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TikTok’s latest venture: subscription-based music streaming

With 1 billion users, TikTok has quickly become one of the music industry’s most important players, and now it aims to revolutionize the way artists are discovered and paid.

Tolga Ackerman | AFP | Getty Images

TikTok recently unveiled a new rival to the music streaming giant Spotify and apple Music, as a popular short video application, seeks new growth avenues.

TikTok Music said on Wednesday it would test its service in Australia, Mexico and Singapore.The announcement was made shortly after Indonesia and Brazil early this month.

Last week, TikTok also announced Extended License Agreement Partnering with Warner Music Group as it looks to expand its library of music content. Parent company ByteDance also recently canceled a free tier for Resso, another music streaming service it owns.

While those efforts are in their early stages, analysts say TikTok has key advantages over other music streaming entrants that could help it grab market share.

“TikTok already has such a large user base that it can be converted into paying subscribers to TikTok Music at a relatively low customer acquisition cost,” said Jonathan Woo, senior research analyst at Phillip Securities Research.

According to data reports, Indonesia and Brazil are TikTok’s second and third largest marketsSecond only to the United States, TikTok has 113 million and 84.1 million active users aged 18 and over, respectively. Meanwhile, Mexico is TikTok’s fourth-largest market, with 62.4 million TikTok users.

For users who are already on Spotify or Apple Music, there is really not much incentive to switch services, because the brand loyalty of users on these premium existing platforms is also very strong.

John Woo

Senior Analyst, Phillip Securities Research

“TikTok Music will make it easy for (users) to save, download and share their favorite TikTok hits,” said Ole Obermann, global head of business development for TikTok Music, at the launch in Indonesia and Brazil.

According to statistics, TikTok is the second largest source of music discovery for teens aged 16 to 19, after YouTube data MIDiA Research shared with CNBC. MiDIA Research is a UK-based research company covering the entertainment and media sectors.

If you’re already in the ecosystem and you use TikTok a lot, you might be willing to switch.

Tatiana Sirisano

Music Analyst, MiDIA Research

exist MiDIA Q4 Consumer Survey48% of respondents said YouTube was one of the main places they found music, while 41% pointed to TikTok. The survey included 9,000 respondents from the US, UK, Australia, Canada, Germany, France, Sweden, South Korea and Brazil.

“A lot of times, people hear a lot of different songs on TikTok, but they don’t jump elsewhere to actually listen or learn more about the artist,” said Tatiana Cirisano, a music analyst at MiDIA Research.

“The great potential of TikTok Music is that it can close that gap,” Sirisano said.

certain market share

The music streaming market is currently dominated by Swedish giants Spotify and Apple Music.

According to the 2023 International Music Summit Business Report, Spotify holds nearly 31 percent of the global streaming market, followed by Apple Music at 13.7 percent.

But Cirisano said heavy TikTok users may convert to TikTok Music users if they use other services such as Spotify. “If you’re already in the ecosystem and you use TikTok a lot, you might be willing to switch,” Cirisano said.

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Still, Phillip Securities Research’s Woo said TikTok Music is “lower risk” to Spotify and Apple Music.

“I do think it’s going to be pretty tough to overtake Spotify and Apple Music given their market share, but TikTok Music can definitely cannibalize some of that,” Woo said.

“For users who are already on Spotify or Apple Music, there really isn’t much incentive to switch services because the brand loyalty of users on these premium existing platforms is also very strong,” Woo said.

Monthly subscription prices for all three services are expected to be “at a similar price point,” he added. In Indonesia, Spotify Premium costs 54,990 rupiah ($3.66) per month, while iOS users pay 49,000 rupiah ($3.26) per month for TikTok Music.

“As a consumer, why should I pay a monthly fee to listen to TikTok Music when I can listen for free on Spotify (despite the ads)?”

TikTok declined to comment on TikTok Music’s expansion plans. Spotify and Apple Music did not respond to CNBC’s request for comment.

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