• TikTok launched its music streaming service this month in Indonesia and Brazil — its second and third-largest markets. It is also testing TikTok Music in Australia, Mexico and Singapore.
• "There's already this large installed base of users which TikTok can convert into paying TikTok Music subscribers – with a relatively low customer acquisition cost," Jonathan Woo of Phillip Securities Research told CNBC.
• Tatiana Cirisano, music analyst at MIDiA Research, said that a heavy TikTok user may just "be willing to switch over to TikTok Music."

TikTok recently launched a new rival to music-streaming giants Spotify and Apple Music, as the popular short video app seeks new avenues for growth.

TikTok Music said on Wednesday that it will be testing its service in Australia, Mexico and Singapore. That announcement comes shortly after it launched in Indonesia and Brazil earlier this month.

Last week, TikTok also announced an expanded licensing agreement with Warner Music Group, as it looks to grow its music content library. Parent company ByteDance also recently scrapped the free tier of Resso, another music-streaming service it owns.

While these efforts are in their early days, analysts said TikTok has key advantages that other music-streaming entrants do not possess and that could help it seize market share.

"There's already this large installed base of users which TikTok can convert into paying TikTok Music subscribers – with a relatively low customer acquisition cost," said Jonathan Woo, senior research analyst at Phillip Securities Research.

According to DataReportal, Indonesia and Brazil are TikTok's second- and third-largest markets, behind only the U.S., with 113 million and 84.1 million active TikTok users aged 18 years and above, respectively. Meanwhile, Mexico is TikTok's fourth-largest market with 62.4 million TikTok users.

"TikTok Music will make it easy for [users] to save, download and share their favorite viral tracks from TikTok," Ole Obermann, global head of music business development for TikTok, said during the Indonesia and Brazil launch.

TikTok is the second-most common source of music discovery for 16 to 19 year olds, behind YouTube, according to data from MIDiA Research shared with CNBC. MIDiA Research is a U.K.-based research firm covering entertainment and media.

In MIDiA's fourth-quarter consumer survey, 48% of respondents aged 16 to 19 years old said YouTube is among their main places for discovering music, while 41% pointed to TikTok. The survey fielded 9,000 respondents across the U.S., U.K., Australia, Canada, Germany, France, Sweden, South Korea and Brazil.

"A lot of times people hear lots of different songs on TikTok, but they don't make the jump to actually listen to it elsewhere or learn more about the artist," said Tatiana Cirisano, music analyst at MIDiA Research.

"The powerful potential for TikTok Music is that it could close that gap," said Cirisano.

Some market share

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

Spotify commands almost 31% of the global streaming market with Apple Music following with 13.7%, according to the International Music Summit Business Report 2023.

But Cirisano said that heavy TikTok users could convert into TikTok Music users if they are using other services such as Spotify. "If you're already in the ecosystem, and you're using TikTok that much, you might be willing to switch over," said Cirisano.

Still, Woo of Phillip Securities Research said TikTok Music presents a "low risk" for Spotify and Apple Music.

"I do think that it would be quite difficult to surpass Spotify and Apple Music in terms of market share given their incumbency, but TikTok Music could definitely eat into some of it," said Woo.

"There really is not that much incentive to switch services for users already on Spotify or Apple Music as brand loyalty amongst users on these premium incumbent platforms is also very strong," said Woo.

He added that monthly subscription prices for all three services are expected to "be at similar price points." In Indonesia, Spotify Premium costs 54,990 Indonesian Rupiah ($3.66) monthly while iOS users pay 49,000 Indonesia Rupiah ($3.26) a month for TikTok Music.

"As a consumer, why should I pay a monthly fee to listen on TikTok Music, when I can listen for free on Spotify, albeit with advertisements?"

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

Boost growth?

TikTok has been looking for growth outside the U.S., where it faces mounting political headwinds. Its flagship app was banned in Montana, the first state to do so, as well as India. TikTok's CEO previously said the company will pour "billions of dollars" into Southeast Asia over the next few years.

The company's e-commerce marketplace TikTok Shop has been aggressively expanding into Southeast Asia, competing against Sea's Shopee and Alibaba's Lazada. Those e-commerce efforts also include livestream shopping.

TikTok in July said livestream shopping isn't the only area it is looking into when asked if it is the "end destination" for TikTok's areas of expansion.

"Shoppertainment is not the only destination, but it is definitely one of the main areas, especially in Asia Pacific that we are leaning in heavily into," Shant Oknayan, head of business across Asia Pacific, the Middle East and Africa & Eastern Europe at TikTok, said during a summit in Jakarta earlier this month.