Key Takeaways:
- TikTok has signed a deal to spin off its U.S. operations to a group controlled by mostly American investors, including Oracle and Silver Lake.
- The new U.S. entity will oversee content moderation and data security, but the underlying algorithm will still be owned by Beijing-based ByteDance.
- The deal raises concerns about the potential for censorship and the unresolved national security concerns around covert data access and manipulation of the algorithm.
- The new entity will be controlled by a consortium of investors, with Oracle, Silver Lake, and MGX holding 45% of the shares.
- The deal delivers a major win for Larry Ellison, expanding his family’s grip on American media and entertainment.
Introduction to the Deal
TikTok has signed a deal to spin off its U.S. operations to a group controlled by mostly American investors, including software giant Oracle, a company run by billionaire Trump ally Larry Ellison. The deal, which was signed on December 18, aims to address concerns about the app’s ties to China and the potential for foreign propaganda. According to the agreement, TikTok’s U.S. algorithm will be retrained with only Americans’ data, and content moderation rules will be set by the new investor-controlled entity. However, the underlying algorithm will still be owned by Beijing-based ByteDance, with the blessing of American auditors.
Implications of the Deal
The deal has significant implications for the future of TikTok in the U.S. and raises concerns about the potential for censorship. Anupam Chander, a professor of law and technology at Georgetown University, notes that the American majority running the content moderation may alleviate concerns about foreign propaganda, but it is possible that the American TikTok might end up censoring or hiding speech that is permissible on the global TikTok platform. Chander hopes that the U.S. content moderation team would allow speech that the American owners might dislike. The deal also raises questions about the unresolved national security concerns around covert data access and manipulation of the algorithm.
Structure of the Deal
Under the terms of the sale, half of the new entity that will control the American version of TikTok will be owned by a consortium of investors including Oracle, private equity firm Silver Lake, and United Arab Emirates state-backed investment firm MGX. These three will control 45% of the new U.S. TikTok entity. About a third of the newly-formed TikTok operation will be held by existing investors of ByteDance, the Chinese parent company of the video app, and around 20% will be kept by ByteDance. A seven-member board of directors, most of whom are American, will oversee the new entity.
Background and Context
The deal caps more than five years of mounting pressure from Washington, where bipartisan concerns about TikTok’s ties to China prompted Congress to pass a law in 2024 that would have banned the app unless it was sold. The law was upheld by the Supreme Court in January, and for months, TikTok was technically operating in violation of federal law. However, Trump issued a flurry of executive actions to delay enforcement of the law that would have banned the popular video app. Jim Secreto, a former Treasury official who worked on TikTok policy during the Biden administration, notes that the deal signed does not completely sever ties with ByteDance, something the law Congress passed was intended to set into motion.
Implications for TikTok and its Users
The deal creates a curious situation for the viral video app, with one version of the service under the direction of an American-backed company and another version, wholly operated by ByteDance, available to the rest of the world. This raises questions about the potential for different content moderation rules and data security measures in different regions. TikTok has an estimated 2 billion users globally, with less than 10% of its worldwide users based in the U.S. The deal delivers a major win for Larry Ellison, expanding his family’s grip on more corners of American media and entertainment. Ellison is a major backer of Paramount Skydance, and his son, David Ellison, has made a hostile bid to take over Warner Bros. Discovery.