In late February, TikTok took down every song in which Universal Music Publishing Group owns a stake, a complicated step in the escalating showdown between the two companies that began a month earlier during the week before the Grammy Awards.
Now we're in uncharted territory: Never before has a major label used the “nuclear option” to pull both recorded music and publishing rights from a platform — a particularly dramatic step because it includes any song in which UMG owns even a small share. (With Advertising sign(According to his estimates, it affects over 60% of the most popular TikTok songs in the US) What most people don't know is that these negotiations may also be affected by a February 9 ruling by the Munich District Court regarding the German implementation of the 2019 European Union Copyright Directive in the Digital Single Market — the Urheberrechts-Diensteanbieter-Gesetz (UrhDaG). It will certainly shape such future negotiations.
The case involved Berlin-based film distributor Nikita Ventures, which operates YouTube channels and, coincidentally, TikTok. And although it wasn't covered much by the English-language press, it shows that the negotiating leverage is gradually shifting from the platforms to the rights holders. “This Verdict” Matias Lozena founding partner of the law firm Lausen, who represented Nikita, told me, “it shows that there is no longer a safe harbor in Europe for rigs.”
In the case, Nikita said he offered to license his content to TikTok in early 2022, at a cost of three euros per thousand views, an amount based on a published rate from GEMA, the German collective management company. (Licensees often appear to pay less than that.) By summer, TikTok had not responded with a counteroffer, and Nikita said the content he had asked TikTok to block was available until August. TikTok told the court that it was still in negotiations, that its filtering system complied with the law and that it had responded to takedown notices. The court essentially ruled that TikTok did not make a best effort to negotiate, however, and found the company liable for infringement, with damages to be determined, as well as requiring it to provide information about how many times the content was accessed. due content, as well as the resulting revenues and profits.
Why does this matter? Until now, the US Digital Millennium Copyright Act and laws like it have limited rights holders' leverage in negotiations. Platforms that make user-uploaded content available have been free to build audiences and businesses as long as they have no direct knowledge of infringement and promptly respond to takedown notices submitted by copyright holders. That gave the platforms what some might call a “free ride,” and on a Feb. 28 UMG earnings call chairman and CEO Lucian Grainge said that “there should be no free rides for massive global platforms like TikTok”.
The European Copyright Directive of 2019 was intended to address this and requires online platforms to use their “best endeavours” to license content, as well as to block content they have not licensed after rights holders have given them the necessary information. But this is the first court decision based on it.
Nothing will change overnight. The scope of this ruling is limited, platforms could potentially circumvent it by better documenting their negotiations with rights holders, and it's hard to imagine it having a material impact on UMG's negotiations with TikTok. However, it shows that Europe is serious about forcing online platforms to negotiate on a level playing field, which will lead to more favorable deals. (However, because European countries do not have class action lawsuits or high statutory damages for copyright infringement, this will not lead to a gold rush of litigation.)
Many of these are in the future and some of these deals will involve platforms that do not yet exist. However, to understand how this might happen, imagine a video-based nano-blogging platform that allows students to record subtle covers of pop songs. (Of course, I'm making this up, but it's not the dumbest idea I've heard this year.) This platform should reach out to rights holders about deals early and often, and then take serious steps to block content that they ask her. That means it should license content before it gets big — not when it's already too big to fail.
Even now, TikTok needs to make a “better effort” to remove the UMG version list. The company took immediate action, so it's likely to be clean there, although it will be interesting to see what happens with registrations speeding up and slowing down. In an age where songs are sliced and diced by influencers, how elaborate should the best effort be? Could we learn from a case involving this controversy? The odds are against you, but stranger things have happened.
For the past quarter century, rights holders have struggled to negotiate on a level playing field, which has arguably driven down the price of content for both online businesses and, through them, users. That dynamic is changing—slower than rights holders want and faster than platforms prefer—but firmly the same. This will be difficult to measure because these large licensing deals are by their nature complex and opaque. Ultimately though – for better or worse depending on which side you're on – we'll see more balanced negotiations, and that could mean more money for music overall.
