On… OpenAI, Bain Capital, Daniel Ek, and causes to be cheerful

MBW Reacts is a collection of analytical commentaries from Music Enterprise Worldwide written in response to main current leisure occasions or information tales. Solely MBW+ subscribers have limitless entry to those articles. The beneath article initially appeared in Tim Ingham’s newest MBW+ Assessment e-mail, issued solely to MBW+ subscribers yesterday (April 6).

It needed to go down as one of many bleakest weeks for music enterprise traders in current reminiscence.

First, on March 13, Sam Altman’s OpenAI filed a coverage submission with Donald Trump’s White Home recommending, in essence, that the USA’s 200-year-old copyright legal guidelines be torn up to assist synthetic intelligence platforms.

To paraphrase OpenAI’s reasoning: “One thing one thing, China is frightening, additionally we like cash.”

Then, 5 days later, the RIAA introduced its personal shocker: recorded music commerce revenues within the US final yr grew by a paltry 2.7% YoY, slower than the speed of inflation.

Even perhaps worse, US ad-supported streaming revenues fell YoY (-1.8%), dragging down total streaming income development on the earth’s largest market to an anemic 3.6%.

We have been prepared for the period of double-digit development to finish, however a stoop into low single digits? Troubling.

The final seven days have solely piled on the torment.

First OpenAI, having now firmly outed itself as an enemy of rightsholders, introduced it had raised $40 billion in a SoftBank-led spherical – cash that can certainly assist amplify the ChatGPT proprietor’s anti-music lobbying arguments.

Then, on Wednesday, the Tony Blair Institute – a ‘assume tank’ based by the previous UK Prime Minister – beneficial that the present British authorities dilute its personal historic copyright legal guidelines to assist AI platforms.

(Alternative quote from the Blair report: “There are higher methods to assist creators flourish within the digital age than strict copyright legal guidelines.” There’s actually not.)

This miserable drip-feed of occasions might have left you questioning if the music biz’s current streaming-fueled get together is over – and if all the things good constructed on this trade for the reason that darkish days of piracy is now, all of a sudden, beneath assault from Large Tech.

Regardless of the doom-laden headlines, I’d like to depart these of you invested (actually or figuratively) on this enterprise feeling considerably optimistic about music’s future.

So, chin up. Listed below are three key causes to be cheerful…

1) Large Cash nonetheless loves music

Intelligent individuals very a lot imagine that music copyright’s subsequent century is gonna work out simply tremendous.

That’s what we will confirm from a raft of recent cash washing into music rights M&A, anyway. Two examples:

• Warner Music Group is anticipated to quickly announce a $1 billion+ pact with Bain Capital to purchase copyrights. I hear that this deal will contain a piece of debt, and talks are ongoing with two potential lenders: Fifth Third Financial institution and Goldman Sachs. Bain’s curiosity in funneling funding into the music enterprise in 2025 is especially reassuring, contemplating the agency’s repute for rigorously researching industries. There’s additionally a doable air of FOMO happening: Bain Capital, alongside Windfall, part-funded the deal that noticed Edgar Bronfman Jr. purchase Warner Music Group in 2004 for $2.6 billion. After floating on the NYSE, WMG was then offered to Len Blavatnik/Entry in 2011 for $3.3 billion. As we speak, even in a depressed inventory market surroundings, Warner is price round $19 billion;
• Pophouse Leisure, the Swedish firm that’s beforehand acquired music rights related to KISS, Swedish Home Mafia, Cyndi Lauper, and Avicii, simply closed out a USD $1.3 billion acquisition fund. Pophouse, led by CEO Per Sundin, says it has thus far deployed 30% of its fund – leaving it with round $900 million+ nonetheless to spend. In response to Pophouse, its financial backers embody “main pension funds, endowments, high-net-worth people, household workplaces, and sovereign wealth funds”.

In the meantime, I hold listening to rumblings that Temasek – the Singaporean state-owned fund – is eager to make a giant splash in music rights. (It’s already invested in music by way of fairness positions in SoundCloud and CAA.)

Additionally contemplate Sony Music Group‘s double-billion-dollar catalog splurge final yr (Queen! MJ! Pink Floyd!) and the frothiness of different current market exercise ($100 million for the $uicide Boy$ publishing, anybody?).

Additional names within the rumor mill of late: Will nation celebrity Zach Bryan promote his songbook for wherever as much as $100 million? May ex-Warner Chappell boss Cameron Strang resurface with a bundle of financial institution cash to amass rights?

Wherever the following headline is coming from, monetary investor curiosity in music catalog doesn’t appear depleted by current occasions. Certainly, it’d even speed up if worldwide consumption of on-line music (a digital good) stays unhindered by these Trump tariffs.

2) Is there really AI-nything to be anxious about?

Image the worst-case state of affairs: OpenAI, Google/Gemini, and the remainder are granted full authorized free rein to coach their fashions on the entire finest music ever launched.

Outcome: you, too, can now make a monitor that sounds identical to Taylor Swift! And what’s this? AI Drake-a-like and AI Kendrick-a-like beefing on the identical tune!

All of it sounds thrilling till you understand… no music fan is definitely going to hearken to this dreck.

We already get 100,000 tracks a day nobody’s thinking about. Quickly we’ll have extra. The tip.

I do know 15 chords and might sing by means of my nostril. Voilà: I’ve all of the ‘coaching supplies’ of Bob Dylan’s profession.

Wish to hear me carry out? Thought not.

Nevertheless, there is an actual hazard that AI may meaningfully compete with the human pen in the case of the ‘constructing blocks’ of nice songs – particularly lyrics.

Nick Cave protested that, when ChatGPT was requested to write lyrics in his fashion, the consequence was “a grotesque mockery”. (Greatest quote: “Writing a very good track just isn’t mimicry, or replication, or pastiche, it’s the reverse.”)

But defending the worth of lyrics – music’s most historical copyright – is a must-win battle for music rightsholders because the age of AI dawns.

Simply as properly, then, that there’s some promising information on that rating.

Witness a extensively misunderstood element of Harmony/ABKCO/Common Music Group‘s ongoing landmark lawsuit in opposition to Anthropic (multi-billion-backed dwelling of AI bot Claude).

In March, the US court docket presiding over the UMG vs. Anthropic case nodded to the truth that OpenAI had not too long ago struck monetized content material licensing agreements with Information Corp, Monetary Occasions, and Shutterstock.

This, stated the choose, recommended {that a} industrial licensing framework for AI coaching already exists (i.e. the cash OpenAI paid to Rupert Murdoch and co. is an early barometer of authorized market dynamics).

In flip, which means if UMG triumphs, the court docket would have a industrial foundation for calculating the financial damages Anthropic would wish to pay for previous mass copyright infringement.

The music publishers preventing the go well with say they continue to be “very assured” of profitable.

3) Apple Music and Amazon Music had a woeful 2024. May they up their sport (lastly) in 2025?

In response to Midia Analysis, there have been 818 million whole subscribers to music streaming platforms globally on the shut of 2024, up by 85 million YoY in web phrases.

Star performers included Spotify (with a 32% market share of 2024’s international subs), China’s Tencent Music (15%), and YouTube Music (10%).

However Midia’s numbers additionally included this stunning stat: Apple Music and Amazon Music added simply 6 million subscribers, globally, between them in 2024.

That’s an particularly weedy determine when you think about that YouTube Music and Spotify, in line with respective firm bulletins, added over 50 (!) million subscribers between them in the identical timeframe (with Spotify up 27 million YoY and YouTube up by roughly 25 million YoY).

So the place do Apple and Amazon go from right here? Apple’s mooted hiring of TikTok’s Ole Obermann definitely means that Cupertino HQ acknowledges it wants a technique change (and higher subscription efficiency) for Apple Music in 2025.

As for Spotify? I’d be amazed if we don’t see additional value rises this yr, along with the launch of the agency’s ‘superfan’ Music Professional tier at round $18 monthly. (I’d like to see Spotify experiment with shifting its ‘free’ tier in america to a lower-price, pay-only-with-ads choice, however I don’t maintain out a lot hope.)

What’s led Spotify to emphatically outperform Amazon and Apple in music subscription these previous few years? That free tier ‘funnel’ definitely helps, sure.

However what about this: the present heads of Apple Music and Amazon Music, Oliver Schusser and Steve Growth respectively, every oversee a number of operations of which music is only one constituent.

Schusser is the President of Beats Electronics, plus the Vice President of Apple Music and ‘worldwide content material’. Growth doesn’t even have music in his official title: he’s Amazon’s Vice President of Audio, Twitch, and Video games.

As for Daniel Ek?

Regardless of Spotify’s current enlargement into podcasting and audiobooks, Ek advised his traders in February that SPOT can be “going all in” on music experiences in 2024, referring to music as his platform’s “core”.

It seems that Mr Ek acknowledges one thing a few of his rivals might have forgotten: the distinctive enchantment, resonance, and worth of music.

That, in a world of infinite content material, the human artistry behind nice music stays irreplaceably finite – and price each billion being invested in it.Music Enterprise Worldwide