<\/p>\n
MBW Reacts is a series of analytical commentaries from\u00a0Music Business Worldwide<\/a>\u00a0written in response to major recent entertainment events or news stories. Only\u00a0MBW+ subscribers<\/a>\u00a0have unlimited access to these articles.\u00a0The below article originally appeared in Tim Ingham\u2019s latest\u00a0\u2018Tim\u2019s Take\u2019 email,\u00a0issued exclusively to MBW+ subscribers.<\/strong><\/em><\/p>\n \u201cHe\u2019s brilliant at translating our artists\u2019 personal creative visions into the digital universe.\u201d<\/em><\/strong><\/p>\n That\u2019s what then-Atlantic<\/a> bosses\u00a0Julie Greenwald<\/a>\u00a0<\/strong>and\u00a0Craig Kallman<\/a><\/strong>\u00a0said about\u00a0Paul Sinclair\u00a0<\/strong>when they\u00a0promoted him to EVP in 2019<\/a>.<\/p>\n Today,\u00a0Sinclair<\/strong>\u00a0is \u201ctranslating creative visions into the digital universe\u201d for a very different kind of company:\u00a0Suno<\/strong>. The AI music platform\u00a0accused<\/a>\u00a0of \u201cmass copyright infringement\u201d by the world\u2019s biggest record labels.<\/p>\n Sinclair\u2019s<\/strong>\u00a0history at Warner Music Group<\/a> was likely one factor in increasing cordiality between Suno\u2019s CEO,\u00a0Mikey Shulman<\/strong>, and WMG boss\u00a0Robert Kyncl<\/a>\u00a0<\/strong>in recent months.<\/p>\n Last week, we saw the result:\u00a0WMG<\/strong>\u00a0settled<\/a>\u00a0its lawsuit with\u00a0Suno<\/strong>, inked a\u00a0licensing deal<\/strong>, and will start getting paid when its catalog is used to train the platform\u2019s models.<\/p>\n WMG\u00a0<\/strong>artists and writers get\u00a0opt-in control<\/strong>; royalties will flow from whatever hits might emerge.<\/p>\n This is a significant moment. The leading generative AI music platform \u2014 with\u00a0100 million+ users\u00a0<\/a>\u2014 has accepted a core principle:\u00a0training data must be licensed and paid for.<\/strong><\/p>\n But the\u00a0WMG\/Suno\u00a0<\/strong>announcement isn\u2019t without its curiosities.<\/p>\n Tucked into last week\u2019s\u00a0press release<\/a>\u00a0was confirmation that, as part of the new agreement,\u00a0Suno<\/strong>\u00a0has acquired Warner\u2019s\u00a0Songkick\u00a0<\/strong>\u2014 the live music discovery platform.<\/p>\n Hmm.\u00a0Except AI artists can\u2019t play live.<\/strong>\u00a0So what exactly does Suno want with a concert app? And what\u00a0economic role<\/strong>\u00a0did it play in the settlement with WMG?<\/p>\n I\u2019ve reviewed\u00a0Songkick\u2019s\u00a0<\/strong>latest annual accounts at Companies House in the UK (where it trades as\u00a0SK Acquisition Ltd<\/a>). The picture isn\u2019t pretty.<\/p>\n In its most recent financial year (ending September 2024),\u00a0Songkick<\/strong>\u00a0generated\u00a0GBP \u00a34.5 million (circa USD $6 million)<\/strong>\u00a0in turnover.<\/p>\n From that, it achieved a pre-tax profit of precisely\u2026\u00a0zero<\/strong>. The prior year was worse:\u00a0a pre-tax loss of \u00a3495,000\u00a0<\/strong>(see below).<\/p>\n More striking still: as of September last year,\u00a0Songkick<\/strong>\u00a0owed\u00a0GBP \u00a313.5 million<\/strong>\u00a0to fellow Warner Music Group companies, likely for tech and other support. That figure increased by around\u00a050%<\/strong>\u00a0year-on-year.<\/p>\n The accounts explicitly state that\u00a0Songkick\u2019s<\/strong>\u00a0health as a going concern is dependent on WMG\u00a0\u201cnot seeking repayment of the amounts currently due\u201d\u00a0<\/strong>and continuing to\u00a0\u201cmake available such funds as they are needed\u201d<\/strong>.<\/p>\n In short,\u00a0Songkick\u00a0<\/strong>is a great app for consumers, but for\u00a0WMG\u00a0<\/strong>it was a commercial dog: unprofitable, kept afloat by intercompany subsidies, and owing\u00a0\u00a313.5 million\u00a0<\/strong>it was likely never going to repay.<\/p>\n By folding\u00a0Songkick<\/strong>\u00a0into the\u00a0Suno<\/strong>\u00a0deal,\u00a0Robert Kyncl<\/strong>\u00a0offloads a non-core liability. He also sheds Songkick\u2019s 25 employees, which advances his mission to\u00a0cut another<\/a>\u00a0USD $300 million<\/strong>\u00a0in annual cost from\u00a0WMG<\/strong>\u2026 mostly through layoffs.<\/p>\n For\u00a0Suno<\/strong>? This might be about data.<\/p>\n Songkick\u00a0<\/strong>sits on years of user data tied to\u00a0Spotify<\/a><\/strong>\u00a0listening habits. That\u2019s a rich seam of behavioural insight \u2014 invaluable to an AI company trying to understand what humans actually want from music.<\/p>\n But did\u00a0Suno\u00a0<\/strong>also\u00a0<\/strong>get a simpler benefit by agreeing to absorb Songkick?\u00a0A reduction in the cash it needed to settle with WMG?<\/strong><\/p>\n Just two days before\u00a0WMG\u2019s<\/strong>\u00a0press release landed on Wednesday, November 26,\u00a0Billboard\u00a0<\/em>obtained<\/a>\u00a0a pitch deck Suno recently used to secure\u00a0USD $250 million<\/strong>\u00a0in\u00a0fresh funding<\/a>.<\/p>\n Buried in that deck was a breakdown of how\u00a0Suno\u00a0<\/strong>expected to spend its new war chest.<\/p>\n According to\u00a0Billboard<\/em>, just\u00a015%<\/strong>\u00a0of the money was earmarked for \u2018data\u2019 costs, with a measly\u00a05%\u00a0<\/strong>allocated to \u2018partnerships\u2019. The remainder? Compute power (30%<\/strong>), M&A (20%<\/strong>), \u2018discovery\u2019 (20%<\/strong>), and marketing (20%<\/strong>). (Yes, I know that adds up to 110%, but apparently that\u2019s what\u2019s in there.)<\/p>\n Even if we generously combine \u201cdata\u201d and \u201cpartnerships\u201d into a single pot, we\u2019re looking at\u00a020%<\/strong>\u00a0of $250 million =\u00a0$50 million<\/strong>.<\/p>\n Is that really enough to cover settlements with the\u00a0three major music companies<\/strong>\u00a0\u2014 not to mention a separate lawsuit from indie artists? If so, did folding\u00a0Songkick<\/strong>\u00a0into its\u00a0WMG<\/strong>\u00a0agreement help\u00a0Suno\u00a0<\/strong>reach a settlement valuation it couldn\u2019t match in cash?<\/p>\n Where does that leave\u00a0Suno\u2019s<\/strong>\u00a0ability to settle elsewhere?<\/p>\n Remember:\u00a0Universal Music Group<\/a><\/strong>\u00a0and\u00a0Sony Music Group<\/a><\/strong>\u00a0continue to pursue legal action against\u00a0Suno<\/strong>\u00a0for alleged \u201cmass copyright infringement\u201d.<\/p>\n Neither is known for\u00a0accepting pittances\u00a0<\/strong>for the keys to their catalogs.<\/p>\n In October,\u00a0Universal Music Group<\/strong>\u00a0announced a\u00a0landmark deal<\/a>\u00a0with Suno rival,\u00a0Udio<\/strong>, which transformed the platform overnight.<\/p>\n User downloads were\u00a0shut off<\/strong>. Paying subscribers woke up to find their creations trapped \u2013 with a grace period of just 48 hours to extract them.<\/p>\n As UMG\u2019s Chief Digital Officer\u00a0Michael Nash<\/a><\/strong>\u00a0told\u00a0Rolling Stone<\/em><\/a>, the aim was for UMG\u2019s artists to avoid\u00a0\u201cdirect cannibalization\u201d\u00a0<\/strong>\u2014 preventing AI-generated songs from\u00a0competing with human releases<\/strong>.<\/p>\n Suno\u2019s WMG deal<\/strong>, by contrast, looks positively libertarian.<\/p>\n Yes,\u00a0Suno\u2019s<\/strong>\u00a0current training models will be\u00a0<\/strong>\u201cdeprecated\u201d<\/a>\u00a0in 2026 when new licensed versions launch. And yes, there will be\u00a0monthly caps on downloads<\/strong>\u00a0for Suno subscribers.<\/p>\n But Suno\u2019s\u00a0fundamental functionality<\/strong>\u00a0survives: create a song, download the file, distribute it to\u00a0Spotify<\/strong>\u00a0if you want.<\/p>\n Why would\u00a0Kyncl\u00a0<\/strong>grant\u00a0Suno<\/strong>\u00a0this freedom, rather than locking the service into a walled garden like\u00a0Udio<\/strong>?<\/p>\n Probably because he\u00a0<\/strong>knows that neutering Western AI platforms too aggressively carries its own risks. Particularly given\u00a0China\u2019s\u00a0<\/strong>history of copyright, erm,\u00a0playfulness<\/em>\u00a0\u2014 and the very real rise of\u00a0DeepSeek<\/strong>.<\/p>\n The title of one\u00a0Reddit thread<\/a>\u00a0for Suno lovers, launched after the WMG deal announcement, captures this fear:\u00a0\u201cSuno is falling. Don\u2019t worry, China is surely cooking up its open-source killer.\u201d<\/strong><\/em><\/p>\n Suno\u00a0<\/strong>users on a different\u00a0Reddit thread<\/a>\u00a0bemoaning the\u00a0WMG<\/strong>\u00a0deal came to similar conclusions:<\/p>\n \u201cSoon there will be a model from China to fill the gap.\u201d<\/em><\/p>\n \u201cChina needs to cook up a clone ASAP.\u201d<\/em><\/p>\n \u201cVery disappointing, weak\u2026 well, China will be swooping in now.\u201d<\/em><\/p>\n Such platforms\u00a0<\/strong>are already embedded in\u00a0China\u2019s\u00a0<\/strong>music ecosystem.<\/p>\n In March,\u00a0Tencent Music Entertainment<\/a><\/strong>\u00a0\u2014 China\u2019s largest music streaming provider \u2014 announced it had\u00a0integrated DeepSeek<\/a>\u00a0into its AI-powered songwriting tools.<\/p>\n Robert Kyncl<\/strong>\u00a0understands this, and is attempting to strike a tricky balance: a licensed-but-functional\u00a0Suno\u00a0<\/strong>beats a neutered platform that\u00a0cedes the AI music market<\/strong>\u00a0to actors beyond the industry\u2019s control.<\/p>\n WMG\u2019s\u00a0Suno<\/strong>\u00a0deal doesn\u2019t kneecap the product; it legitimizes it. That\u2019s not how you negotiate with a platform you\u2019re trying to punish \u2013 it\u2019s how you negotiate with a platform you\u2019re\u00a0betting on<\/em>.<\/p>\n That goes double if my spidey sense is correct\u2026 and\u00a0Warner\u00a0<\/strong>managed to\u00a0<\/strong>bag some\u00a0Suno equity<\/strong>\u00a0as part of the bargain.<\/p>\nThe Songkick strangeness<\/strong><\/h6>\n
Robert Kyncl: \u00a0Keeping an eye on China?<\/strong><\/h6>\n