User-generated content is set to provide a fast-growing revenue stream for the music industry, according to a new report.
The Rising Power Of UGC, published by MIDiA Research in partnership with Audible Magic, has forecast music-related UGC advertising revenue over the next three years.
Alongside YouTube, rights-holders will also benefit from revenues from growing platforms including Twitch, TikTok and SoundCloud. In the UK, YouTube is top with 45% of the adult population using the service, followed by TikTok (9%), SoundCloud (7%) and Twitch (4%).
Despite concerns in the industry about the so-called ‘value gap’ in returns for rightsholders from YouTube, it remains the most powerful player in terms of reach.
“YouTube dominates streaming music consumption across most markets globally,” stated the report. “UGC and user interaction is one of the key reasons it continually outranks Spotify and other audio streaming services.
“TikTok is the most notable new player, creating a vast global audience of creators with music as the backdrop. Whereas YouTube relies upon a minority of users to create content for the majority, TikTok has created an environment where the majority of the audience become potential creators in one way or another.”
Dua Lipa recently featured TikTok creators in her video for the remix of Levitating (pictured).
Fleetwood Mac's Dreams is at at No.35 in the singles chart after a video featuring the track went viral on TikTok.
TikTok is the most notable new player, creating a vast global audience of creators with music as the backdrop
MIDiA estimates that music-related UGC revenue from advertising will be worth $4.05 billion (£3.1bn) in 2020, of which $2.2bn (£1.7bn) is potential music rights holder income. That overall figure increased from $3.594bn (£2.76bn) in 2019.
On the current trajectory of social media activity, revenue is set to increase to $5.907bn (£4.54bn) by 2022, with music rights holder revenue potential of $3.2bn (£2.46bn). MIDiA stressed that all figures are an estimate of the potential revenue attributable to music-based UGC.
The growth of the Chinese digital marketplace?is is key to this growth, with Chinese platforms representing 50% of the social media advertising revenue increase between 2019 and 2022. Drivers of growth are ByteDance’s Doyin in China and TikTok ?in the rest of the world.
“Although TikTok faces uncertainty in the US and India in 2020, the sheer scale of ByteDance’s revenue indicates just how important a player the company is for the UGC music sector,” said the report.
The report advocates simpler licensing frameworks for the music industry to capitalise on UGC-related opportunities. Companies such as Lickd have been working with labels to harness the power of UGC with licensing models.
Social media platform advertising revenue totalled $119 billion (£91.5bn) in 2019, while in-app purchases and virtual merch are emerging forms of monetisation.
Although the UK is not obliged to enact the EU Copyright Directive, the report suggested that the legislation could help protect European rights-holders, who will be expected to invest in metadata on compositions.
“The way major markets interpret and transpose the directive is yet to? be made clear, but without a doubt the directive is productive in that it facilitates a balance to be struck between the necessary protection of copyrighted content and the enabling of users to create, enjoy and share experiences while using content reasonably,” said the report.
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