TikTok Music closure a win for Spotify, says Deutsche Bank

TikTok Shuts Down Music Streaming App, Boosting Spotify’s Prospects

TikTok’s announcement to discontinue its premium music streaming app has sent ripples through the music industry. As reported by MBW, TikTok Music will shut down by the end of November in Indonesia, Brazil, Australia, Singapore, and Mexico—the five markets where the app is available.

TikTok’s decision to close its music streaming service comes as the company shifts its focus to the ‘Add To Music App’ feature. This function allows TikTok users to save songs discovered on the platform to playlists on established streaming services like Spotify, Amazon Music, and Apple Music.

While TikTok Music’s exit may be welcomed by rival services in these countries, Spotify stands to gain the most. According to a research note from Deutsche Bank, TikTok Music’s closure presents a significant opportunity for Spotify to attract the displaced subscribers.

Deutsche Bank estimates that TikTok Music had gathered between 2 million and 2.5 million subscribers across its five operating markets. With the app shutting down, the analysts predict Spotify could gain around 1.3 million net new paying subscribers in Q4 2024, assuming it captures a large portion of TikTok Music’s former users.

Additionally, with one less direct competitor in the market—especially one appealing to younger users similar to Spotify—the promotional environment could ease, which may benefit Spotify’s profit margins in these countries.

There had been widespread speculation about TikTok Music’s potential expansion into major markets like the U.S., the U.K., or Germany. However, Deutsche Bank now suggests that concerns over TikTok Music disrupting Spotify’s market dominance with aggressive pricing strategies seem to have dissipated.

For record labels, the outcome is more complex. While having additional distributors would shift more power toward intellectual property owners, labels have been advocating for price increases in streaming services. TikTok’s pricing strategy could have pressured other platforms, like Spotify, to hold off on price hikes to avoid losing market share.

TikTok Music, formerly known as Resso, launched under its new branding in Indonesia and Brazil in July 2022, later expanding to Australia, Singapore, and Mexico in October. Resso shut down its free tier in May 2022, transforming into a premium-only service. However, despite initial success in driving user growth, the service struggled to convert free users into paying subscribers.

Without an ad-supported option to funnel new users, TikTok Music faced difficulties gaining traction, a problem highlighted in the Deutsche Bank note. The service’s global monthly active users (MAUs) peaked in February 2024, just seven months after its rebranding, but failed to maintain momentum.

Deutsche Bank’s analysts point out that TikTok Music’s younger audience might have been more inclined to use a free tier before transitioning to a paid subscription—a key element missing from the platform. In contrast, Spotify’s long-established ad-supported tier has proven effective in driving growth and user retention.

As TikTok Music shuts down, the closure opens the door for other platforms—especially Spotify—to strengthen their hold on these emerging markets.