Updated

Trump's 'key money' request complicates Microsoft-TikTok deal

Microsoft said that it won’t comment further until after a deal is done with ByteDance, the owner of the mobile, video-focused social-networking company.

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Microsoft confirmed on Sunday that it is interested in buying the American business of ByteDance’s popular TikTok social-networking service, pending a review by the Trump administration, with the intention of closing the deal by mid-September. President Trump, however, had his own demands.

Microsoft’s announcement caps off an eventful weekend that began Friday night with President Trump stating that he would ban TikTok, the Chinese short-form social video service. Rumors then began swirling that Microsoft was interested in aquiring the company, but that Trump’s opposition to the service might prevent the deal from occurring. A Sunday-night blog post from Microsoft confirms that the deal is, in fact, in the works.

According to Microsoft, Microsoft chief executive Satya Nadella and President Donald Trump spoke, with Trump apparently giving his approval for a potential acquisition to proceed. “Microsoft fully appreciates the importance of addressing the President’s concerns,” Microsoft said. “It is committed to acquiring TikTok subject to a complete security review and providing proper economic benefits to the United States, including the United States Treasury.”

Trump, however, on Monday threw an unexpected wrench into the deal, claiming that Microsoft would be forced to pay a finder's fee of sorts to the government.

"I did say that if you buy it, whatever the price is... I said a very substantial portion of that price is going to have to come into the Treasury of the United States, because we're making it possible for this deal to happen," Trump said. "Right now they don't have any rights, unless we give it to them. SO if we're going to give them the rights, then it has to come into this country.

Trump compared the arrangement to a landlord-tenant arrangement. "Without a lease, the tenant has nothing. So they pay what's called 'key money' or they pay something."

TikTok deal set to close by September

Microsoft said Sunday that it hoped to complete the deal by Sept. 15, 2020, pending discussions with TikTok’s parent company, ByteDance. Microsoft would in fact buy TikTok’s operations in several English-speaking countries, including the United States, Canada, Australia, and New Zealand, and would result in Microsoft owning and operating TikTok in these markets. 

According to reports, the Trump administration was concerned that data collected by TikTok was being transferred to the Chinese government. (ByteDance has denied these allegations.) Microsoft said that all data collected by the TikTok operations it would acquire would remain within the United States, and any data that was stored or backed up outside the United States will be transferred to its servers within the United States. The data residing on those servers outside the U.S. would then be deleted, it said.

Microsoft and ByteDance said that it has given notice to the Committee on Foreign Investment in the United States (CFIUS). Microsoft also said it would not comment further until the deal was done, or rejected.

Microsoft’s track record in the social-media market has been mixed, as the company has tended to favor the enterprise and business space. LinkedIn, a social-networking company Microsoft bought for $26 billion in 2016, remains Microsoft’s biggest and most successful play in the space, though LinkedIn is primarily designed to connect employees, potential recruiters, and other career-oriented members together. Microsoft tried out a social network called so.cl, but shuttered it without much promotion. Ironically, Microsoft unexpectedly closed its Mixer streaming service on June 22, sending users to Facebook Gaming instead. 

This story was updated on Monday, Aug. 3 at 12:17 PM with additional details, including Trump's "key money" request.

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