Welcome to the NEW Major Label AI Club: Were’ A Very Small Group, and You Ain’t In It!
As we stand at the precipice of a new era in the music industry, driven by rapid advancements in artificial intelligence (AI) and shifting power dynamics, it is imperative to understand the forces at play and their implications. The traditional paradigms that have governed music production, distribution, and consumption are being disrupted by innovative technologies and evolving consumer behaviors. This article delves into the critical changes reshaping the industry, the challenges faced by legacy rightsholders, and the opportunities that lie ahead for those willing to adapt.
The Rise of AI-Driven Music
AI’s Impact on Music Creation
Artificial intelligence has begun to play a transformative role in music creation. AI music startups, such as Suno, which recently secured $125 million in funding, are producing music that rivals, and in many cases surpasses, the quality of newly released human-made tracks on streaming services. With approximately 120,000 tracks being uploaded to streaming platforms daily, and over 25 million tracks remaining unplayed in the last year, the industry’s landscape is becoming increasingly competitive and saturated.
The advent of AI-generated music represents a significant shift in how music is produced and consumed. AI’s ability to create compelling compositions quickly and efficiently challenges the traditional dominance of human musicians and composers. This shift signifies the onset of a ‘new normal’ in the music industry, where AI-driven content gains a substantial share of the market.
Platforms as Primary Influencers
The music industry’s historical patterns reveal a recurring narrative: innovative companies introduce new monetization models that eventually diminish the influence of legacy rightsholders. This phenomenon is evident in the current dynamics between digital platforms and traditional music labels. Platforms like Spotify are not only curating content but increasingly creating and owning it, reducing their reliance on external rightsholders.
Spotify’s “Year of Efficiency” highlights its strategic shift towards algorithmic discovery and reduced human influence on playlist curation. This transition boosts Spotify’s profit margins while spreading the pro rata stream royalty pool thinner among a broader array of participants. This paradigm shift mirrors the experiences of social media platforms like TikTok, where mainstream music no longer holds sway as it once did.
Spotify’s Strategic Dominance
Algorithmic and Playlist Control
Spotify’s control over its audience is underscored by its dominance in playlist curation. Analyzing the top 25 global playlists on Spotify reveals a significant trend: all these playlists are owned and managed by Spotify, eliminating third-party influence. This strategic control over playlists allows Spotify to prioritize its content, including music from independent streaming right holders like Epidemic Sound, which often bypasses traditional performance royalties.
The concentration of power within Spotify’s ecosystem poses a threat to major rightsholders. The platform’s ability to influence what music is discovered and consumed on a global scale diminishes the leverage of traditional labels and artists. This shift necessitates a reevaluation of strategies by legacy rightsholders to maintain relevance and market share.
AI-Generated Music and Market Share Dilution
The proliferation of AI-generated music further dilutes the market share of traditional rightsholders. Despite efforts to mitigate the impact, such as Spotify’s 1,000-stream payout threshold and the demonetization of short ‘noise’ tracks, the fundamental challenge remains: AI-generated music is here to stay, and consumers are embracing it.
AI empowers average consumers to create and distribute music with minimal resources, blurring the lines between listeners and creators. This democratization of music production threatens the established order, as millions of AI-generated tracks flood streaming platforms, challenging the supremacy of traditional rightsholders.
Opportunities for Major Rightsholders
Adapting to the New Landscape
To navigate the evolving music industry, major rightsholders must adapt their business models and strategies. Embracing AI and leveraging it to their advantage is crucial. Developing algorithms for A&R (Artists and Repertoire) that can identify potential hit content from social media platforms and nurturing it into mainstream success can offer a competitive edge.
Major rightsholders should also focus on managing micro-influencers, operating popular social media pages, and directly engaging with brand or artist audiences. Scaling digital marketing campaigns to drive traffic to platforms and trigger favorable algorithms is essential for maintaining visibility and relevance.
Building Attention Assets
Creating and scaling ‘attention assets’—digital properties that capture and retain audience engagement—will be vital. Companies like HYBE and Create Music Group exemplify this approach. Create Music Group, with its extensive audience across TikTok, Instagram, YouTube, and streaming playlists, is well-positioned to thrive in the new landscape. Their success underscores the importance of developing robust ecosystems that can quickly adapt to and capitalize on emerging trends.
Are You Entertained?
The music industry is undergoing a profound transformation driven by AI and shifting power dynamics. Traditional rightsholders must adapt to the new reality where platforms and AI-generated music play a dominant role. By embracing innovative technologies, leveraging digital marketing strategies, and building strong attention assets, legacy rightsholders can navigate this new landscape and continue to thrive. The future of music lies in the ability to adapt, innovate, and engage with audiences in novel and meaningful ways.
