WHAT’S HAPPENED?
Elon Musk’s social media platform, which was previously known as Twitter, and rebranded on Monday (July 24) to ‘X’, upped the stakes in the competition between social media platforms on Thursday (July 13) when it announced the launch of its Creator Ads Revenue Sharing program.
The newly-launched initiative, which Musk teased as early as last November, means creators on the platform will be able to collect a portion of the revenue generated by the ads embeds in their threads – though the company has yet to reveal how much of the ad revenue it will be sharing.
It will eventually “be available in all the countries where [payment processing platform] Stripe supports payouts,” but it won’t be available to everyone.
The news arrived two weeks before Twitter’s rebrand to ‘X’, which CEO Linda Yaccarino said, in a series of Tweets over the weekend, marks the beginning of the platform’s transition to becoming an AI-powered “everything” app, “centered in audio, video, messaging, payments/banking – creating a global marketplace for ideas, goods, services, and opportunities.”
To qualify for revenue sharing, a Twitter (or should we say X) user will need to have a Twitter Blue check mark (for which Twitter recently started charging a monthly fee) or a yellow Verified Organization check mark.
Additionally, only creators who have had a minimum of 5 million impressions on their Tweets in the prior three months will be eligible – a fairly steep threshold meaning that only the top echelon of Twitter/X creators will be able to monetize their content through the program. And it won’t be automatic for eligible users; they’ll have to sign up for the program.
So far, the revenue sharing program has been rolled out to a small fraction of high-engagement Twitter creators, some of whom have reported receiving payouts from Twitter in the thousands or even tens of thousands of dollars – although the payments are back-dated to February, in essence meaning the payouts represent some five months’ worth of shared revenue.
The program is expected to roll out to the broader Twitter/X community by month’s end.
WHAT’S THE CONTEXT?
The move came just days after Facebook owner Meta launched Twitter competitor Threads, and amid a serious slump in Twitter’s ad revenue.
Giving creators on Twitter/X a financial incentive to produce material for the platform is, at first glance, a smart move on Musk’s part, especially given the stunning initial success of Threads. The Meta-owned app became the fastest-growing platform in history when some 100 million users signed up within a few days of its July 5 launch. And at last count, Threads had already surpassed 150 million users.
That makes Threads already considerably more successful than the various Twitter alternatives that some users have migrated to since Musk’s controversial buyout of Twitter, apps such as Mastodon, Spill and BlueSky (whose board of directors includes Twitter co-founder and former CEO Jack Dorsey).
Threads always had a better shot at success than those others, for the simple reason that it’s linked to Instagram, which has 2.35 billion users worldwide. And Instagram makes it very easy for users to set up a Threads account.
Whether or not that rapid growth translates into a commercially successful business for Meta remains to be seen, and some early red flags have already emerged. Data analytics company Similarweb reported that the number of daily active users on Threads (as opposed to total sign-ups) fell by half between July 7 and July 14, from 49 million to 23.6 million in the space of a week.
Users have complained about some of the app’s features, or lack thereof. There is no desktop version; the app lacks accessibility functions for users with disabilities, such as alt text fields or in-app captioning; and perhaps most crucially, the app’s users are unable to customize their feeds. Threads users are fed an algorithm-based feed, and don’t have the option to switch to one consisting of the accounts they follow – although Meta has said it plans to fix that.
All the same, Threads threatens to pull users and attention away from Twitter/X, at a time when Musk’s app is facing one of the biggest financial challenges in its history.
Musk said just over week ago that the platform’s ad revenue has fallen by half. And despite his aggressive cost-cutting measures – which included laying off about 80% of Twitter staff – the slump in ad revenue, combined with the payments on the debt Musk took on to buy the platform, means Twitter is now seeing negative cash flow.
Twitter is a notoriously unprofitable business, having reported a negative net income for every year of its existence except 2018 and 2019, but its current problems are particularly acute. Musk took out $13 billion in loans, from a consortium of banks led by Morgan Stanley, to finance his $44-billion buyout of the app’s shareholders last fall. That debt sits on Twitter’s books (now X Corp’s books), and analysts estimate the interest on it alone amounts to $1.2 billion per year.
Since taking over Twitter, Musk has been pursuing new monetization strategies, with mixed results. His key change to the platform’s business model, so far, has been to start charging for the blue check mark that appears next to the names of verified users. Twitter Blue, as it’s known, costs $8 per month in the US, €8 in most of Europe and £9.60 in the UK, and has proven controversial with many Twitter users.
Twitter Blue’s success has been moderate at best. As of May, some 620,000 users were paying for a blue check mark, out of 450 million monthly active users worldwide. This amounts to revenue of around $60 million per year for X Corp.
So a big question hangs over Twitter’s move to revenue-sharing: Is the company actually in a financial position to share its revenue?
“Twitter stores and gives the public access to a large amount of copyright-protected content and is a major platform for distributing infringing music content, both audio and video.”
Complicating Twitter’s outlook is the fact that other social media platforms are also moving towards revenue-sharing models. Facebook last year announced revenue-sharing with music rights holders on videos longer than 60 seconds that are posted to the site – a more lucrative alternative to Facebook’s previous policy, which was to demonetize videos that used copyrighted works of music.
Under Facebook’s new policy – the result of partnerships Meta struck with music rights holders – the platform will give 20% of ad revenue earned on a video to the rights holder. As with Twitter’s revenue sharing, there are restrictions: Only those creators who are eligible for in-stream ads and meet Facebook’s monetization eligibility criteria can participate in the program.
According to a report at Bloomberg News last November, the three major music recording companies – Sony Music, Universal Music Group and Warner Music Group – have been pushing for a similar revenue-sharing deal with TikTok, a platform where, arguably, music is much more central and prominent than it is on Facebook.
(It’s worth noting that earlier this year, TikTok announced a revenue-sharing program for partner publishers. The new Pulse Premiere program, as it’s called, counted Buzzfeed, Conde Nast, DotDash Meredith, MLS, NBCUniversal, UFC, Vox Media and WWE as program partners as of launch time).
It would appear that the social media space as a whole is moving towards revenue-sharing business models. This year’s social media trends report from Insider Intelligence predicts that nearly every social media platform will be sharing ad revenue with creators by the end of the year.
WHAT DOES THIS MEAN FOR THE MUSIC BUSINESS?
The broad philosophy adopted by the music recording industry in the digital era can be described as ‘the more, the merrier’ – after all, there’s little harm in placing music on any legitimate platform where it can be monetized.
And Twitter/X could certainly be one of those platforms – but only if it can work out its conflict with the music business over copyright infringement.
Unlike platforms like Facebook, Instagram and TikTok, Twitter has no licensing agreements with major music companies. That might not have seemed like much of a problem so long as Twitter was purely a text-based microblogging platform with a 138-character limit, but as the platform increasingly expanded into video and other media, it began to be a source of friction with rights holders.
Long before Musk’s takeover, industry insiders accused the platform of turning a blind eye to music copyright infringement among users.
In December 2020, the RIAA suggested during a Senate Judiciary Subcommittee on Intellectual Property hearing that infringement on Twitter equates to “piracy on an industrial massive scale.” In February of 2022, the IFPI labeled Twitter “a significant concern to the music industry.”
“Twitter stores and gives the public access to a large amount of copyright-protected content and is a major platform for distributing infringing music content, both audio and video,” the IFPI said in its submission to the EU Counterfeit and Piracy Watchlist Consultation.
Twitter and the big three recording companies entered into talks on licensing music rights for the platform’s content in the fall of 2021, but those talks reportedly stalled after Musk took over the platform late last year, and began aggressively cutting costs at the company.
So the music industry moved to Plan B: litigation. On June, 17 music publishers sued Twitter for $250 million, alleging “hundreds of thousands” of copyright infringements involving 1,700 musical works.
“While numerous Twitter competitors respect the need for proper licenses and agreements for the use of musical compositions on their platforms, Twitter does not, and instead breeds massive copyright infringement that harms music creators,” the complaint, filed in a Tennessee court, alleged.
History shows that these types of lawsuits by music industry groups and major companies are an effective pressure tactic to get digital media companies to the table for negotiations. In most prior cases of lawsuits against digital companies, the result has been some sort of long-term licensing agreement.
So it’s entirely possible that Twitter’s move towards revenue sharing with creators, combined with the music industry’s lawsuit, could result in a revenue-sharing agreement between the platform and rights holders at some point in the future.
A final thought
In the meantime, some prominent musical artists could make a little additional income off their presence on the platform.
Many of the world’s biggest-selling musicians have a presence on Twitter, though some have neglected their accounts in favor of Instagram or TikTok, where fan engagement with musical artists is often more robust.
Nevertheless, Rihanna has 108 million followers on Twitter, and her semi-regular Tweets invariably reach 1 million impressions, often rising into the tens of millions. Katy Perry, who typically tweets once or twice a week, has 107 million followers and her posts typically reach 1 million impressions.
Taylor Swift may be one of the most effective musical tweeters these days. With 93 million followers, her tweets typically hit a minimum of 10 million impressions. (Justin Bieber has 112 million Twitter followers, but rarely tweets.)
At that scale, given the size of payouts that Twitter has made to prominent influencers over the past week, artists could garner a significant income from Twitter revenue sharing.
Also, with the news that the Twitter brand is being abandoned as the company moves to develop “a global marketplace for ideas, goods, services, and opportunities” in the form of an AI-powered “everything” app called X, “centered in audio, video, messaging, payments/banking”, the music industry will be watching closely to find out what that means for its relationship with the platform…
Music Business Worldwide
