Universal Music (UMGNF) and Warner Music (WMG) are reportedly closing in on AI licensing deals that could reshape the music industry. According to the Financial Times, the discussions are centered on how music labels could license their songs for AI-generated tracks and for training large language models. Investors are watching closely, as the partnerships may unlock new revenue streams, boost efficiency, and spark fresh momentum for music stocks.
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Notably, Universal Music and Warner Music are leading music companies and represent top artists like Taylor Swift, Ed Sheeran, Dua Lipa, Cardi B, and BTS. The potential licensing deals for AI-generated tracks could create a new revenue stream for Universal and Warner, increasing their earnings. These deals also show that the labels are embracing AI trends, which may boost investor confidence and drive stock demand.
Big Tech Meets Big Music
Reports stated that Universal and Warner are close to finalizing AI licensing deals within weeks. Discussions have included startups such as ElevenLabs, Stability AI, Suno, Udio, and Klay Vision. The companies are also in talks with major tech players like Google (GOOGL) and Spotify (SPOT).
Sony Music (SONY), the third-largest major label and the home of stars such as Adele and Beyoncé, added that it is engaging with companies employing ethically trained AI models that support its artists and songwriters.
Under these agreements, the labels are seeking a payment system similar to streaming platforms, where each use of a song triggers a small payment. To track this, the labels want AI companies to create technology, similar to YouTube’s Content ID, that can detect when their music is being used.
Music Labels Tackle AI Disruption
The music companies view these talks as a proactive way to manage disruption from AI and avoid the mistakes of the early internet era, which nearly devastated their business.
AI-generated tracks are becoming more common on streaming services. In September, French streaming service Deezer (FR:DEEZR) said almost one-third of its uploads were made by AI, while Spotify said it had taken down 75 million low-quality AI-generated tracks in the past year.
Sources said the labels hope these deals will set a standard for how AI companies pay for music, though the payment models could vary across platforms.
Which Music Stock Hits the Right Note, According to Analysts?
Using TipRanks’ Stocks Comparison Tool, we compared music stocks to see which ones analysts favor.
SPOT stock is rated a Strong Buy, while UMGNF and WMG have Moderate Buy ratings. Among these, Universal Music’s stock has a price target of $36.17, offering an upside potential of 22.82% from current levels.
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