Universal Music Posts Strong Quarter While Firing Off Fighting Words on AI
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Driven by big releases from Morgan Wallen, Taylor Swift, Tomorrow X Together, Drake and others, Universal Music Group saw its revenues rise 11.5% year over year to $2.71 billion in the first quarter of 2023.
But the company’s earnings call on Wednesday was just as newsworthy for the company doubling down on the strong remarks it has made about the fast-rising presence of — some would say threat from — AI in the music world, which hit UMG in the form of “Heart on My Sleeve,” a song using AI-generated soundalikes of two of the company’s biggest artists, Drake and the Weeknd.
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“The recent explosive development in generative AI will, if left unchecked, both increase the flood of unwanted content hosted on platforms, and create rights issues with respect to existing copyright law, in the U.S. and other countries, as well as laws governing trademark, name and likeness, voice impersonation, and right of publicity,” chairman-CEO Lucian Grainge said on the call.
“Much of the latest generative AI is trained on copyrighted material, which clearly violates artists’ and labels’ rights, and would put [streaming] platforms completely at odds with the partnerships with us and our artists,” he continued. “Any way you look at it, this oversupply, whether or not AI-created is, simply, bad. Bad for artists. Bad for fans. And bad for the platforms themselves.”
Michael Nash, the company’s chief digital officer, added later, “We own all sounds captured on our sound recordings. Soundalikes confuse the public.”
Grainge began the call by discussing the company’s results for the quarter, which saw revenue from streaming and subscriptions rise nearly 10% to $1.47 billion, with physical revenue soaring 32% to $346 million (probably assisted by Taylor Swift’s latest, “Midnights”). Downloads and other digital revenue continued to fall, down 19% to 55 million $60 million.
Universal Publishing had a strong quarter as well, with revenues rising 13.3% to $469 million. Its digital revenue was up almost 21% year over year to $255 million, with synch up 11% to $76 million and performance dipping 1% to $99 million.
Grainge also singled out releases by Metro Boomin, Karol G, Boygenius, the Courteeners, Lana Del Rey, Ellie Goulding, the Lathums, Sam Smith, Shania Twain, U2 and King & Prince.
Yet he turned to AI as part of his comments about the company’s plans for a new streaming model that they call “artist centric,” and which was discussed broadly on the last earnings call. He spoke of “the pressing need to redefine the streaming model in a manner that appropriately rewards those artists whose music drives fans to engage — and remain engaged — on platforms in the first place,” he said. “One of the issues this new model is designed to address is the flood of content on platforms that fans neither want nor choose to consume.
“Here’s an example from one music platform’s own publicly disclosed data: of the 9 million content uploaders on that platform, 8.3 million of them — more than 92% of them — have fewer than 1,000 monthly listeners and only 2% are quote-unquote ‘professional or professionally aspiring’ artists.”
He is pointing to what is essentially “junk” content on platforms — usually low-royalty, low-engagement background music.
“The music by our artists drives meaningful engagement on these platforms, yet the majority of content hosted on these platforms represents an insignificant percentage of what is actually consumed,” he continued. “And included in that oversupply is AI-generated content. Not many people realize that AI has been a major contributor to this content oversupply. Most of this AI content on DSPs comes from the prior generation of AI, a technology that is not trained on copyrighted IP, and thus produces very poor-quality output with virtually no consumer appeal.
“However,” he continued, “Unlike its predecessors, much of the latest generative AI is trained on copyrighted material, which clearly violates artists’ and labels’ rights, and would put platforms completely at odds with the partnerships with us and our artists, that drive success. Should platforms traffic in this kind of music, they would face the additional responsibility of addressing a huge volume of infringing AI-generated content.”
With the company’s planned “artist-centric” model, he said, “Platforms can focus on rewarding and enhancing the artist-fan relationship and, at the same time, elevate the user experience on their platforms, by reducing the sea of ‘noise,’ better highlighting the artists and music their customers care about most, and eliminating unauthorized, unwanted, and infringing content entirely.”
He also emphasized that the company does understand that AI is here to stay and already works with it extensively, although the intellectual property issues must be resolved. “When properly developed and employed, AI is a powerful tool for our future,” he said. “In fact, we already employ AI in a variety of ways: identifying new audiences for our artists, optimizing the production, mixing, and mastering of recordings, and enhancing the quality of music experiences, such as immersive sound. In fact, we hold several patents in these kinds of AI applications. I am confident that, in the service of artists, AI will meaningfully accelerate our business in the years to come.”
Variety will have much more on the developing relationship between AI and the music industry in the coming days.
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