The Value of Silence: The Effect of UMG’s Licensing Dispute with TikTok on Music Demand

Social media platforms like TikTok have transformed how music is discovered, consumed, and monetized. This study examines the implications of the dispute between TikTok and Universal Music Group (UMG), which resulted in UMG excluding its music from TikTok from February to May 2024. UMG claimed that TikTok’s compensation was inadequate, as presence of its tracks on the platform potentially reduced revenue that could be generated elsewhere. Conversely, TikTok argued that their compensation was appropriate, emphasizing the promotional and discovery benefits for artists. To examine the validity of these conflicting viewpoints, we conduct a Difference-in-Differences analysis, using tracks from Sony and Warner as a control group. We generally find that removing UMG music from TikTok did not significantly alter the overall demand for UMG tracks on streaming platforms like Spotify and YouTube. However, there is significant heterogeneity across tracks: previously available tracks on TikTok experienced a 2-3% increase in consumption when removed, indicating a substitution effect, predominantly encompassing more popular tracks from well-known artists. Conversely, UMG tracks not previously available on TikTok saw a 1-3% decrease in streams, indicating a complementary effect, mainly encompassing less popular tracks from lesser-known artists. Further analysis suggests that the complementary effect is driven by TikTok’s role in promoting and discovering artists with a partial presence on the platform. An economic impact analysis shows that TikTok significantly undercompensates UMG, aligning with the terms of a new licensing agreement between the parties. This study provides valuable managerial implications for music labels, social media platforms, streaming services, and artists.