Universal Music Group and China, Regulating TikTok, Tyga's New Deal

Hey! Yesterday's Tyler Perry case study has gotten quite a bit of traction. Please read and share with those who would enjoy it!

This update covers Universal Music Group's big third-quarter and what it means for its relations in China, the U.S. efforts to regulate TikTok, and Tyga's new deal with Columbia Records.

Universal Music Group, Tencent, Hip-Hop, and China

From Billboard:

"Universal Music Group continues to outpace the other majors with revenue rising to €1.8 billion ($2.012 billion), a 15.7% constant currency increase over the €1.495 billion ($1.733 billion) during the company’s third quarter ended Sept. 30. All three operations -- recorded music, music publishing and merchandising -- contributed to that performance...

Taylor Swift’s Lover was cited as a big-ticket item, selling 700,000 copies in the U.S. while the company noted. Post Malone’s Hollywood’s Bleeding had the biggest streaming week for an album in the United States in 2019, with over 365 million on-demand audio streams. Further, the company said that “UMG has had the five biggest United States debut sales weeks for albums this year with Taylor Swift, Post Malone, Jonas Brothers’ Happiness Begins, Ariana Grande’s Thank U, Next and Billie Eilish’s When We All Fall Asleep Where Do We Go?"

Taylor's getting a lot of the credit here, but UMG has been hot for a minute now. Its valuation has surged on the backs of Spotify and Apple Music's continued growth. That's a good sign for Vivendi, UMG's French parent company, that's been public about its goal to sell up to 50% of its stake in the record label.

For context, here's a take—which I agree with— from Variety on why Vivendi wants to find buyers:

"Vivendi appears to be looking not so much to offload half the company as to maintain control by bringing on a passive partner. Look at Mubadala’s interest in EMI Music Publishing: Before selling its 60% stake, the private equity firm was essentially a hands-off owner, content to collect steady returns. It recently sold EMI – whose catalog features some 2.1 million songs, including titles by Carole King, Motown classics and standards like “Somewhere Over the Rainbow” – to Sony for $2.3 billion."

Vivendi has been partially successful. In August it was announced that Tencent wanted a 10% stake in UMG. Yes, the same Tencent that suspended its ties to broadcast NBA games in China after Houston Rockets GM Daryl Morey's pro-democracy "Stand with Hong Kong" tweet. Yes, the same Tencent that already has a 9% stake in Spotify.

Tencent is eager to dominate China's music (and media) landscape. And Asia is UMG's fastest-growing market according to Vivendi's Q3 report. From a hip-hop perspective, this will play out in two ways.

First, I except that we will see future conflicts with American hip-hop artists and Chinese government, similar to the current situation with the NBA and China. Hip-hop culture has become more and more popular in China. But its government views hip-hop the same way that U.S. mainstream media did back in the 1980s. As American artists grow stronger fanbases in China, I expect hip-hop stars to take stands on issues, just like Morey did for Hong Kong.

Second, Chinese hip-hop is its own dominant culture. It's in Tencent's best interest to support the rise of its up-and-coming Chinese rappers. Tencent's multimedia conglomerate status should make that easier, but that may also lead to conflicts with the country's government.

Fun times ahead, y'all! Globalization is great, but it surely has its growing pains. I ultimately believe that it will all get to a better spot, but we're not there yet.

Regulating TikTok

Speaking of China, U.S. Senator Marco Rubio (proud Nicki Minaj fan) is laying down the gauntlet on ByteDance, the company that owns TikTok.

Here's a segment of his letter to U.S. Department of Treasury:

"I write to express concern with regard to Chinese Influence operations, including by the social media network, TikTok, a short-video app owned by the Chinese backed, ByteDance. According to reports, TikTok acquired Musical.ly, a video-sharing platform, without any oversight and relaunched the service for Western markets. These Chinese-owned apps are increasingly being used to censor content and silence open discussion on topics deemed sensitive by the Chinese Government and Community Party."

A few days later, The National Music Publishers' Association followed up Rubio's letter with a request to investigate TikTok for copyright theft:

"In addition to important censorship concerns, it appears that TikTok has consistently violated U.S. copyright law and the rights of songwriters and music publishers. Many videos uploaded to TikTok incorporate musical works that have not been licensed and for which copyright owners are not being paid."

The issues are somewhat related, but let's separate them.‍

Censorship

‍Earlier this week, TikTok hired two former U.S. lawmakers to review its content moderation policy. It's a step in the right direction for free speech, but this "review" doesn't guarantee change.

One of the loudest critics of TikTok's practices has been Facebook CEO, Mark Zuckerberg. His company is on the other side of the spectrum of content moderation. Facebook's critics believe Zuck has been too lenient on what's allowed on the platform, especially with fake news and its impact on the geopolitical landscape.

There's an ideal medium between TikTok's overt control and Facebook's lasseiz-faire approach to policymaking. The idealist in me believes that Facebook's world, despite its imperfections, is closer to the desired medium. But the pragmatist in me believes that ByteDance/TikTok have more than enough loopholes and rationalizations to rely on that can strengthen its position. Companies like YouTube, Twitter, and other social media apps have been too loose on this and have enabled hate speech. The polarizing nature of these positions indirectly strengthens TikTok's position to not allow this type of content on its platform. (That's not an advocacy stance for TikTok by any means, but it's an acknowledgment of the reality).

‍Publishing

‍The labels have publicly pushed on TikTok for more money, but there were already deals in place. The major labels can similarly advocate for their publishing arms. Any new agreements with the majors will likely include both record labels and publishing licenses. The payouts may not equal NMPA's ideal scenarios, but the payouts will still be there.

I'll be following this closely since tons of aspiring hip-hop artists are trying to follow the Lil Nas X playbook. I expect the publishing dispute to reach a resolution much sooner than the censorship debate will. This will be an ongoing debate until there's a social media platform that is universally seen as the gold standard in content moderation and can therefore be used as a litmus test.

Tyga's New Multi-Million Dollar Deal with Columbia Records

The come-up is real. Tyga, the rapper who had the biggest comeback of 2018, has a new record deal in place.

"After playing the independent field for the last several years, Tyga is ready to get a "Taste" of what a major label feels like again. On Tuesday (Oct. 15), Columbia Records announced that the "Rack City" MC joined their roster after signing a multi-million dollar deal."

The 29-year-old rapper was famously signed to Cash Money Records—a label notorious for not paying its talent or business partners. Here's what I wrote about Birdman's business practices last year:

"When Cash Money bested [Universal Music Group], it was victorious. But when Cash Money bests its own people, it’s predatory.

In many cases, the artists were too inexperienced to push back. Former Cash Money artist Tyga, who is suing the label for $10 million, signed a deal when he was 17 that gave him a lawyer who also represented Cash Money. It was a conflict of interest designed to limit the “Rack City” rapper’s power.And that’s just one story. The rap sheet on Cash Money’s disputes with rappers is longer than a CVS receipt."

Tyga signed that deal when he was a child with no leverage. That doesn't absolve Cash Money from its predatory tactics, but it highlights how easy it was for Tyga to get caught up in that type of situation.

This new deal likely has terms that are favorable to Tyga, but I'm skeptical of how it turns out. When "Taste" dropped, Tyga was independent. He had a distribution deal in place with EMPIRE to drop his Legendary album. The flexibility was ideal since it wasn't clear if Tyga would ever get another mainstream hit.

But "Taste" has now run its course. Tyga might get a hot feature here and there, but it's hard to expect another stretch of hits that warrants a multi-million dollar record deal with Columbia, a label that's known for its star power.

It's clear why Tyga wanted the deal. He believes he still has untapped potential and believes that a label can take him to new heights. And if Columbia is bullish on its own capabilities—as it should be—then it believes it can get him there too.

But I've always seen Tyga as a west coast version of Fabolous. Both came out the gate hot but eventually got pigeonholed into guest features and regional fanbases. They were like high drafts picks that eventually became strong role players in an ideal lineup. Those spots are valuable. Those folks are important. But overpaying for those folks is rarely a good thing.