Digital Business Deal TikTok #1

Taken from DealBook Briefing August 17, 2020  TikTok isn’t standing still

As TikTok negotiates its potential sale, which must be completed within 90 days to prevent the Chinese-owned app from being shut down in the U.S., it is signing a different sort of deal.

TikTok is partnering with UnitedMasters, a music distribution company, to allow artists on the video-sharing platform to distribute their songs directly from the app to streaming services like Apple Music, Spotify and YouTube. UnitedMasters also arranges music deals with brands like ESPN and the N.B.A. The deal is expected to be announced today. It’s the first major transaction for Kevin Mayer, TikTok’s C.E.O., who joined the company in May after a long career at Disney. Much of his time has been spent reacting to geopolitics, with TikTok’s parent company, the Beijing-based ByteDance, ensnared in the tech cold war between the U.S. and China. Citing national security concerns, President Trump has ordered TikTok’s U.S. operations to be sold to an American owner — Microsoft is the most likely buyer — or shut down. • Despite the uncertainty of TikTok’s fate in the U.S., the UnitedMasters deal shows that the company is not standing still, even if the benefits of the new partnership will probably accrue to a new owner. It’s an effort to deepen relationships with influential artists who use the app. TikTok’s young and engaged audience has helped songs go viral, jump-starting the careers of musicians like Lil Nas X and BMW Kenny. Trying to keep these creators engaged with the app is particularly important as TikTok faces competition from deep-pocketed rivals like Facebook’s Instagram, which recently launched a TikTok clone called Reels. It’s a sign of the times for the music industry. Instead of selling their rights to a label, artists who sign with UnitedMasters keep 90 percent of their royalties, as well as ownership of the master recordings. UnitedMasters was founded in 2017 by the former label executive Steve Stoute and funded by the likes of Alphabet and Andreessen Horowitz. The deal, which creates a platform designed to circumvent the traditional music-label business model, is aimed at “tomorrow’s stars who will be famous, fiercely independent and wealthy,” said Mr. Stoute, a long-established tastemaker in the hip-hop industry. • In many ways, TikTok has already upended the music business: Scouts no longer go to bars and clubs to discover the hottest unsigned artists — they scroll through the app instead. By partnering with UnitedMasters, the app is aiming to bolster its appeal to independent-minded artists who operate outside the traditional industry machinery. But what about that other deal? TikTok would not comment on the state of the company’s takeover talks with Microsoft. The deal with UnitedMasters does not appear to be contingent upon that transaction, and is billed as a “global” partnership. However, if TikTok were to shut down in the U.S., it would clearly affect the reach of the music deal. Terms of the transaction were not disclosed.