{"id":112722,"date":"2025-11-01T17:16:45","date_gmt":"2025-11-01T17:16:45","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/112722\/"},"modified":"2025-11-01T17:16:45","modified_gmt":"2025-11-01T17:16:45","slug":"will-it-hurt-or-help-the-record-label-business","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/112722\/","title":{"rendered":"Will It Hurt or Help the Record Label Business?"},"content":{"rendered":"

\n\tA few years into the debate about AI\u2019s potential economic impact\u00a0on music, the jury is still out.\u00a0\u00a0<\/p>\n

\n\tAI could be great for the music business, enabling new products and creating new revenue streams for artists and songwriters.\u00a0Universal Music Group\u00a0(UMG)\u00a0has said as much.\u00a0\u201cWe believe the commercial opportunity is potentially very significant,\u201d chief digital officer\u00a0Michael Nash\u00a0said during the company\u2019s\u00a0earnings call<\/a>\u00a0on Thursday (Oct. 30), a day after it announced a licensing deal <\/a>with AI music generator\u00a0Udio.\u00a0\u201cThese new products and services could constitute an important source of incremental additional new future revenue for artists and songwriters.\u201d\u00a0<\/p>\n

\t\t\t\t\tRelated\t\t<\/p>\n

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\t\t\t\t\t\t\"Universal<\/p>\n

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\n\tThen again, AI could erode record labels and music publishers\u2019 businesses by flooding the internet with inexpensively made music that takes some \u2014 not all \u2014 of their market share. Record labels have already lost market share to independent artists in recent years, and\u00a0AI could be either a continuation or acceleration of existing trends. \u00a0\u00a0<\/p>\n

\n\tTwo years ago, analysts at Barclays Research were dismissive of AI-generated music\u2019s threat to the established music business. The general population might have access to music-making tools, but, Barclays reasoned, the quality of the music was poor, and songs created by faceless software housed on computer servers couldn\u2019t create the human connection that listeners desire. Record labels and music publishers could be hurt if social platforms pushed AI music, but the money-saving tactic could run into legal roadblocks, they said. For all the initial hoopla about AI\u2019s ability to upset the status quo, too many questions at the time remained unanswered.<\/p>\n

\n\tToday, though, Barclays is singing a different tune, and advancements in AI platforms have answered some of their earlier questions. Now, the analysts are more convinced of AI music\u2019s potential to erode record labels\u2019 market share and weaken their financial standing. The quality of music has \u201cimproved significantly,\u201d they wrote\u00a0in a\u00a0Tuesday\u00a0(Oct.\u00a028)\u00a0report titled \u201cAI in Music: Danger Zone,\u201d\u00a0adding that\u00a0it\u2019s\u00a0\u201chard to differentiate between human music and AI music.\u201d Fans still crave connections with human artists, they wrote, but\u00a0as opposed to their earlier take, they conceded that\u00a0AI music\u00a0represents\u00a0a threat to the music establishment.\u00a0\u00a0<\/p>\n

\t\t\t\t\tRelated\t\t<\/p>\n

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\t\t\t\t\t\t\"Suno<\/p>\n

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\n\tIn the Barclays analysts\u2019 view, AI is a mixed bag of gains (such as AI-enabled superfan tiers) and losses (lower royalties from social media platforms\u2019 adoption of cheap AI music). Overall, though, they believe the damage that AI can create will outweigh its benefits. Their bottom line: In an average scenario, UMG takes a 1% hit to earnings before interest, taxes, depreciation and amortization (EBITDA) and Warner Music Group\u2019s EBITDA drops 4%. A worst-case scenario calls for deeper losses. A best-case scenario sees AI providing a boost. <\/p>\n

\n\tNot everybody is in the Barclays camp, however. Despite advancements in the quality\u00a0of music produced by AI platforms, analysts at J.P. Morgan are sticking with their opinion from 2023 that AI will not have \u201ca meaningful impact on industry revenues.\u201d Analysts wrote in a\u00a0note to UMG investors\u00a0on Monday (Oct. 27)\u00a0that AI risks have been \u201cnegated\u201d and \u201ccontrolled\u201d by the company\u2019s efforts in recent years to get streaming platforms to prioritize and reward professional artists over mass-produced, low-quality recordings. \u00a0\u00a0<\/p>\n

\n\tLike Barclays, J.P. Morgan believes market erosion\u00a0is\u00a0a genuine threat to UMG\u2019s market share. But J.P. Morgan\u00a0analysts\u00a0see\u00a0much more upside in AI.\u00a0(Notably, J.P. Morgan\u2019s analysis was less thorough; unlike Barclays,\u00a0it\u00a0didn\u2019t\u00a0put a dollar value on\u00a0AI\u2019s\u00a0potential\u00a0impact.)\u00a0They note that UMG will\u00a0benefit\u00a0from AI artists\u2019 need for publishers and record labels (which\u00a0jibes with\u00a0Billboard\u2019s assessment<\/a> of Hallwood Media\u2019s impact\u00a0on Xania Monet\u2019s on-demand\u00a0streams). AI can also generate revenue streams from new licensing opportunities\u00a0and\u00a0make listening to music more enjoyable, they write.\u00a0\u00a0<\/p>\n

\t\t\t\t\tRelated\t\t<\/p>\n

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\t\t\t\t\t\t\"Universal<\/p>\n

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\n\tThe major labels and publishers haven\u2019t signed or created AI artists yet, but if they do, J.P. Morgan believes they will benefit from economics that are superior to their deals with human artists and songwriters. It\u2019s not a stretch: To capture some of the market share that has shifted to independent artists, UMG has invested heavily in artist services by building up Virgin Music Group and attempting to acquire Downtown Music Holdings (the European Commission will announce its decision on the proposed merger in February 2026). If AI artists are to compete in the marketplace, they will need the same services that are available to human artists, such as promotion, distribution, copyright administration and public relations.<\/p>\n

\n\tOne thing is certain: Because AI music is in its infancy, trying to figure out its long-term trajectory is difficult. When the music industry began navigating the shift from physical to digital in the late \u201890s, few people could have guessed that the marketplace of 2025 would be dominated by subscription royalties and that download revenue would be almost nonexistent. When Napster launched in 1999, nearly a decade before the iPhone debuted, imagining the influence of an app like TikTok would have been nearly impossible. Music companies got to this point by enforcing the value of their intellectual property through a few decades of licensing agreements and lawsuits.<\/p>\n

\n\tIn the near term, expect more deals like UMG\u2019s partnership with\u00a0Udio. Over the long term,\u00a0expect\u00a0to be surprised.\u00a0\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"A few years into the debate about AI\u2019s potential economic impact\u00a0on music, the jury is still out.\u00a0\u00a0 AI…\n","protected":false},"author":2,"featured_media":112723,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[365,59876,363,364,111,139,69,145,65111,80478,80479],"class_list":["post-112722","post","type-post","status-publish","format-standard","has-post-thumbnail","category-artificial-intelligence","tag-ai","tag-ai-music","tag-artificial-intelligence","tag-artificialintelligence","tag-new-zealand","tag-newzealand","tag-nz","tag-technology","tag-the-ledger","tag-universal-music","tag-warner-music"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/112722","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=112722"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/112722\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/112723"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=112722"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=112722"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=112722"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}