AI, new tech are opportunities more than threats, say music investors

SUPPLYING background music in virtual reality worlds; building software so that musicians can create songs on their phones; helping creators monetise their work on social media – these are just a few of the opportunities technology is bringing to investors in the music industry.

Such opportunities outweigh the threats posed by artificial intelligence (AI) and the growing clout of social media platforms, industry players said.

Consider the mobile music app BandLab, which announced on Mar 22 that its user base has crossed the 100 million mark. This critical mass, impossible without tech, could pave its way to profitability.

“We’re already heavily in our monetisation phase,” said chief executive Kuok Meng Ru.

BandLab, part of the Caldecott Music Group stable founded by the Kuok family scion, allows users to make music on their phones or computers. They can also share their music on the app and interact with the community.

Up to about two years ago, Kuok said, BandLab was busy building its user base and feature set. Over the course of 2021 and 2022, however, the company raised money from outside investors and began to monetise the app.

BandLab is free to use, but fee-paying members gain access to additional music and marketing features. Users can also make one-time payments for advertising campaigns.

“Think of it like boosting an ad on (a social media platform),” said Kuok.

In May, BandLab raised US$25 million in a funding round, valuing it at US$425 million. The company is not yet profitable – BandLab Singapore’s last filing with the Accounting and Corporate Regulatory Authority showed that revenue for FY2022 was US$18.3 million while losses came to US$16 million – but could now be on the way there.

Kuok said the main reason monetisation has become possible is the product’s maturity. “We didn’t feel that it would make sense to monetise the platform until there was a base level of maturity of the entire ecosystem.”

Technology has transformed the music industry – making it possible for anyone to create music on a phone, tablet or laptop and promote it to millions.

“Traditionally, the music industry has been ring-fenced by a handful of players,” said Tan Chee Meng, founder and chief executive of artist rights platform Blackx. “With tech, a lot of those barriers have been taken away.”

Global recorded music revenues are on the rise thanks to the popularity of streaming services and the reach afforded by social media.

The latest Global Music Report from the International Federation of the Phonographic Industry (IFPI), released on Mar 21, showed a 10.2 per cent increase in revenue to US$28.6 billion in 2023 – the ninth consecutive year of growth.

Subscription streaming revenues grew 11.2 per cent and accounted for 48.9 per cent of the global market.

At the same time, IFPI, which represents the global recording industry, flagged the threat that the industry faces from AI.

The challenges that the industry faces include streaming fraud, digital piracy in all its forms and the “abuse of generative AI if it is not developed responsibly and with respect for artists’ and labels’ rights”, said IFPI’s chief legal officer and interim joint head Lauri Rechardt.

AI represents an “existential” threat to parts of the music industry, said Professor Linda Bloss-Baum, assistant director of the business and entertainment programme at American University’s Kogod School of Business.

“If it’s difficult to be able to tell if the music is generated by a machine or a human, that has a pretty detrimental effect on the humans,” Prof Bloss-Baum said.

If music can be generated by machines, she added, there could be a fall in the music made by humans that is entitled to royalties. Such music could include background music on games, videos and social media.

The ongoing dispute between Universal Music Publishing Group and TikTok highlights the recording industry’s fraught relationship with social media.

TikTok videos are no longer allowed to use music by some artists with links to Universal – such as Coldplay and Harry Styles – as the two parties disagree on licensing payments.

Universal claims that TikTok is “refusing to respond to our concerns about AI depriving songwriters from fair compensation, or provide assurances that they will not train their AI models on your songs”. TikTok has called Universal “greedy”.

Critical role

TikTok and other social media platforms such as YouTube play a “critical” role in music discovery, said Prof Bloss-Baum. “A lot of younger artists really rely on social media (to build a following),” she said. “It also allows artists to get directly to their fans.”

This year’s Grammy Awards, presented by the Recording Academy of the United States for outstanding achievements in the music industry, included a new award for African music, which has been popularised on TikTok.

“I’m optimistic that they will find a solution, because it is so popular,” said Prof Bloss-Baum of the disagreement.

She believes the music industry will continue to be attractive as an investment sector despite these challenges.

“Music is such a universal part of everybody’s lives,” she said. “It is a great investment. All you have to do is look at the tours of Taylor Swift and Beyonce. AI will never replace that live music experience that we all love.”

Blackx’s Tan is similarly optimistic. His company runs a fund that acquires music catalogues and helps unlock their value.

This process includes metadata management to improve discoverability; and working with show producers, directors and other new technologies to look at different use cases.

“We are open to all partners,” said Tan, adding that tech is increasing the touchpoints for music. “It could be new technology, augmented reality, the metaverse.”