New Partnerships Form Between Tech Giants and Record Labels

After Years of Conflict, Opportunities for Collaboration Emerge

For years, record companies have criticized tech giants for using music to attract customers without compensating the owners of that music. But now, record labels are singing a different tune as they ink billions of dollars worth of deals with social media platforms.

In the early 2000s tech companies gave people ways to pirate music, which hurt CD sales and record companies’ balance sheets. Then streaming platforms like Pandora and Spotify (SPOT) cut into labels’ revenue. As companies like YouTube (GOOGL), Facebook (FB), and Snapchat (SNAP) grew, for some time these platforms displayed user created content featuring music without compensating record labels. Now social media and tech platforms are seeing the benefits of developing closer relationships with music companies.

Billion-Dollar Deals Between the Tech and Music Industries

Last year YouTube reported that it paid the music industry more than $3 billion. Three years ago Facebook entered an agreement to pay music companies over $600 million per year to allow people to use songs in their videos on the platform.

One of the most significant players in this new era of relationships between tech platforms and record labels is TikTok. The Chinese short video app with over 600 million users has made many songs go viral and generate revenue across other platforms. TikTok recently signed an agreement with Warner Music (WMG), which will raise the fees TikTok pays for song rights. The terms of the deal were not disclosed, but it marks a significant development in the relationship between the tech and music industries.

How the Pandemic Impacted Relations Between the Two Industries

Though tech companies and the music industry were beginning to form partnerships before the pandemic, unique circumstances this year have accelerated that trend. “It feels like we’ve seen years’ worth of change and evolution in the course of a handful of months,” explained Oana Ruxandra, Chief Digital Officer at Warner Music.

Many revenue streams for record companies have been hurt this year. Concerts have been canceled, radio listenership is down, stores and restaurants which pay to play music are closed. Meanwhile, people stuck at home are spending more time engaging with social media and other tech platforms. This has led to more collaboration between tech and music companies. In addition to partnering with social media platforms, record labels are entering deals with fitness platforms, video game makers, and other branches of the tech industry.

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