent sector as well as the major labels and publishers.
“We know that our community of over a billion music fans value the diversity and richness that independent music brings to our platform. We are committed to entering into direct deals with Merlin members in order to keep their music on TikTok.”
Merlin told its members in the letter last week that it’s interpreting TikTok’s decision to allow their deal to lapse as an effort to “[fragment] the Merlin membership, in order, we believe, to minimize their pay out”.
“Given that TikTok refused to negotiate with us, our view is that they must see the obligation to pay fair royalties as a nuisance,” Merlin claimed in the letter.
“Given that TikTok refused to negotiate with us, our view is that they must see the obligation to pay fair royalties as a nuisance.”
Merlin
It added: “They must view Merlin – with its mission to protect and maximize the value of our members’ music – as too strong a negotiating partner for their liking.”
Merlin told its members that it is doing all it can “to re-engage with TikTok to secure a renewal agreement for our members”.
MBW understands that indie labels have until October 25 to sign direct agreements for TikTok and CapCut for their catalogs to remain on the platform from November 1, onward.
Merlin claims to represent 15% of the recorded music market. It was founded in 2008 as a digital music licensing and membership organization and negotiates deals collectively on behalf of of its independent label, distributor, and other rightsholder members.
In the letter issued to its membership last week, Merlin suggested that TikTok’s new approach of wanting to do direct deals with indie music companies rather than negotiating with Merlin on behalf of its entire membership “devalues our community”.
Added the letter: “TikTok has asked us for an ‘orderly transition’ to do direct deals with those members they deem worthy. As you know, Merlin was founded to stand up for and champion its members.”
Merlin recently negotiated, on behalf of its members, the renewal of its “strategic partnership” with Facebook parent company Meta, in a deal covering Meta properties Instagram, Facebook, and Messenger.
Elsewhere in Merlin’s letter to its members, it pointed to a reason behind TikTok’s decision to let the deal lapse, explaining that TikTok suggested it’s “walking away” from negotiations due to “concerns” about streaming fraud.
Merlin argued that “as we have told [TikTok] them on numerous occasions, we are incredibly pro-active on this issue”.
The letter continued: “We recognized early on, and communicated with TikTok, the concerning growth and impact of stream manipulation and fraudulent content both on TikTok and across the marketplace.
“We have worked productively and collaboratively with TikTok on this issue, and until now, no concerns have been raised about the approach Merlin is taking. We have implemented measures to address illegitimate activity and content; automated systems to detect suspicious activity; and a dedicated team to address issues and impose sanctions, including ultimately, termination of membership for bad actors.”
Merlin’s licensing dispute with TikTok arrives four months after The National Music Publishers’ Association (NMPA) decided to not renew its licensing deal with TikTok. The NMPA’s deal ended on April 30.
The US trade body told its members that if they wanted to continue to license their music to TikTok beyond the April 30 deadline, they would need to “engage directly” with the platform.
News of the NMPA’s decision to let its deal with TikTok lapse followed Universal Music Group‘s initial refusal to re-license its recorded music and music publishing to TikTok. UMG and TikTok struck a new licensing deal in May.
You can read Merlin’s letter in full below:
Dear Merlin Member,
On August 5th, we informed you that we expected a difficult negotiation with TikTok.
This past Wednesday, with no warning, TikTok walked away before negotiations even began. They informed us that (1) they do not want to renew our deal, which expires on October 31st, and (2) they intend to license some of our members directly. To be even more clear, unfortunately, as of now, there will not be a Merlin-TikTok deal after October 31st.
We believe the most likely reason that TikTok did this is that TikTok does not want to pay a fair rate for the music that powers their platform. If this is right, then TikTok does not value independent music, the independent labels and distributors who support that music, nor the diverse artists who create it. They are unlike every other partner that Merlin works with.
TikTok pays substantially less for your music than other services, apparently relying on the perception that artists cannot afford to have their music unavailable on the platform. We made a good faith proposal to narrow this gap, but rather than negotiate, TikTok chose to simply walk away.
Given that TikTok refused to negotiate with us, our view is that they must see the obligation to pay fair royalties as a nuisance. They must view Merlin – with its mission to protect and maximize the value of our members’ music – as too strong a negotiating partner for their liking. Their approach suggests that they believe their objectives can be better served by fragmenting the Merlin membership, in order, we believe, to minimize their pay out.
TikTok has asked us for an “orderly transition” to do direct deals with those members they deem worthy. As you know, Merlin was founded to stand up for and champion its members. We will not support an approach that devalues our community.
The Merlin team remains dedicated to forging meaningful relationships between our members and partners, as well as driving value into every partnership. This includes dedicated teams to answer member inquiries across every aspect of our partnerships, operational support, best practices guides, partner-led and Merlin-led webinars, consolidated pitch forms, and so much more.
We are doing all we can to re-engage with TikTok to secure a renewal agreement for our members. We have already made it clear to them that we are ready to hold an actual negotiation and address any concerns they may have. TikTok has also suggested that they are walking away because of concerns about “fraud,” but as we have told them on numerous occasions, we are incredibly pro-active on this issue.
We recognized early on, and communicated with TikTok, the concerning growth and impact of stream manipulation and fraudulent content both on TikTok and across the marketplace. We have worked productively and collaboratively with TikTok on this issue, and until now, no concerns have been raised about the approach Merlin is taking. We have implemented measures to address illegitimate activity and content; automated systems to detect suspicious activity; and a dedicated team to address issues and impose sanctions, including ultimately, termination of membership for bad actors.
Members must, as ever, make their own decisions on how to deal with TikTok. For our part, we will never stop fighting for the value that our members bring, regardless of how this situation resolves itself.
We will follow-up by separate email with whatever answers we might have on your operational questions.Music Business Worldwide