Is the music streaming boom over? Is an AI-song about to become a real hit? Which lower league Welsh football club would YOUR favourite artist sponsor? And much more...

0:03Hello there, welcome to The Price of Music brought to you by Music Ally. If you want an easy guide to what's going on in the music industry, and know about how it all works, then here we are every week looking at the finances of the music industry, whilst also bringing you stories and comments from the pop biz in the last seven days. He is Stuart Dredge. I am Joe Sparrow. And Stu, by way of introduction, let's start with your big number. This is something that caught your eye this week.

0:28Stu:uh it's two that's how many hills i climbed in the lake district last week i wasn't doing this show no you want a music industry number right go on big hills they were big hills um seven billion euros there you go that's a big number for you is big and what is it well this is how much less a universal music group is worth now than it was at the start of this year um that's based on its market cap which is its valuation based on its share price. So its share price has fallen by 20 % at the beginning of the year. It was worth 35 billion euros in January, and now it's worth just over 28 billion euros.

1:04Stu:And why this is noteworthy is that many of the other numbers around the company's business, the biggest major label in the world, are going up. So its financials were announced recently. Its revenues are up. Publishing revenues are up. Streaming revenues are up. But what has happened is that Wall Street, so shareholders, investors, appear to be spooked by the fact that the growth that Universal Music is seeing is not as big as they were expecting, particularly from streaming subscriptions. Now, this is interesting, isn't it? Now, this is not financial advice, and share prices go up and down all the time, don't they?

1:37So this is just a sort of, the one thing I always think about when looking at share prices of companies is that it's a snapshot of market sentiment. So this is how people think, how confident they feel at the moment. And of course, in six months, it might change again. But last week, all these big companies that are listed on the stock exchange released their quarterly reports. So we had all the major labels saying, here's how much money we made, and here's how much our share price, how much return we give per share, and all those things. And it was after Universal announced their quarterly reports that their stock price dropped 25 % immediately, right?

2:16But the weird thing is that all the numbers went up. Like, growth went up. They're growing.

2:24Stu:They're making loads and loads of money. Why has this happened? Well, it's because their expectations, and sometimes those expectations come from the companies themselves, that we think we'll grow by this much next quarter, if they didn't. Other times, they come from the investors, and it can be found quite harsh, that you've grown really well, but because analysts thought you'd grow more, they all dump your shares. But this happened last week with Spotify too. So Spotify was one of those other companies in ounces as well, wasn't it? And you were covering this in my absence. And I mean, it hit a big milestone, 300 million premium subscribers, which is unthinkable.

2:56Stu:Like 15 years ago, if you said there will be 300 million people paying for music from one streaming service. Its revenues are up 15 % year on year, but its share price dropped by nearly 6%. And again, that's about expectations of growth. and is the growth tailing off? Is there going to be a ceiling to subscriptions growth? Is it all slowing down in a way that the companies in the industry, Spotify and UMG, haven't really predicted? And the same with Spotify. Like, Spotify's worth a lot more now than it was a couple of years ago. But since the beginning of this year, it's down 11%. So its market cap is$105.3 billion at the moment.

3:35Stu:And it was$118.3 billion in the year. So it's dropped, what's that,$13 billion. since January. Again, a market of sentiment could go up again tomorrow. It's all vibes, really, isn't it? Financial vibes. The interesting thing I was going to say is that this is all based around... We talk a lot about streaming and these huge numbers and money, and we try and boil it down to money going to artists and songwriters at the bottom. And from a sort of helicopter perspective, above everything, all these big numbers are going up more subscribers more billions more more more more all the time but so is it that the suggestion is there's a so the markets are when we say markets we're talking about generally not just like you and me investing a bit of money here and there in companies these are big institutional investors who might be investing 10 billion dollars into a business you know they're big big investment firms or they're public pension pots or whatever and so they're saying, well, we're seeing your growth slow down a bit.

4:42And so we're going to pull some of those shares out and put them elsewhere into something else that's growing a bit faster. So what does that mean? If we've been riding the streaming train for 20 years now, and the number has gone up rapidly, and now the number of the money that's coming in is still going up, but the speed at which is going up is slowing down. What does that mean for A, the major labels who are making most of their money that way and b spotify let's say because that's the standalone streaming platform of note where their growth rate is still pretty good it's like nine percent or seven percent depending on which company you're at but but that's coming down from sort of super high levels what does it mean in terms of what they have to do next

5:25Stu:well this is a thing because there's two incentives here one is you want to grow because you want to grow, you want to do better and make more this year than last year. But there's also the need for growth. When you're a public company, you need to grow and you need to be showing growth and proving it's going to carry on. And so there's these two things. One is what do you do to keep growing a business? What does Spotify do to boost subscriptions further and find new revenue streams? What does Universal do to make more money from streaming and so on? But there's also the how do you communicate to the markets, to investors, to Wall Street, that you believe more growth is coming?

5:59Stu:how can you tell that narrative how can you say yes and so a lot of ways this might be ai is a good example at the moment and spotify has a little air and it's done a deal with merlin for its ai remixing covers tool and this is part of that message or both sides it's a way to make money you know people fans might pay to remix songs by their favorite artists using ai or they might not as we've talked about before but you then have to also say look no no it looks like stream may be slowing down, but there's this new wave of growth coming and it's all about AI and we're really into AI. We're really good at it.

6:32Stu:Don't panic. So it's that really. I think it's that sense of you can't just sit on your laurels and be a business that makes the same amount every year and is about as profitable. You have to grow. Sometimes there's a cycle where companies that were public go private again and they go, oh, it's great. We don't have to be on this awful hamster wheel of people expecting us to grow. And then a few years later they go, no, we're going public again because you can make loads of money by going public. That stonks all around. So it's a weird thing. But yeah, Universal Music is public. Spotify is public.

7:06Stu:Warner. So to a sense there's always going to be this. They announced their financials, they seem good and yet their share price has gone bleh. While Stu was up a hill last week on holiday, I had the privilege of covering all this news. And also listening into the Spotify, they have a, what do they call it, investor call. And it's when they announce their report and then they talk about it a bit and take questions from journalists. My question was not approved to be answered, by the way. Were you trying to get, well, we'll come later on to what were you trying to get to say? But it was, the thing that occurred to me was they were very keen to push the narrative you just mentioned, which is, oh, we're going to grow by doing this.

7:48And they They were really keen to say that their users, their Spotify users, were very enthusiastic about add-ons. So they announced an audiobook add-on, which gives you more audiobooks. You pay more money to get more audiobook hours per month. They announced an add-on for, I think it's called like, you get articles from like Rolling Stone and Vogue read to you, I guess, by an AI voice. And that's a sort of another form of podcasting. That's an add-on as well. So it looks like they're saying, well, our natural growth from expanding into new markets is slowing down a bit. So there's a sort of two-tier approach, I think.

8:26And this was also from some research he did on UMG. They're expecting this growth to continue in two places. One, they will expand into what they're calling emerging markets, so places like India and places in South America, where obviously prices begin lower, but they're going to start getting more people signed up and then increasing the prices there. So more people, more money. And then the other half is by looking at new ways of getting money out of people in established markets, so like the UK and Germany and the US, which sort of growth is slowing down because pretty much everybody who's signed up to Spotify has signed up to Spotify.

9:00So now they're going to convince them, hey, pay us a bit more to get audiobooks and blah, blah, blah, blah, blah. So we will see price increases across the board in the coming years, but definitely look out for, I think, lots of add-ons and extra things to pay for in your streaming app and around artists from a label perspective in the coming years. Speaking of add-ons and AI, we've spoken ad nauseum about AI on this podcast, but because there's so many interesting and weird things keep happening, There's a lot happening with the sort of AI, generative AI. So this is the company that makes AI music.

9:36The one we sort of refer to quite often is Suno. And there's a lot happening. And here's three of them. So let's breeze through these three things. First of all, there was a big legal ruling about Suno in Germany. Stu, what's going on?

9:52Stu:Yes, don't switch off. Yes, we started with stocks and we go straight to legal. This is also a story about Boney M's Rasputin and Mambo No. 5. Yeah. Yeah. Which is the two of the most German-centric songs I can think of, if I'm being honest. But yeah, this is about German collecting society Gemma, which has won a huge, a really big copyright infringement lawsuit against Suno in Germany. In the regional court. And this has been going on. So Gemma sued Suno. I say Gemma, it's Gemma, isn't it? Gema. It's Gemma, yeah. It's a hard key. Because they said they're legal to and basically entered existing song lyrics and style prompts in Chisuno, and the outputs were so close to the original songs that they were like, you have not just learned from these songs, you have copied them, you have taken them in, you've memorized them.

10:39Stu:Memorized sounds like a normal word, but it's actually quite a key legal phrase here. You've memorized these songs and you're outputting them in an infringing way. And you can go to the website and hear this for yourself, can't you? They've got a whole page of like, yeah, these are the prompts we've written and this is the song. Here's the original Mambo No. 5. And here's when we asked Suno to create Mambo No. 5. Here's what it sounds like. It's very, very similar. And so it's a big deal. And the judge ruled in Gemma's favour against Suno, which now faces financial damages. It's got to disclose data to Gemma to help those damages be calculated.

11:10Stu:It's got to tell them what it trained on. And a stop and desist order. Although Suno came out with a statement saying, we don't agree with this and we are examining all our options, including an appeal. It's a rape pill. But this is the second case. So Gema has been quite on top of this. So last year, they sued OpenAI over ChatGBT replicating lyrics. Because obviously Gema Collective Study represents publishing and songwriting, including lyrics. It's not about the recordings, it's about the works, the songs. And so these two wins, and it won that case too. So these two wins are basically saying in Europe, because obviously Germany is part of Europe, so this has ramifications across the continent.

11:50Stu:If you run a generative AI service of any kind and you haven't got explicit publishing licenses for music, then there are big legal and financial risks for you. And it also, I mean, this is where we get into slightly the weeds, but hopefully I can explain it because it is important. This idea of memorization. So I think what the traditional thing that AI companies often say is, we're not copying anything. We're not memorizing things and just chucking them out. we are listening to music and learning from it like a human would do. We're learning how music works. It's vibes, Stu. It's all vibes all the way down now.

12:23Stu:It's all vibes. Yeah. Wasn't that a lawsuit as well? That's the Ed Sheeran, Marvin Gaye lawsuit. But this ruling is saying, no, you didn't just learn from these songs. You did memorize them and you outputted them. And that kind of strips away one of these arguments about we are not legal. And it also does this, there's this hard line in Europe now, because in the US, everyone is still arguing about, is it fair use to just train your AI on any music you want? In Europe, this is kind of saying, if you want to operate here, you've got to pay for licenses. In this context, you've got to pay for a collective license from someone like Gemma.

13:01Stu:And it kind of raises this prospect. Although this, again, this case is now it could go to appeal and so on. but it does leave a thing of if you're a suno now do you say right we're going to have to negotiate licensing deals or we're going to have to geo-block europe entirely yeah and not have anyone there use it and just keep out the vision until we can get some some more clarity now listen i don't want to from share prices to german legal rulings to european um uh laws right so but so i'll just drop this in and leave it but on a week ago there is a european-wide ai law so this is the eu ai act i will leave you at home to do your own research here and dig into it but basically one of the tenets of this new law which is now enforced across europe is that if you create anything with ai that can be a chatbot or it can be music you have to legally under the order of a judge reveal what you trained that model on.

14:02So a judge under the under appropriate court case now has the legal power to force AI companies to reveal exactly what data went into their models to train them. So we might actually see a spicy lawsuit coming up at any time where people, and what people want, what artists and songwriters and everybody seems to want who opposes this is they say, look, just tell us what you trained it on. Just reveal, be honest with us and be transparent. Now, under European law, that can be requested and be forced by a judge under the threat of punishment of various types. I'll leave you to research that yourself, folks.

14:44So what does Sudo do next? They release a long blog post making promises about how much it really supports human artists.

14:53Stu:Yeah, well, this also happened last week. which I thought was, but it's part, there've been a few things like in some recent months where people, a couple were on LinkedIn who were saying, this is what we're doing, this is why we are responsible. And I think many music teams just go, there's a sight of it. I don't even want to read it. But these are really interesting because they're important signs of how Suno is shifting. Because this is from the CEO, Mikey Shulman, who is a man who, when Suno got sued by the major labels, he wrote this blog post that they said, the corporate record labels are turning to their old playbook and was very, whereas now he is very much like, no, we want to be responsible and good partners and an artist-friendly creative assistant.

15:31Stu:So it does show, it shows that change. And you can argue that change has come because of lawsuits, but it's important still. And yeah, I mean, you can tell me if I'm wrong, because obviously you wrote this story. There were two things, one is there's going to be a new download policy that means you can't just like make thousands of tracks and download them all and put them on streaming services. And upload. So it's about pipeline. So you can only download so many, you can only upload so many to streaming platforms. And they're going to watermark and fingerprint the files to help people identify songs made on Suno, which I think comes at a point when I think it feels to me a bit like it's been presented as being responsible.

16:13Stu:This is the right thing to do. I feel like it's almost also a bit of a survival tactic because we feel very close to streaming shows saying we're not going to let this stuff on or we're going to take it. So this is a way of saying actually, yeah, before you ban Suno-made music from your services, we're going to make it watermarked so you can properly label it. Which is a good thing, but I think it is a response ahead of that. I don't want to drag this back into the realms of the European court, but one of the tenets of the EU AI Act that's just come in is that all media must be tagged clearly for humans and machines to read.

16:48So any AI-generated stuff now in Europe must have a metadata tag to say to machines, this is AI-generated or contains portions of it, and humans consuming it as well. So I presume it's sort of aligned a bit with that, but it is definitely a defensive thing. And finally, from Suno this week, what could be more human than the warmth and the soundstage that only vinyl can bring you to?

17:13Stu:Well, true. and what could be more human than generating a someone suno and pressing it to vinyl yes tell us about this well this is the same thing so they've opened a wait i think they opened a waitlist haven't they for suno vinyl where you can basically pick up up to 46 minutes is it of your ai made tracks yeah upload your artwork and have a physical record sent to your front door so as far as i know you're paying 45 to get a record of your own stuff it's not like a commercial no you can it's a one-off yeah yeah um which kind of i don't know it just i feel like stop me if this is a lukewarm take i feel like the reason vinyl has been on this 20 year revival is because it is about warmth and an artist's craftsmanship and like slow intentional listening and having it ai generated audio from a text prompt pressed into a physical It feels like it hollows that out for me a bit.

18:15Stu:I mean, there are people doing stuff on Suno that has a lot of craft in it. And that's... That's where it gets spicy, I think. Well, but I don't know, really. It just seems like a... It seems off. For me, this feels like a sort of good birthday gift. You and your friends could make 45 minutes of band-filled songs about a friend, press it under vinyl, upload a picture of the front cover and present it to him. Oh, your vinyl bore friend. you could okay okay i'm sold on this and it's a good yeah yeah so just think i think think about the banter potential i think i think that the one the one thing i'll sum it all up with is i think we are getting i think slowly this is not the vinyl stuff but we're getting to a place where sooner is doing the things that you can see once and whether you think that's happened at kind of essentially legal gunpoint or not we're getting to the point where it's going to watermark stuff it's going to have done with them it's the things that people have been pressing it for and now we need to settle that, Kate, that idea of, well, should you pay for training?

19:13Stu:And there is a path for Suno to become a part of the industry. Whether that solves the kind of the trust gap with artists and music fans remains to be seen there. It's kind of been a quite like a speed run of that really tedious move fast and break things tech bro mantra, which is we're going to come in and shake up the music industry and people hate making music and, you know, all this, you know, the labels are the big old dinosaurs kind of thing. And then eventually they will fall in line and kind of end up being roughly where we expected them to be. And that's actually only taken a couple of years, which is fairly fast.

19:45And it goes some lengths to explain how heavily legally regulated the music industry and copyright is, which brings, and you were talking there about sort of getting onto the pathway towards a future, a reasonable future of AI music. And this next story is one that I've been following for a bit and I think offers another perspective on, we've been talking there sort of about the legalities, but this is about human acceptance of AI music. And this is a song by, you may not be familiar, folks, with the work of Phoenix Flexin, who's a West Coast American rapper, and his song, Rubbers with a Z. Stu, this is all about, for our American listeners, condoms, right?

20:25Is it about condoms? I assume. It is not. No, I can tell you. Is it about tires on a car? No, it's about when you're making a lot of money in a kind of gangstery way, you have to bundle your money together with rubber bands.

20:39Stu:Oh, wow. That's what it means, yeah. Anyway. I mean, I just, how would I know this? I've never had more than, you know, six notes at one point when I go on holiday. Exactly. This is where I ask you about this, because I'll tell you what I understand. Yeah. Like, at some point, I knew this rubber. It was kind of a viable TikTok joke. Yeah. But then it became an actual chart success. Yeah. And there was some talk then about, isn't this a it sounds a bit ai generated yeah and phoenix flexing was like no it's not but that's where the things have changed in the last week is that correct that's right so i sort of first became familiar with this story uh like i think about a month and a half ago and it was because i saw an interview with phoenix flexing right who is this he's been a rapper as part of a crew originally on the west coast for some years right and he He sort of built up a following.

21:32And then he went solo. And he's sort of one of these kind of, these rappers who is kind of quite a character. You know, he's very colorful. He looks colorful. He's got tattoos everywhere. He's kind of weird. And his music's good, right? And then what he's done is he's teamed up with this producer whose name I've forgotten, but I got it.

21:51Stu:Perps on the beat. Perps on the beat. Perps on the beat. That's right. I like that. So I knew you would know that. But so he teamed up with this producer called Purps on the Beat, and then he started his solo career. Anyway, he recorded a song which sounded very different to all of his other songs. So all of his other songs are kind of hip-hop, and you can sort of anticipate which way that goes. But then he released a song with Purps on the Beat, which sounds, and the best description I can give you is, it sounds like the Smiths crossed with hip-hop, crossed with 1980s Human League-style synth-pop, right?

22:26and it became a viral hit on TikTok because it's really catchy like it doesn't matter if you think it's good or bad I actually quite like it but it's very very catchy it's got this weird lyric it's kind of something emotional about it and he's singing in it in this kind of faux English Morrissey-esque accent sort of so it's a really weird song but it's got a great chorus in my opinion. And it's called Rubbers. And then he's been sort of dogged all the whole time. This has been his biggest hit, right? So it's the only song he's had that's gone viral. And there's been this sort of accusations that he's actually just taken an AI generated song, sort of re-recorded some of the vocals, and then passed it off as his own work.

23:11And people have opinions on that. And then in the last week, another producer, an artist, American artist called Medicine, but it's spelled a bit differently. Here he is. Yeah. Yes, there you go. He put a TikTok post up that got millions of views saying, let me blow the lid on this and explain exactly how this is a totally AI-generated song. So he goes into sort of detail and says, look, I found file endings. And so it's all gone back and forth. Essentially, where we're at now is this.

23:38Stu:There was like, they posted a Pro Tools thing, is that right? Yes. And he said, no, that could be fake. Everything could be faked. So Phoenix Flexin' and Purps on the Beat. You'll be getting into real niche hip-hop stuff here, Stu. Purps on the Beat sounds like a skill. Yeah, that's right. He purps on the beat. He does, yeah. That's why his songs are so successful. He's really good at that. They released a video of showing the Pro Tools session where they put the song together. But people then said, well, look, we know what you did was you created this song on this platform, you exported all the stems, you've remixed it a bit and added some vocals in and then you've released it as your own song now the the big issue here is and the interesting part is this is now going up the hot 100 in america in the u.s charts right so it's actually hitting the charts and people like it and he's playing it live and people like it it's a hit song and we might be entering the sort of the point that you and i have talked about a lot which is what happens when there is a big hit song that is AI generated.