Sales of the music catalog hit an all-time high. So how will AI music catalogs fit into this new matrix and what is their value?
The following MBW op / ed was written by Rory Kenny, co-founder and CEO of Loudly, a Berlin-based AI music technology company. The company claims to have the largest AI Music catalog in the world with more than 150,000 audio sounds and has developed an AI Music engine capable of generating new musical compositions “in seconds”.
Music catalogs have always been viewed as a niche asset and subject to the unpredictable winds of an evolving music industry. However, the recent upsurge in transactions occurring not only within the music industry but also now heavily influenced and exploited by the entry of private equity has changed this forever.
One need only look at the recent prices obtained by the old catalogs to see that this is a booming field. Bob Dylan’s official figure for his catalog was not disclosed, but industry insiders suggested a price of between $ 300 million and $ 600 million, while Stevie Nicks sold a share of his catalog for $ 100 million. of dollars.
BMG’s merger with KKR to raise $ 1 billion to spend on music catalogs alone is a blatant demonstration of confidence in the future earning potential that music royalties will provide.
The growth in the acquisition of music catalogs is a paradigm shift towards the traditional model in which the music industry generates revenue.
While the deal size is huge, it’s actually a more conservative approach as it hedges against the riskier artist portfolio investment thesis.
With an existing music catalog, you simply apply a multiple of growth over current revenue and a hockey stick chart is your answer.
What are the factors underlying this incredible growth multiple?
The first factor is the constant increase in streaming services like Apple and Spotify which are constantly unlocking new audiences and rekindling interest in golden hits as well as long-tail strangers. Investing in the longevity of the financial performance of various types of music catalogs is no different than how institutions invest in stable asset classes like gold.
âInvesting in the longevity of the financial performance of various types of music catalogs is no different than how institutions invest in stable asset classes like gold. “
The second factor is the growing prevalence of media engagement (images, stories, videos) across all social media platforms – the more hi-fi the sound, the better! From Instagram to TikTok to Twitch, audiences are being exposed to music in new ways, and the trend is expected to continue. Royalties continue to flow …
But part of this is already old news. The next big thing in our digital lives is the coming Metaverse and that will require a lot more musical content than what is currently available.
If you think people are enjoying Facebook and Instagram today in their current 2D flat feed format, imagine how they’ll feel in a more immersive 3D touch experience – it’s the metaverse. Beyond social interactions, the Metaverse is ready to disrupt everything from games to e-commerce to the virtual workplace.
If the nature of the metaverse is that anyone can use its protocols to build and Personalize their own worlds, then these virtual environments will require similar protocols for music: allowing everyone to personalize the soundtrack according to their digital life. Big brands like Gucci to underground NFT artists to kids on their smartphones are already developing virtual environments on Roblox, Minecraft, and Fortnite – all aimed at delivering ‘Ready Player One’ type mocks – paving the way for what these worlds will look like. finally.
So what does the Metaverse need when it comes to music production?
First, there is the issue of personalization. The only way to do this is to integrate a powerful music engine that can handle a huge catalog of music that can be instantly personalized.
Second, there is the issue of volume. In today’s market, around 1.2 million music tracks are added to music streaming services per month to meet audience demand. However, in the Metavers we must accept the concept that the laws of the known universe will no longer apply. Every square inch of the Metaverse will have infinite musical parameters. If we assume a tectonic shift in 2D social media users to more immersive Metaverse worlds, we envision 2 billion user sessions per day (based on Facebook’s current DAUs) while waiting for new music every time they â are entering ‘into a new environment or meeting a digital asset, etc., with those kind of numbers, I guess a minimum of several million new soundtracks per day will be a prerequisite.
All of this creates a lot of pressure on the music industry and Metaverse’s tech companies to deliver. But AI music technology is the answer. It is customizable because it is based on “protocols” which, like the Metaverse architecture, allow anyone to easily create and edit music without requiring extensive musical knowledge.
“The rate at which the music industry evolves is accelerating and AI will certainly play a central role in how the future emerges.”
One of the most revolutionary advancements in AI music technology is that it democratizes music creation for everyone, enabling non-musicians to generate studio-quality music and, in doing so, unleashes the potential for any creator. , application developer or technology company to programmatically generate original music for their specific use case, media or Metaverse environment.
If today’s booming prices are any indication of how buyers appreciate a ‘fixed’ music catalog (i.e. a limited number of static music tracks), how will the market assess. there emerging AI music catalogs that have no limits and are uniquely positioned to serve future tech trends?
AI music catalogs differ considerably in that they do not have a fixed number of songs but rather the ability to produce an infinite number of combinations of tracks and compositions which can be 1) produced by the owner of the AI ââtechnology b) produced by users who access its technology 3) as a service that even music labels can leverage to expand their existing catalog.
So, with this tangible future in mind, the battlefield emerges: who will control and operate these catalogs of AI music, and what competitive position will they achieve? If monopolization trends in the tech industry are any given, my prediction is that there will be relatively few AI music catalogs based on the mainstream technology available, but there will be many assertive buyers – of the technology. media players in the music industry who will seek to take advantage of the long-term royalties derived from the catalog and the competitive advantage that accompanies the technology.
The pace of change in the music industry is accelerating and AI will certainly play a central role in how the future emerges. Combined with the parallel disruptive trends seen in blockchain, cryptocurrencies, NFT markets, VR / AR, and our increasingly digital lives, AI Music is well positioned as a ‘new world’ solution to serve the momentum. and the inherent demands of the future Metaverse and Web 3. Music trade around the world