UMG shareholder Pershing Sq. doesn’t assume AI poses a risk to the trade since most AI-generated music ‘will seemingly by no means be heard.’
Pershing Sq., the New York Metropolis-based hedge fund administration firm headed by billionaire investor Invoice Ackman and proprietor of about 10% of Common Music Group (UMG) shares, launched a half-year fiscal replace letter to shareholders final week. The corporate stays bullish on UMG and sees AI as a chance for development on which the music rightsholder large is already capitalizing.
“UMG’s enterprise progress, as evidenced by its first half outcomes, and the articulation of the corporate’s AI technique, on each an offensive and defensive foundation, has largely put (AI-related) issues to relaxation,” writes Pershing. “We imagine that investor issues about AI displacing main labels and artists are misplaced. Relatively, we imagine that AI represents a big alternative for the corporate.”
Regardless of losses in H1 2023 (the six months ending in June), UMG’s inventory regained its share worth of round €23 by mid-August after dropping to roughly €18 per share. That strains up with Ackman’s assertion final yr that UMG has the potential to develop income by no less than 10% every year for the subsequent ten years, an evaluation that Pershing Sq. hasn’t up to date since however on which UMG has all however delivered.
Pershing Sq. argues that AI is a optimistic drive for UMG and the trade as a complete, that regardless of the sudden increase in AI content material — which contributes to roughly 120,000 new audio tracks uploaded to DSPs every day — UMG’s market share has stood agency at round 30%.
“Whereas pleasure round AI will improve the proliferation of content material even additional, we imagine that this lengthy tail of AI-generated content material will seemingly by no means be heard and won’t displace professional artists’ work,” reads the letter to shareholders.
“Within the handful of cases the place unsanctioned AI-generated songs imitating well-known current artists have achieved virality, they’ve been promptly eliminated by DSPs to guard artists’ rights,” the letter continues earlier than including that any DSPs’ failure to behave on unsanctioned AI-generated tracks represents “alternatives for artists and their labels for compensation.”
The necessity to defend artists from unlicensed or undesirable use of AI that might compromise their public picture is a part of what Pershing Sq. calls the “defensive” facet of UMG’s technique. In the meantime, the “offensive” facet is evidenced in offers the rightsholder has secured with AI builders.
“UMG’s partnership with Endel and HYBE’s current launch of a observe in a number of languages present a framework for the way the corporate can monetize AI-assisted music,” reads the letter, referencing HYBE artist MIDNATT’s launch that includes “the first-ever multilingual observe produced in Korean, English, Japanese, Chinese language, Spanish, and Vietnamese,” and a first-of-its-kind deal that UMG struck in Might with AI-startup Endel.
UMG has additionally entered into a brand new settlement with YouTube to collectively develop AI instruments providing “protected, accountable, and worthwhile” alternatives to music rights holders, that includes a brand new “Music AI Incubator” at YouTube.