This week we have an exciting outline: the bond between innovation and the music industry cashflow. Between AI regulations, music industry numbers and the forces set in motion to create a stronger streaming industry, we have a lot to cover!
#1. What does AI regulation have to do with Music?
AI has become such an established and pervasive reality that the need for regulation in this field is increasingly evident. The European Union could set a precedent in this regard as it makes progress in approving the AI Act, legislation aimed at regulating AI applications and, most importantly, mitigating its risks. The law includes provisions to prohibit certain uses of AI and expands the category of "high-risk AI" to encompass recommendation systems used by major social media platforms. It also forbids intrusive practices like remote biometric identification and emotion recognition by law enforcement agencies. In the music industry, generative AI systems must comply with transparency requirements, disclose AI-generated content, and publish copyright-protected training data. Thus, the law underscores the importance of recognizing AI-generated content in music.
However, the AI Act already faces obstacles even before it becomes law. Among them is OpenAI, which has exerted pressure on European regulatory authorities to relax the regulations of the AI Act. Although the CEO of OpenAI publicly supports AI regulation, the company has proposed modifications that have been incorporated into the final version of the AI Act, expected to be completed by January 2024.
Speaking of AI, significant news has emerged regarding the implementation of new rules by the Recording Academy for the 2024 Grammy Awards, stipulating that music created solely by generative AI will not be eligible for a Grammy. Only works with human authorship can be considered for nomination and win a Grammy Award. However, works that incorporate AI elements are eligible if the human contribution is substantial and relevant to the category.
These rule changes come amidst ongoing ethical debates on AI-generated music and align with the European Union's call for technology giants to label AI-generated content. In this complicated situation, Grammy Awards will continue to prioritize human creators, requiring human involvement in songwriting and performances for eligibility.
#2. US Music Publishing Industry Outshines Recorded Music in 2022
The music publishing industry in the United States surpassed the growth of its recorded music counterpart in 2022. A confluence of factors, including a surge in streaming activity, the gradual reopening of public spaces, and a favorable ruling by the Copyright Royalty Board, propelled this achievement. The industry experienced a retroactive increase in mechanical royalty rates, and a new royalty rate was established for the years ahead, both contributing to a substantial boost in publishers' revenue.
According to the National Music Publishers' Association, trade revenue skyrocketed by an impressive 19.25%, surging to an astounding $5.605 billion. This figure marks a momentous milestone, as it more than doubled the industry's annual revenues in 2016. While the recorded music sector outperformed the music publishing industry in terms of overall revenue, the latter experienced a remarkable growth of $900 million, almost double that of its record industry counterpart.
This outstanding growth can be attributed to multiple factors too. The increase in royalty payments, driven by the retroactive adjustment and new rates, played a significant role in boosting revenue streams for publishers. Furthermore, the recovery of performance royalties following the easing of Covid-19 restrictions provided a substantial impetus to the industry's growth. Additionally, sync revenue from diverse media platforms, including films, advertisements, and online channels like YouTube and TikTok, contributed significantly to the industry's remarkable expansion.
In summary, the music publishing industry in the United States showcased an extraordinary performance in 2022, outshining the recorded music sector.
#3. Merch Remains the Best Revenue Stream
Can merchandising truly make a difference in the music industry? While it may sound like a rhetorical question, it has been proven that merch represents a significant portion of artists' earnings.
The current situation is challenging for musicians due to the decline in streaming revenues. Consider that only 0.4% of artists on streaming services are able to sustain themselves adequately with the income generated from this source. Furthermore, the increasing accessibility of music technology has led to an enormous quantity of new songs, while social media algorithms make it difficult for artists to reach their fans. Not to mention the challenges posed by the rapid advancement of artificial intelligence. It's obvious that creating music alone no longer provides equitable pay, but there is still something that works: selling merchandise. Artists of all kinds have long relied on merchandise to support their careers.
Likely, The music merchandising industry is a multimillion-dollar sector. According to Tersha Willis, the founder of Terrible, a boutique music merchandising company, merchandising often accounts for around 70% of an artist's earnings!
Rachael Scarsbrook, Head of E-commerce at BSI Merch, which handles merchandise for artists like Harry Styles, stated that the streaming economy has contributed to the increasing importance of merchandising in artists' strategies: "Artists are earning less than ever from streams, while the sale of a t-shirt can generate revenue equivalent to tens of thousands of streams."
For artists with a dedicated or niche fan base, It is important to remember that merchandising also requires careful strategy. Is not limited to superstars but also encompasses emerging and veteran artists. All in all, this is a business that should never be underestimated.
#4. Music Publishers are Suing Twitter for $250 Million
In a significant legal showdown, music publishers have launched a lawsuit against Twitter, seeking a staggering $250 million in damages for alleged copyright infringement. The National Music Publishers' Association (NMPA), representing 17 prominent publishers including Sony, Universal, and Warner Chappell, accuses Twitter of willfully violating the rights of approximately 1,700 copyrighted works. According to the complaint, Twitter has been leveraging infringing copies of musical compositions to drive its business, while its competitors have proactively established licensing agreements.
The NMPA highlights Twitter's disregard for formal infringement notices, pointing out an alarming number of over 300,000 infringing tweets. The publishers are seeking maximum damages of $150,000 per infringed work as they aim to hold Twitter accountable for its actions.
Adding complexity to the lawsuit is Elon Musk's ownership of Twitter, with the tech billionaire displaying a reluctance to address the copyright infringement issue. Twitter's longstanding absence of licensing agreements with music publishers has been a subject of concern, and Musk's previous statements indicate a readiness to engage in a protracted legal battle. The outcome of this lawsuit could have far-reaching implications for Twitter's operations and the broader landscape of online copyright protection.
#5. Music Industry Unites to Combat Streaming Fraud
A recent study has revealed that approximately 3% of music streams on platforms like Spotify are fraudulent. However, this number only accounts for detected cases, leaving numerous instances of fraud still concealed. Acknowledging this issue, the music industry has taken action, with influential companies such as Believe, Empire, Spotify, and Amazon Music forming a global task force called 'Music Fights Fraud'.
To tackle streaming abuse, these companies have already implemented internal measures to combat fraudulent practices, including the use of bots, click farms, and imposters. Such deceptive activities adversely affect all artists by reducing legitimate earnings, diluting royalty pools, and causing delays in song releases.
Music Fights Fraud will thus focus on detecting, preventing, mitigating, and enforcing anti-fraud measures within digital streaming services. Alliance members will also collaborate and share data through a partnership with the trusted National Cyber-Forensics and Training Alliance (NCFTA), an organization dedicated to countering cybercrime.
Supported by influential organizations such as the Recording Industry Association of America (RIAA) and the Music Business Association, Music Fights Fraud aims to protect the rights of music creators and preserve the industry's integrity. Through this collective effort, the objective is to establish a more equitable and transparent streaming environment for all stakeholders involved.