How artificial intelligence is retuning the music industry
Artificial intelligence (AI) has a major impact on various industries. The music industry is no exception. The musical collaboration between Stromae and AI already created a world first 5 years ago. By using AI, artists and producers can find new ways to make music and promote their work. With the arrival of the summer come music festivals, which offer music lovers an experience no record can match. Can AI also play a meaningful role on major music stages? Many think so. With AI seeping into the music landscape, it’s time to examine its impact. Because one thing is certain: AI will have an impact.
AI changes the music game
In the same way that any individual can use AI to create music, labels and their artists can use it to speed up the creation process, generating beats, lyrics, or sounds in a more time and cost-efficient manner. In no time you can get thousands of suggestions, from which you can decide what to use or not. With generative AI, you never have to wait for divine inspiration again. Possibly AI also might define new musical styles. In the past, new technology often meant the start of new music.
Generative AI is unlikely to replace musicians, but musicians who don’t use generative AI will likely struggle to compete against those that do.
Jose Hernandez, Equity Analyst at KBC Asset Management
AI also helps artists to stand out by enhancing the whole music experience. During concerts, AI can adjust light shows and visuals, or sound, based on the acoustics of the environment. It can improve artist-audience interaction. The Abba Voyage for example, was an enchanting piece of virtual art. Recently, world-famous DJ/producer David Guetta joined forces with AI in an extraordinary way by including an AI-generated verse mimicking Eminem’s style in one of his songs. The result: a raving audience and a hit on social media. So no doubt AI can add an extra sparkle to live shows.
That extra sparkle is much needed since the art of making music is no longer limited to music artists alone. Competition becomes tougher. “The flood of tens of millions of AI-generated songs will make it more difficult for genuine artist
to break out or reach large audiences”, says Jose Hernandez, Equity Analyst at
KBC Asset Management.
Music industry rises to the challenge
Tougher competition may lead to less revenues. Regarding background or ambient music, it is easy to imagine videogame developers or movie studios switching to AI-generated, cheaper songs instead of licensed songs.
Tougher competition also makes it more difficult for an independent artist to reach fame. “This increases the value that labels bring to the artists”, says Hernandez. “In essence, the job of a label is to find and promote artists so that they have the chance to become superstars and generate royalties on their music for both the label and themselves. Marketing expertise and industry relationships with radio hosts, Digital Service Providers (DSPs) and playlist curators, just to name a couple, become of priceless value. In addition, when
labels use AI in combination with their vast amounts of data on listener preferences, they can fine-tune their marketing efforts in order to gain market
share against AI-generated songs.”
AI creates marketing opportunities, as music labels can focus their efforts on the right audience and personalized playlists can help artists bring their music to a wider audience.
Jose Hernandez, Equity Analyst at KBC Asset Management
AI questions the entire business model
With AI models trained on unlicensed artist songs, it is possible to replicate the voice and style of an artist without compensating them. Can this copyright infringement affect industry revenues in a similar way as the rise of illegal downloads through platforms like Napster in the early 2000s? Music labels respond proactively. “In order to protect their businesses, labels take effort in detecting AI-tracks in DSP’s and are forcing them to take them down”, says Hernandez. “Using AI to detect AI is becoming common business.”
But the most important approach labels are taking, is pushing for change in the way DSPs pay out to labels and artists. Streaming platforms like Spotify or Apple Music create a pool of money by collecting subscription fees and advertising dollars. They take a cut for themselves and hand out the rest of the pool to music labels, who share these revenues with their artists. However, the average person doesn’t listen to hundreds of different artists. On the contrary. The average listener mostly pays to enjoy the songs of a few dozen artists. “Music labels therefore argue that the really prominent artists, those who generate the most valuable streams , should get a bigger portion of the pie”, stipulates Hernandez.
A change in the revenue model as we know today with streaming platforms, could mitigate the effects of a long-tail of AI-generated songs. But this is all speculation for now.
Jose Hernandez, Equity Analyst at KBC Asset Management
Another option being considered is to let AI be trained legally on licensed music, which would then allow people to create music mimicking the style of another artist and paying a portion of the revenue generated back to the labels and artists in the form of royalties. This could certainly be an additional source of income for some artists, but could also feel very uncomfortable for others who don’t want their work to be tinkered with.
Sounds like music to the investor’s ears
AI has its limitations and there are still challenges to overcome. Nevertheless, the music industry as a whole is expected to do well in the next few years. As we all pay more attention to real experience, music was, is and always will be for many a way to escape the hectic pace of everyday life. Moreover, it is an extremely affordable form of entertainment, providing access to virtually all music for less than 10-12 EUR per month. For investors who want to capitalize on this, we see multiple opportunities. “Music labels like Universal Music Group, Warner Music Group and Sony Music Entertainment (part of Sony Group) not only own a big portion of the most relevant musical content, they also strive continually to own an even bigger portion. Digital Service Providers like Spotify, Deezer, Apple Music or Amazon Music are still winning paying subscribers every day”, says Hernandez. “And from a broader, thematic perspective, the music industry allows you to invest in our favorite leisure activities.”
To conclude, we return to the pinnacle for music lovers: the summer festivals. While AI does not have the soul to grasp and replace the emotional connection that fans make with artists on the meadow, there is no doubt that it is changing the face of the industry.
AI can spark a new revolution in the world of music. Together with AI, artists and labels can achieve great things that will take the experience of music to the next level. What they cannot afford to do is ignore the potential impact of AI.
Jose Hernandez, Equity Analyst at KBC Asset Management
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This article is informational only and should not be considered investment advice.
