universal music group
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Usually, when one says a label dominates an album chart, that means it has most of the top ten — seven, for example, or maybe sometimes eight. This week in Germany, however, UMG has all 10. This seems to be the first time this has happened in Germany, although it is hard to say this […]
Universal Music Group (UMG) has won the dismissal of a closely-watched class action that challenged the fairness of its 2008 purchase of shares in Spotify — a case that accused the company of taking lower-than-market royalty rates in return for a chunk of equity that’s now worth hundreds of millions.
The lawsuit, filed last year by the members of the ’90s hip-hop duo Black Sheep, claimed that UMG had secured its now-lucrative stake in the then-nascent streamer by signing an “undisclosed, sweetheart deal” that left artists underpaid to the tune of $750 million. UMG has called the claims “patently false.”
In a decision Monday (Nov. 20), U.S. District Judge Jennifer L. Rochon ruled that even if UMG had taken below-market royalty rates from Spotify in return for equity, doing so would not have breached its contracts with artists — which give the music giant “unfettered discretion” to license its recordings as it sees fit.
“Plaintiffs argue that UMG exceeded the bounds of its discretion under the contract by making an undisclosed licensing deal in exchange for Spotify stock, for which UMG is withholding artists’ rightful share … of the proceeds UMG reaped,” the judge wrote. “But they do not square that conclusion with UMG’s unlimited right to license their work.”
Black Sheep members Andres “Dres” Titus and William “Mista Lawnge” McLean sued in January, claiming Universal acted in “bad faith” when it secretly acquired a 5% stake in the “fledgling streaming service” in 2008 for just a few thousand dollars. The real payment to Spotify, the lawsuit claimed, had been UMG’s willingness to accept “substantially lower royalty payments” — an arrangement that benefited UMG and Spotify but “shortchanged artists” and “deprived” them of fair royalties.
“Universal concealed from artists that it acquired Spotify stock and that royalty payments were depressed as a result,” lawyers for the duo wrote in their complaint. “Over time, the value of the Spotify stock that Universal improperly withheld from artists has ballooned to hundreds of millions of dollars.”
When the case was filed, Universal called the claims “patently false and absurd.” In later court filings, the company flatly denied the core allegation: “UMG disputes that the equity stock acquired in 2008 was part of the consideration that Spotify provided for a license to UMG’s music catalog.”
Reps for both UMG and Black Sheep did not return requests for comment on Tuesday.
The major music companies all acquired equity in Spotify during the streamer’s early days. According to a 2018 report by Music Business Worldwide, the then-Big Four music companies (Universal, Warner, Sony and EMI) plus Merlin paid just €8,804 total for a combined 18% of the streamer divvied up between them. The role that royalty rates played in that deal, and whether artists would eventually see some of the profit, was hotly debated for years.
After Spotify went public in 2018, it started to become clear just how valuable those stakes had become. Sony Music sold 50% of its shares for $768 million in April 2018, followed by Warner selling its entire stake for $504 million in August 2018. Both later made good on previous pledges to disburse some of the proceeds to artists, although reportedly with differing stipulations.
Universal has yet to sell its shares in Spotify, but it made a similar pledge in March 2018. Later that year, when Taylor Swift signed with the company, she reportedly required that UMG further promise to distribute the money to artists regardless of unrecouped balances — meaning artists will be paid regardless of whether they still owe the label money.
But in their lawsuit, Black Sheep argued that such promises were not good enough. They said Universal had already wronged many of its artists in one of two ways — simply by taking lower rates and thus reducing their royalty payments, or by failing to disburse the profits of their equity stakes as royalties.
In Monday’s ruling dismissing the case, Judge Rochon said she did not even need to decide whether or not those allegations were true. Instead, she simply ruled that even if they were true, Universal would still not have violated its record deal with Black Sheep.
“The contract’s plain language does not support plaintiffs’ theories,” the judge wrote about the allegedly reduced rates, noting that the deal gave UMG the “sole, exclusive and unlimited right” to license the recordings. “Given this wide discretion, there is no basis upon which to find that UMG breached the contract by accepting a lower royalty from Spotify.”
Judge Rochon also rejected the argument that UMG should have accounted for the equity profits when paying artists, saying the contract only requires payment for revenue that is “solely attributable” to their specific songs.
“Plaintiffs cannot directly trace UMG’s alleged acquisition of Spotify stock to the use or exploitation of their work alone,” the judge wrote. “UMG did not breach the contract by failing to account for its value when paying Plaintiffs their royalties.”
Even beyond the merits of the lawsuit, the judge also said she would have dismissed most of it for a far simpler reason: That it had been filed far past the statute of limitations. If the case had moved forward, Rochon said it only would have applied to royalty payments made after January 2021, not those reaching back all the way to 2008.
Music companies’ third-quarter earnings reports have so far been full of good news and positive trends. Subscription and streaming growth continue to drive revenues for record labels and publishers. Live entertainment continues its post-pandemic expansion. Margins are healthy. Overall, these have been solid report cards for the state of the music business.
Among the companies to report thus far are Universal Music Group, Sony Music, Spotify, Believe, Sphere Entertainment Co., MSG Entertainment, HYBE and SiriusXM. Next week’s earnings reports will come from Warner Music Group (Nov. 16) and Tencent Music Entertainment (Nov. 14). German concert promoter CTS Eventim will report on Nov. 21.
Here are seven items from the earnings releases to date that stood out and deserve more attention.
Universal Music Group struck out against “merchants of garbage.” During Universal Music Group’s Oct. 26 earnings call, chairman and CEO Lucian Grainge got a lot of attention when he bemoaned the “merchants of garbage” — creators of low-value functional music such as generic mood music and nature sounds — that want to be on equal royalty terms at streaming platforms as such UMG artists as Taylor Swift, The Beatles and The Rolling Stones. Grainge’s memorable turn of phrase came in defense of UMG’s artist-centric royalty scheme crafted in partnership with French music streaming service Deezer. “Sorry, I can’t really think of another word for content that no one really actually wants to listen to,” Grainge said.
Spotify’s price increase gave a much-needed uplift to subscription revenues. The price for an individual Spotify subscription in the U.S. was $9.99 from 2011 to July 2023. The price hike to $10.99 in roughly 50 markets may have arrived later than its competitors, but it came just when Spotify needed a boost. Spotify’s premium average revenue per user dropped 6% year over year (1% at constant currency) mainly because the company had a larger share of family plans compared to the prior-year, CFO Paul Vogel said during the July 25 earnings call. Early returns from the price increase in the U.S., U.K. and dozens of other markets helped offset those losses. Because Spotify’s number of subscribers increased 16% year over year to 226 million, subscription revenue grew 10% year over year (16% at constant currency) to 2.9 billion euros ($3.1 billion). With three full months of a price increase in the fourth quarter and considering the price increase covered about 75% of Spotify’s revenue base, the company expects the price increase to provide “a positive, mid-single digit” benefit (excluding foreign exchange) in the fourth quarter, said Vogel.
No company lowered guidance, and some have raised guidance. Sony Music raised guidance for revenue and adjusted operating income before depreciation and amortization by 5% and 4%, respectively. Reservoir Media raised guidance for fiscal 2024 revenue and adjusted EBITDA by 10% each. It’s one thing for a company to meet expectations it had previously laid out to investors. But raising previously released expectations is something else altogether — a sign the future will be better than expected. It’s usually a benefit to the stock price, too. The share price is the present value of future cash flows. When an estimate for future cash flows takes a sudden jump, that changes the financial model used to calculate the share price.
Consumers aren’t slowing their spending on live music. In August, concerns arose that a resumption of student loan payments, paused to help people struggling during the pandemic, would take a bite out of pocketbooks and cause music fans to pull back on the record amounts they were spending on live entertainment. Three months later, there is no indication that consumers are slowing down, according to Live Nation. “We’re seeing no sign of weaknesses,” said president and CFO Joe Berchtold, noting that Ticketmaster’s October sales in North American were up double-digits year over year. “We’re not seeing any pullback in any way from a club to a stadium tour from Milan to Argentina right now,” added president and CEO Michael Rapino.
SM Entertainment has big plans for its new publishing subsidiary, Kreation Music Rights. The K-pop stalwart has been “aggressively recruiting global writers” and plans to have 80 of them under contract this year, CEO Jang Cheol Hyuk said during the Nov. 8 earnings call. SM Entertainment is pursuing collaborations with both domestic and international publishers and plans to recruit foreign writers “who wish to advance into K-pop by establishing overseas subsidiaries,” Jiang said.
Radio advertising continues to struggle — but the clouds may be starting to part. iHeartMedia’s October revenues were down 8% and the company expects its fourth-quarter revenue excluding political revenue to be down in the mid-single digit percent year over year. The fourth quarter will be iHeartMedia’s strongest quarter of the year “but will be weaker than we originally anticipated due to some dampening of advertising demand which coincided with the uncertainty caused by the recent geopolitical events,” CEO Bob Pittman said during Thursday’s earnings call. That said, iHeartMedia’s digital business “is sort of in recovery mode,” said Pittman, and the company is “seeing the pieces falling into place” for radio’s recovery as most advertisers expect to be “back in growth mode…and spending to support that” in 2024.
The market for catalog acquisitions isn’t slowing down. Reservoir Media CEO Golnar Khosrowshahi said catalog prices aren’t contracting despite higher interest rates. “We’re still seeing a lot of demand for assets and continued infusion of new capital within the competitive set,” she said during Tuesday’s earnings call. “And that is certainly fueling the demand. The pipeline is robust. And it ranges in size from large to a lot of smaller deals.” Reservoir Media hasn’t been suffering from sticker shock, though. Acquisitions in the Middle East-North Africa market — such as some catalog of Saudi Arabian label Mashrex in June — provide the company with good value, Khosrowshahi added. “If we’re looking at a market here that is somewhat saturated with a lot of capital in the marketplace, and we’re able to execute [deals in MENA] at these lower multiples, that makes it just that much more attractive to us.”
Offering a preview of arguments the company might make in its upcoming legal battle with Universal Music Group (UMG), artificial intelligence (AI) company Anthropic PBC told the U.S. Copyright Office this week that the massive scraping of copyrighted materials to train AI models is a “quintessentially lawful.”
Music companies, songwriters and artists have argued that such training represents an infringement of their works at a vast scale, but Anthropic told the federal agency Monday (Oct. 30) that it was clearly allowed under copyright’s fair use doctrine.
“The copying is merely an intermediate step, extracting unprotectable elements about the entire corpus of works, in order to create new outputs,” the company wrote. “This sort of transformative use has been recognized as lawful in the past and should continue to be considered lawful in this case.”
The filing came as part of an agency study aimed at answering thorny questions about how existing intellectual property laws should be applied to the disruptive new tech. Other AI giants, including OpenAI, Meta, Microsoft, Google and Stability AI all lodged similar filings, explaining their views.
But Anthropic’s comments will be of particular interest in the music industry because that company was sued last month by UMG over the very issues in question in the Copyright Office filing. The case, the first filed over music, claims that Anthropic unlawfully copied “vast amounts” of copyrighted songs when it trained its Claude AI tool to spit out new lyrics.
In the filing at the Copyright Office, Anthropic argued that such training was a fair use because it copied material only for the purpose of “performing a statistical analysis of the data” and was not “re-using the copyrighted expression to communicate it to users.”
“To the extent copyrighted works are used in training data, it is for analysis (of statistical relationships between words and concepts) that is unrelated to any expressive purpose of the work,” the company argued.
UMG is sure to argue otherwise, but Anthropic said legal precedent was clearly on its side. Notably, the company cited a 2015 ruling by a federal appeals court that Google was allowed to scan and upload millions of copyrighted books to create its searchable Google Books database. That ruling and others established the principle that “large-scale copying” was a fair use when done to “create tools for searching across those works and to perform statistical analysis.”
“The training process for Claude fits neatly within these same paradigms and is fair use,” Anthropic’s lawyers wrote. “Claude is intended to help users produce new, distinct works and thus serves a different purpose from the pre-existing work.”
Anthropic acknowledged that the training of AI models could lead to “short-term economic disruption.” But the company said such problems were “unlikely to be a copyright issue.”
“It is still a matter that policymakers should take seriously (outside of the context of copyright) and balance appropriately against the long-term benefits of LLMs on the well-being of workers and the economy as a whole by providing an entirely new category of tools to enhance human creativity and productivity,” the company wrote.
Led by strong subscription growth and a dominant quarter from Taylor Swift, along with strong sales of releases by Olivia Rodrigo, Morgan Wallen and Seventeen, Universal Music Group (UMG) grew revenue 3.3% (9.9% at constant currency) to 2.75 billion euros ($3 billion at the period’s average exchange rate) in the third quarter, the company announced Thursday (Oct. 26).
UMG will get another boost this quarter from Swift’s release of the re-recorded version of her 2014 album, 1989, on Friday. “She is a phenomena,” said UMG chairman/CEO Lucian Grainge, listing a string of global chart successes of Swift’s previous 2023 album of re-recordings, Speak Now (Taylor’s Version), released in July. “This level of performance can only really be described as truly astonishing.”
UMG’s fourth quarter will also benefit from the new release of an unreleased track by The Beatles, “Now and Then,” on Nov. 2. “Now and Then” was written by John Lennon in the late ‘70s and just recently finished by the band’s remaining members, Paul McCartney and Ringo Starr. “The fact that more than four decades after its original recording, we can use the latest technology to bring this recording everywhere is truly remarkable and something that we’re very proud of,” said Grainge.
Third-quarter adjusted earnings before interest, taxes, depreciation and amortization (EDITDA) increased 5.1%, or 11.3% at constant currency, to 581 million euros ($632 million), and adjusted EBITDA margin improved 0.3 percentage points to 21.1%.
The company’s recorded music segment declined 1.1% to $2.04 billion ($2.2 billion), a 5.2% increase at constant currency (or an 8.9% increase excluding a 71 million euro legal settlement recognized in the prior-year quarter). Subscription revenue grew 6.7% (13% at constant currency), despite not yet receiving a boost from recent price increases at Spotify and YouTube Music. Those benefits are expected to be felt in the fourth quarter, said CFO Boyd Muir, who noted that “each of these services raised prices in certain markets, and on certain plans, not across all subscribers.” YouTube, which Muir said “has a particularly global subscriber base,” raised prices first in the United States and other markets in the following weeks. As a result, “the benefit will initially be more limited.”
Recorded music’s ad-supported streaming revenue grew 5%, the same as the previous quarter. UMG remains “cautious” about ad-supported growth in the coming quarters, said Muir. Results in any quarter come from a mix of fixed and variable deal structures, he explained, meaning UMG’s results aren’t a close reflection of trends in the advertising market. “We do, however, continue to see opportunities for improved deal terms and product innovation driving higher levels of growth in this business over the medium term,” he said.
Downloads and other digital revenue declined 56.9% (53.2% at constant currency) due to the prior-year legal settlement and a broad decline in download sales. Licensing and other revenue declined 11.8% (6.9% at constant currency) due to a strong prior-year quarter that benefitted from artists’ return to touring as the concert business recovered from pandemic-era shutdowns.
Music publishing revenue grew 17.5% (24.6% at constant currency) to 491 million euros ($534 million). Excluding a 53 million euro ($58 million) catch-up payment in the music publishing segment related to the Copyright Royalty Board’s (CRB) Phonorecords III ruling for streaming royalties from 2018 to 2022, publishing revenue improved 4.8% (11.2% at constant currency).
Publishing’s digital revenue grew 25.6% (33.6% at constant currency) on strong streaming and subscription growth and the CRB III catch-up payment. Synch revenue declined 3.5% (and grew 3.8% at constant currency) while mechanical revenue was stable.
Revenue growth “is beyond our expectation and guidance,” said Muir, while noting that “the revenues that are incremental to our expected growth are actually coming from lower-margin areas of our business.” In the third quarter, 75% of UMG’s revenue above analyst’s consensus expectations came from merchandise and physical products. “They are EBITDA-accretive, but margin-dilutive of the business segments we must pursue,” said Muir. UMG still expects a one-point improvement in adjusted EBITDA in calendar year 2023.
Revenue grew 3.3% (9.1% at constant currency) to 2.75 billion euros ($3 billion).
Recorded music revenue declined 1.1% to $2.04 billion ($2.2 billion), a 5.2% increase at constant currency.
Publishing revenue grew 25.6% (33.6% at constant currency), or 4.8% (11.2% at constant currency) excluding a CRB III retroactive royalty adjustment.
Adjusted EBITDA increased 5.1%, or 11.3% at constant currency, to 581 million euros ($632 million).
Adjusted EBITDA margin improved 0.3 percentage points to 21.1%.
Spotify is planning to implement changes to its streaming royalty model in early 2024 that would affect the lowest-streaming acts, non-music noise tracks and distributors and labels committing fraud, sources tell Billboard.
Conversations have been going on for weeks with the major record labels, Universal Music Group, Sony Music Entertainment and Warner Music Group, as well as independent labels and distributors, sources say. While the new royalty system will keep its existing pro-rata model, it introduces new floors that will grow the pool for more established artists and rights holders.
The changes to Spotify’s royalty model, which were first reported by Music Business Worldwide, include:
A new threshold of minimum annual streams that a track must meet before it starts to generate royalties. The threshold, according to MBW, will de-monetize tracks that had previously received 0.5% of Spotify’s royalty pool.
Financial penalties for music distributors and labels when fraudulent activity on tracks they have uploaded to Spotify has been detected.
A minimum play-time length that non-music noise tracks, such as bird sounds or white noise, must reach to generate royalties.
The specific benchmarks of these changes and how financial penalties will be calculated or implemented are currently unclear.
Spotify will need new agreements to the royalty structure changes with most record labels and distributors to implement the plan, but that doesn’t mean entirely new licensing renewals. Changes can be made specifically for these elements, sources say. And since the major labels — which all negotiate their deal renewals with Spotify on different timelines — are likely to benefit from the new terms, they are all likely to sign onto them.
When reached for comment, a Spotify spokesperson said in a statement, “We’re always evaluating how we can best serve artists, and regularly discuss with partners ways to further platform integrity. We do not have any news to share at this time.”
The standard, existing pro-rata streaming model has been a major topic of consideration this year, ever since Universal Music Group CEO Lucian Grainge called for an “updated model” for the business that will be “an innovative, ‘artist-centric’ model that values all subscribers and rewards the music they love” in his annual New Year’s letter to staff. Following, UMG announced partnerships with Tidal, Deezer and Soundcloud to explore alternative models, and reports surfaced that similar conversations were underway with the other leading streaming platforms.
In July, during UMG’s second quarter earnings call, Grainge announced a “newly expanded agreement” with Spotify, under which he said “they have committed to continue to work to address” what he outlined as key components to the “artist-centric” approach: Fairly rewarding “real artists with real fanbases” for “the platform engagement they drive”; applying “stricter fraud detection and enforcement systems” and “ensuring real artists don’t have their royalties diluted by noise”; and “better aligning the relationship between artists and fans by promoting greater discovery and promotion of real artists.” Two out of three of these priorities are now being pursued by Spotify.
In September, UMG and Deezer outlined a new model for what they called “artist-centric streaming.” That model was similar, albeit more severe, than what Spotify is planning. It included royalty “boosts” for “professional” artists whose music streamed above a threshold, while promising to crack down on fraud and replace “non-artist noise content” with its own functional music that would be excluded from the royalty pool.
Unlike Spotify — which relies heavily on industry-leading algorithm-recommended playlists and auto-play, lean-back listening — Deezer’s plan also demoted passive listening royalties by “boosting” artists who are actively searched for by users. Unlike Deezer, Spotify is planning to roll this out will all major labels and leading independent labels and distributors.
BMG said on Thursday (Oct. 18) that it will use Universal Music Group’s (UMG) commercial services division for the distribution of its physical recorded music, in what BMG CEO Thomas Coesfeld described as the first project of a burgeoning “alliance.” Last month, BMG announced it was winding down its agreement with Warner Music Group’s ADA […]
YouTube is planning to roll out a new artificial intelligence tool that will allow creators to make videos using the voices of popular recording artists — but inking deals with record companies to launch the beta version is taking longer than expected, sources tell Billboard.
The new AI tool, which YouTube had hoped to debut at its Made On YouTube event in September, will in beta let a select pool of artists to give permission to a select group of creators to use their voices in videos on the platform. From there, the product could be released broadly to all users with the voices of artists who choose to opt in. YouTube is also looking at those artists to contribute input on that will help steer the company’s AI strategy beyond this, sources say.
The major labels, Universal Music Group, Sony Music Entertainment and Warner Music Group, are still negotiating licensing deals that would cover voice rights for the beta version of the tool, sources say; a wide launch would require separate agreements. As label leaders have made public statements about their commitments to embracing AI in recent months, with UMG CEO Lucian Grainge saying the technology could “amplify human imagination and enrich musical creativity in extraordinary new ways” and WMG CEO Robert Kyncl saying, “You have to embrace the technology, because it’s not like you can put technology in a bottle” — some music executives worry they’ve given up some of their leverage in these initial deals, given that they want to be seen as proponents of progress and not as holding up innovation. Label executives are especially conscious of projecting that image now, having shortsightedly resisted the shift from CDs to downloads two decades ago, which allowed Apple to unbundle the album and sent the music business into years of decline. Some executives say it’s also been challenging to find top artists to participate in the new YouTube tool, with even some of the most forward-thinking acts hesitant to put their voices in the hands of unknown creators who could use them to make statements or sing lyrics they might not like.
The labels, sources say, view the deal as potentially precedent-setting for future AI deals to come — as well as creating a “framework,” as one source put it, for YouTube’s future AI initiatives. The key issues in negotiations are how the AI model is trained and that artists should have the option to opt-in (or out); and how monetization works — are artists paid for the use of their music as an input into the AI model or for the output that’s created using the AI tool? While negotiations are taking time, label sources say YouTube is seen as an important, reliable early partner in this space, based on the platform’s work developing its Content ID system that identifies and monetizes copyrighted materials in user-generated videos.
Publishing, meanwhile, is even more complicated, given that even with a small sampling of artists to launch the tool at beta there could be hundreds of songwriters with credits across their catalogs — which would be sampled by the model. Because of this, a source suggests that YouTube may prefer paying a lump sum licensing fee rather that publishers will need to figure out how to divide among their writers.
As complicated as the deal terms may be, sources say music rights holders are acting in good faith to get a deal done. That’s because there’s a dominant belief this sort of technology is inevitable and if the music business doesn’t come to the table to create licensing deals now, they’ll get left behind. However, one source familiar with the negotiations says this attitude is also putting music companies at a disadvantage because there is less room to drive a hard bargain.
For months, AI-soundalike tools that synthesize vocals to sound like famous artists have been garnering attention and triggering debate. The issue hit the mainstream in April when an anonymous musician calling himself Ghostwriter released a song to streaming services with soundalike versions of Drake and The Weeknd on it that he said were created with artificial intelligence. The song was quickly taken down due to copyright infringement on the recording, not based on the voices’ likenesses, but in the aftermath a month later Billboard reported that the streaming services seemed amenable to requests from the major labels to remove recordings with AI-generated vocals created to sound like popular artists.
In August, YouTube announced a new initiative with UMG artists and producers it called an “AI Music Incubator” that would “explore, experiment and offer feedback on the AI-related musical tools and products,” according to a blog post by Grainge at the time. “Once these tools are launched, the hope is that more artists who want to participate will benefit from and enjoy this creative suite.” That partnership was separate from the licensing negotiations currently taking place and the beta product in development.
On Wednesday, UMG, Concord Music Group, ABKCO and other music publishers filed a lawsuit against AI platform Anthropic PBC for using copyrighted song lyrics to “train” its software. This marked the first major lawsuit in what is expected to be a key legal battle over the future of AI music, and as one source put it a signal that major labels will litigate with AI companies they see as bad players.
Universal Music Group (UMG) and other music companies are suing an artificial intelligence platform called Anthropic PBC for using copyrighted song lyrics to “train” its software — marking the first major lawsuit in what is expected to be a key legal battle over the future of AI music.
In a complaint filed Wednesday morning (Oct. 18) in Nashville federal court, lawyers for UMG, Concord Music Group, ABKCO and other music publishers accused Anthropic of violating the companies’ copyrights en masse by using vast numbers of songs to help its AI models learn how to spit out new lyrics.
“In the process of building and operating AI models, Anthropic unlawfully copies and disseminates vast amounts of copyrighted works,” lawyers for the music companies wrote. “Publishers embrace innovation and recognize the great promise of AI when used ethically and responsibly. But Anthropic violates these principles on a systematic and widespread basis.”
A spokesperson for Anthropic did not immediately return a request for comment.
The new lawsuit is similar to cases filed by visual artists over the unauthorized use of their works to train AI image generators, as well as cases filed by authors like Game of Thrones writer George R.R. Martin and novelist John Grisham over the use of their books. But it’s the first to squarely target music.
AI models like the popular ChatGPT are “trained” to produce new content by feeding them vast quantities of existing works known as “inputs.” In the case of AI music, that process involves huge numbers of songs. Whether doing so infringes the copyrights to that underlying material is something of an existential question for the booming sector, since depriving AI models of new inputs could limit their abilities.
Major music companies and other industry players have already argued that such training is illegal. Last year, the RIAA said that any use of copyrighted songs to build AI platforms “infringes our members’ rights.” In April, when UMG asked Spotify and other streamers in April to stop allowing AI companies to use their platforms to ingest music, it said it “will not hesitate to take steps to protect our rights.”
On Wednesday, the company took those steps. In the lawsuit, it said Anthropic “profits richly” from the “vast troves of copyrighted material that Anthropic scrapes from the internet.”
“Unlike songwriters, who are creative by nature, Anthropic’s AI models are not creative — they depend entirely on the creativity of others,” lawyers for the publishers wrote. “Yet, Anthropic pays nothing to publishers, their songwriters, or the countless other copyright owners whose copyrighted works Anthropic uses to train its AI models. Anthropic has never even attempted to license the use of Publishers’ lyrics.”
In the case ahead, the key battle line will be over whether the unauthorized use of proprietary music to train an AI platform is nonetheless legal under copyright’s fair use doctrine — an important rule that allows people to reuse protected works without breaking the law.
Historically, fair use enabled critics to quote from the works they were dissecting, or parodists to use existing materials to mock them. But more recently, it’s also empowered new technologies: In 1984, the U.S. Supreme Court ruled that the VCR was protected by fair use; in 2007, a federal appeals court ruled that Google Image search was fair use.
In Wednesday’s complaint, UMG and the other publishers seemed intent on heading off any kind of fair use defense. They argued that Anthropic’s behavior would harm the market for licensing lyrics to AI services that actually pay for licenses — a key consideration in any fair use analysis.
“Anthropic is depriving Publishers and their songwriters of control over their copyrighted works and the hard-earned benefits of their creative endeavors, it is competing unfairly against those website developers that respect the copyright law and pay for licenses, and it is undermining existing and future licensing markets in untold ways,” the publishers wrote.
In addition to targeting Anthropic’s use of songs as inputs, the publishers claim that the material produced by the company’s AI model also infringes their lyrics: “Anthropic’s AI models generate identical or nearly identical copies of those lyrics, in clear violation of publishers’ copyrights.”
Such litigation might only be the first step in setting national policy on how AI platforms can use copyrighted music, with legislative efforts close behind. At a hearing in May, Sen. Marsha Blackburn (R-Tenn.) repeatedly grilled the CEO of the company behind ChatGPT about how he and others planned to “compensate the artist.”
“If I can go in and say ‘write me a song that sounds like Garth Brooks,’ and it takes part of an existing song, there has to be compensation to that artist for that utilization and that use,” Blackburn said. “If it was radio play, it would be there. If it was streaming, it would be there.”
Universal Music Group’s Universal Production Music division has launched a new subscription-based service, offering a pre-cleared library 50,000 songs and 200,000 sound effects, starting at $5.99 per month. The new library, called Universal Music for Creators, is aimed at servicing influencers and online talent that need royalty-free music for their videos and podcasts at a low price.
Universal Music Group’s library includes the option to separate out some of its songs into audio “stems,” industry shorthand for individual instrument tracks used collectively to create a full sound recording. This offers creators greater flexibility to customize the song to best fit their needs.
Though it is full of options for creators, the library does not include any of the major acts that are signed to UMG — like Drake, Rihanna, Taylor Swift and many more. It is searchable through the website’s search bar, where users can type in descriptions of mood and style to find the songs they want. The company also offers curated playlists of different moods and occasions for faster discovery.
UMG is not the first to try to fulfill the needs of the growing creator economy through a subscription-based pre-cleared music library, but the company’s announcement claims that Universal Music for Creators “boasts more tracks and SFX than any other claims-free music subscription service.” In recent years, a number of other libraries have formed with similar business models and offerings, including Songtradr, Loudly, Collabhouse, Bopper, Epidemic Sound and more. Some digital platforms, including TikTok and YouTube, have also amassed their own pre-cleared music libraries for creators to choose from in order to dissuade creators using songs without the proper clearance to do so.
Soundtracking social media content is also one of the most cited use-cases for the burgeoning field of generative artificial intelligence. Some of the models hoping to provide AI music for this use includes Stability AI’s Stable Audio, Soundful, Tuney, and more. These companies threaten to disrupt today’s music libraries, offering soundtracks that are one-of-a-kind and customizable for content creators at a similarly low monthly fee. Still, some of these models do not yet create music that rivals the quality of stock human-made music.
Jody Gerson, UMPG chairman and CEO, said: “Universal Music for Creators delivers our unparalleled production music library to content creators everywhere for the first time. Innovative programs like this exemplify why Universal Production Music continues to lead the industry.”
Jane Carter, president of Universal Production Music said, “We’re thrilled to become the first major publisher to offer production music to content creators as a subscription service and grow the accessibility of our music catalog. With a brand heritage that signifies trust, quality and prestige, Universal Music for Creators will provide affordable, hassle-free music and sound effects for the most imaginative creators. We are excited to provide yet another innovative opportunity to support our talented production music songwriters and composers.”