TikTok, with its billion users, has quickly become a major player in the music industry and is now aiming to revolutionize the way artists are discovered and compensated. The popular short video app recently launched a new service, TikTok Music, which is poised to compete with music-streaming giants Spotify and Apple Music. The company plans to test the service in Australia, Mexico, and Singapore, following its successful launch in Indonesia and Brazil. Additionally, TikTok has expanded its licensing agreement with Warner Music Group to enhance its music content library.
TikTok has a significant advantage over other music-streaming platforms due to its large user base, which it can easily convert to paying TikTok Music subscribers at a low customer acquisition cost, according to Jonathan Woo, a senior research analyst at Phillip Securities Research. Indonesia and Brazil are TikTok’s second and third-largest markets, respectively, behind only the United States. Mexico is also a significant market for the platform.
TikTok Music aims to make it simple for users to save, download, and share their favorite viral tracks from TikTok. It is currently the second-most common source of music discovery for 16 to 19 year olds, second only to YouTube, according to data from MIDiA Research. The platform has the potential to close the gap between discovering songs on TikTok and listening to them elsewhere, thus boosting its market share.
While Spotify and Apple Music currently dominate the music streaming market, heavy TikTok users may be willing to switch over to TikTok Music due to their high engagement on the platform. However, TikTok Music poses a low risk to these industry incumbents due to strong brand loyalty and similar subscription prices. Despite this, TikTok Music could still eat into Spotify and Apple Music’s market share.
TikTok has been seeking growth outside of the US, where it faces political challenges. The company plans to invest billions of dollars in Southeast Asia in the coming years. Additionally, TikTok Shop, its e-commerce marketplace, is aggressively expanding into Southeast Asia, competing against Sea’s Shopee and Alibaba’s Lazada. Livestream shopping is one area of focus for TikTok, but it is not the only destination for the platform’s expansion efforts.
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