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Snap, the parent company of Snapchat wants to license music for users to embed in posts and possibly even launch hit songs. With R&B and hip-hop being music’s most consumed genre, the Wall Street Journal reported the company is in talks with Sony Music Entertainment, Universal Music Group, and Warner Music Group as they have the biggest artist in this category signed to their labels. Will these music bops be enough to impress investors and fend off Facebook’s territory poaching Instagram?
The Breakdown You Need to Know
Competition in this space is quite steep but holds a lot of upside. Case and point look at Lil Nas X’s “Old Town Road” song with Billy Ray Cyrus, the song first caught on with TikTok as a meme and now has spent eight weeks at #1 on the Billboard Top 100 chart. Last year, Facebook cemented licensing deals with major labels, once again beating Snap to what could be another way to increase advertising sales.
When it comes to record labels CultureBanx noted that securing these licensing deals is imperative for Snap. For example, Universal Music Group and its family of labels which include Capitol Music Group, Island Records, and Def Jam just to name a few own music rights to some of the biggest hit makers in the industry. They have a deep roster of heavy hitters like Rihanna, Kendrick Lamar, Drake and Migos.
Licensing music from these labels could be the best way for Snap to monetize its 186 million daily active users and grow advertising revenue. E-Marketer forecasts that Snapchat’s U.S. video ad business is estimated to grow 19.9% year over year in 2021, reaching $727.4 million. In general the company has made inroads into video advertising, but still has a small slice of the overall market, as its nemesis Facebook still commands the lion’s share of all video ad spending.
Snapping Up Teens
One of the main reasons Snap is focused on music licensing is the shifting viewing behaviors of younger generations. African American teens are the first-movers in many ways when it comes to deciding what’s going to take-off on social media. Teenagers and their technology are inseparable with 9 out of 10 black teenagers using Snapchat, according to a survey by The Associated Press-NORC Center for Public Affairs Research. Black teens are also the most likely to have access to smartphones, which could explain why they’re the biggest and most frequent users of mobile-friendly social media apps like Snapchat.
The disappearing photo and video platform needs to get a hold on this demographic. Piper Jaffray's found in its 2018 "Teens Survey" that Snapchat has a slight advantage in the social media teenager race with 83% of teens opening the app monthly, whereas 82% of teens are monthly active Instagram users.
