News & Insights

Digital Dive: UMG’s Breakup with TikTok, YouTube’s Vision, and OpenAI’s Sora

By Alyssa Carino

The Digital Dive - Digital Intelligence Newsletter.

The Big Story

The Day the Music Died on TikTok

On January 30th, Universal Music Group (UMG) released a candid open letter announcing their decision to end their leasing contract with social media giant, TikTok. UMG, the largest record label in the world, representing today’s biggest artists like Taylor Swift and Drake, pulled their music catalog from the app after TikTok allegedly failed to meet them on three critical issues – appropriate compensation for their artists and songwriters, protecting human artists from the harmful effects of AI, and online safety for TikTok users.

UMG called out TikTok for “trying to build a music-based business without paying fair value for the music.” According to the record label, TikTok had proposed to pay their artists only a fraction of the rate that other similar major social platforms pay, which did not fly with them. Regarding protecting their artists from AI, UMG claimed that TikTok allows their platform to become flooded with AI-generated recordings and are pushing new tools to encourage AI music creation on the platform. With the pollution of AI-generated recordings, UMG feels that real human artists and musicians are being devalued. UMG also spoke on TikTok’s unsafe environment for artists and users, “TikTok makes little effort to deal with the vast amounts of content on its platform that infringe our artists’ music and it has offered no meaningful solutions to the rising tide of content adjacency issues, let alone the tidal wave of hate speech, bigotry, bullying and harassment on the platform. The only means available to seek the removal of infringing or problematic content (such as pornographic deepfakes of artists) is through the monumentally cumbersome and inefficient process which equates to the digital equivalent of ‘Whack-a-Mole.’”

As negotiations between the two continued, UMG claims that TikTok attempted to “bully” them into accepting a deal that was worth far less than market value. According to UMG, TikTok selectively removed music from some of their developing artists to stunt their discoverability. UMG wrote “TikTok’s tactics are obvious: use its platform power to hurt vulnerable artists and try to intimidate us into conceding to a bad deal that undervalues music and shortchanges artists and songwriters as well as their fans.”

TikTok released a statement in response to UMG’s fiery letter, expressing disappointment that “Universal Music Group has put their own greed above the interests of their artists and songwriters.” TikTok stated that UMG’s narrative is untrue.

At the end of the day, we all know that Universal Music Group and TikTok will be fine. Who this does affect though are the artists and creators on the platform. Users that had previously used UMG music in their content, like Jarred Jermaine who built a large following from posting music sample breakdowns, have gotten their content silenced as a result of UMG’s decision. There are many artists and creators on the platform that have built a following based on the usage of UMG’s catalog and now they are being silenced until they can figure out a work around.

Social Updates

European Union Opens Investigation into TikTok

The European Commission announced a formal probe into TikTok’s compliance with the Digital Services Act. This act, which officially went into effect on January 1st, aims to establish a safer online environment by imposing new rules on content moderation, user privacy and transparency. The Commission is focusing its investigation particularly on the negative effects of TikTok’s site design and algorithm to see if it encourages addictive behavior or the “rabbit hole effect.” The Commission also plans to look into the platform’s privacy and safety measures for minors, advertising transparency and proper age verification for users. Although TikTok seems to be cooperative with the European Commission, these violations, and the failure to address them, could force them to hand over up to 6% of annual global revenue.

Federal Judge Blocks Ohio Social Media Parental Consent Law

After halting a new social media law from going into effect in Ohio last month, Chief U.S. District Judge Algenon Marbley has extended this block indefinitely, saying that the law is likely unconstitutional.  Marbley agreed with NetChoice, who is representing Meta, TikTok and X, that the legislation violates minors’ first amendment rights and fails to address the root of the problem. “Foreclosing minors under sixteen from accessing all content on websites that the Act purports to cover, absent affirmative parental consent, is a breathtakingly blunt instrument for reducing social media’s harm to children,” Marbley wrote. “The approach is an untargeted one, as parents must only give one-time approval for the creation of an account, and parents and platforms are otherwise not required to protect against any of the specific dangers that social media might pose.” This marks the latest court decision to block state legislation designed to protect young people online amidst growing concerns over online safety. Ohio Governor Mike DeWine, who had originally passed this legislation, called the ruling disappointing after delivering “overwhelming evidence” of the negative impact that social media has had on the mental health of minors.

YouTube’s Vision for 2024

In a recent letter from YouTube’s CEO, Neal Mohan, the company outlines its vision for 2024, highlighting four significant bets that will shape the future of the platform.

  1. Empowering Human Creativity with AI: Mohan recognizes the power of generative AI in transforming creative expression. Rather than replacing human creativity, Mohan believes that AI should amplify it and that these tools should be easily accessible to all creators. Initiatives like Dream Screen and Music AI Incubator showcase YouTube’s commitment to democratizing access to AI tools, allowing everyone to unleash their creativity.
  2. Elevating Creators to Next-Generation Studios: According to Mohan, creators are not just entertainers but entrepreneurs shaping the future of entertainment. Through innovative monetization options like channel memberships and fan funding features, creators are diversifying their revenue streams. YouTube’s support extends beyond financial incentives, programs like the Creator Collective foster collaboration and community among creators globally. With over 3 million channels in the YouTube Partner Program and $70 billion paid out to creators, artists, and media companies, YouTube continues to pave the way for creators to thrive.
  3. Expanding YouTube’s Reach to the Living Room and Subscriptions: “We’re bringing everything viewers love about YouTube to the living room experience.” The boundaries between traditional studio content and creator-generated content are blurring, with viewers demanding a seamless experience across platforms. YouTube’s presence on TV screens is substantial, with viewers watching over 1 billion hours of content daily. The platform’s subscription services, including YouTube TV and Music Premium, continue to attract millions of subscribers, offering exclusive content and enhanced experiences.
  4. Prioritizing the Protection of the Creator Economy: As YouTube evolves, ensuring a safe and healthy online environment remains paramount. From protecting children’s content to combating misinformation during elections, YouTube is committed to upholding its responsibility to the community. With the rise of generative AI and potential challenges like deepfakes, YouTube is implementing new measures such as synthetic content labels to maintain transparency and integrity.

Digital Updates

OpenAI Introduces Sora

OpenAI, the founders of ChatGPT, are launching a new video-generation model called Sora. With Sora, users can create realistic videos up to a minute long based on text instructions. According to OpenAI’s introductory blog post, “Sora is able to generate complex scenes with multiple characters, specific types of motion, and accurate details of the subject and background. The model understands not only what the user has asked for in the prompt, but also how those things exist in the physical world.” Sora’s technology also enables it to generate videos based off a still image and fill in missing frames or extend an existing video. It is unknown when this new tool will be released to the public as OpenAI is currently working to understand the potential dangers. At the moment, only “red teamers” who are assessing the model for potential harm and risks have access to Sora. OpenAI is also encouraging access for visual artists, designers, and filmmakers to get feedback from the experts. As of now, OpenAI has noted that the current model has some weaknesses, like accurately portraying the physics of a complex scene and fully understanding specific instances of cause and effect.

Walmart Looks to Expand Advertising Business with $2.3 Billion Dollar Deal with Vizio

Walmart confirmed their plans to purchase Vizio for $2.3 Billion, signaling a big step for their advertising business. With this acquisition, the retail giant hopes to boost their ad business by tapping into Vizio’s SmartCast Operating System, which serves free ad-supported content on its TVs. This billion-dollar investment from Walmart is reportedly driven by their goal of increasing ad revenue and competing with Amazon in the advertising space. This deal also looks to accelerate Walmart’s media business in the US, Walmart Connect, by combining Vizio’s advertising solutions with their reach and capabilities. Executive Vice President and Chief Revenue Officer of Walmart, Seth Dallaire, expressed his excitement for the acquisition, “We believe Vizio’s customer-centric operating system provides great viewing experiences at attractive price points. We also believe it enables a profitable advertising business that is rapidly scaling. Our media business, Walmart Connect, is helping brands create meaningful connections with millions of customers who shop with us each week. We believe the combination of these two businesses would be impactful as we redefine the intersection of retail and entertainment.

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