Responsibility for AI copyright infringement lies with the platforms and three other things we learned from Robert Kyncl’s interview with Goldman Sachs

The problem with unauthorized AI-generated music counterfeits lies with the platforms on which they proliferate.

That’s one of several claims Warner Music Group CEO Robert Kyncl made during a question-and-answer session on Wednesday (Sept. 6) at Goldman Sachs’ Communacopia + Technology Conference in San Francisco.

Kyncl touched on everything from WMG’s international expansion strategy to his previous experiences as an executive at Netflix and YouTube, but one thing he wasn’t asked about was the big news in the industry that day – the announcement of Universal Music Group and the streaming service Deezer new “artist-centric” payment model for artists.

This could have made for an interesting conversation, considering that the model announced by UMG and Deezer sounds quite similar to the “multiplier” payment model that Kyncl itself proposed earlier this year.

This model sees artists receiving a “multiplier” on their payments if they are particularly popular with users or if users tend to start their listening sessions with their music.

In the model Deezer has announced with UMG – starting with France this year and expanding to other markets in 2024 – Deezer promises a double boost [i.e double the stream weighting] to what they define as “professional artists” – those who have at least 1,000 streams per month from at least 500 unique listeners.

There will also be an additional “double boost” for titles played that users have actively searched for.

Although Kyncl’s conversation didn’t touch on the UMG/Deezer deal, the WMG CEO shared some thoughts on what a shift to an “artist-centric payment model” – as the idea is dubbed by industry players – would mean in practice.

Creating a viable alternative to the pro-rata payment system in place today will require “broader collaboration” between industry players, both music companies and streaming services, Kyncl said.

“When you’re on the DSP side, you obviously don’t want one partner to be there and another partner to be there. So you want some kind of scalable model that can work. Therefore, it is important that not just one company works on it [are] Several companies in the industry are working on it. And I think we’re starting to recognize that…quite actively,” Kyncl said.

“That’s why I find it astonishing that there is a push, especially among the big music companies, to change both the revenue per user and the distribution of the pie.”

“Focusing on revenue per user is [a] a very, very important part of what the industry needs to do.”

Robert Kyncl, Warner Music Group

According to Kyncl, these two elements – revenue per user on streaming services and the distribution of funds earmarked for royalties – are the two key factors in defining a new payment model.

Revenue per user on streaming services “is lagging inflation today,” Kyncl said, adding that if Spotify’s premium monthly subscription fee had kept pace with inflation since the service launched in the U.S. in 2011, it would cost $13.25 today, not $10.99. Fees are currently charged (and an increase from $9.99 a few months ago).

Kyncl estimates that Spotify’s average monthly revenue per paying user, when taking Spotify’s family plans into account, is about $7.50, and that there is a “tremendous opportunity” to increase that number. (Spotify itself reported an ARPU of €4.27 per user, or $4.58 at current exchange rates, in the second quarter of 2023, although this figure also includes ad-supported users.)

“So the focus is on revenue per user [a] “This is a very, very important part of what the industry needs to do,” Kyncl said.

Kyncl also confirmed the recent announcement of a joint venture between WMG and Eliot Grainge’s 10K Projects, which will see WMG take a 51% stake in the seven-year-old Los Angeles-headquartered label.

“We are bringing incredible talent into our pool on both the artist side and executive level,” Kyncl said. “And of course, we continue to recruit and invest in technology talent and launch the company.”

Here are three more things we learned from Kyncl’s Q&A session…

The responsibility for AI-driven copyright infringement lies primarily with the platforms

This year, as AI technology exploded, a particularly alarming development for music rights holders has been the introduction of AI-generated tracks that mimic the voice and style of professional artists, perhaps including the “fake Drake” track featured in this one Spring went viral is the most obvious example.

According to Kyncl, there are three main players in solving this problem: the government, with its ability to pass laws; the “consumer platforms” on which these titles are distributed; and developer of generative AI engines.

Government regulation “always takes time,” and AI developers are in a race to develop their technologies ahead of the competition, Kyncl said, so at least for now: “I think the main responsibility… lies with the consumption platforms… in particular open consumption.” Platforms on which the content ends up.”

By “open platforms,” Kyncl meant platforms where anyone can upload content, such as YouTube and TikTok.

“I find it astonishing that there is a push, particularly among the major music companies, to change both revenue per user and the distribution of the pie.”

Robert Kyncl, Warner Music Group

When someone creates new content using a third-party tool, “they want to get views or streams somewhere and will move to big platforms.” So my focus is primarily on…platforms to make sure they have practices in place to help us “To protect artists’ choices and ensure they have the right attribution and monetization framework.”

Kyncl compared today’s situation with AI to the situation with user-generated content (UGC) 15 or 20 years ago, when YouTube began as a cultural phenomenon.

“When I came to YouTube early on, we had a lot of problems with it [UGC], and we had to work on sorting. And… we did it. We built a very large, multi-end dollar business for our partners from fan-uploaded content using their copyrights and leveraging their copyrights[s]. And it required technology, deals, partnerships and all of that, and we applied and built it all.”

In Kyncl’s view, the problems with AI are a parallel: “just a little different, more advanced and faster, but the playbook is very similar.”

Kyncl’s stance on this is particularly significant given the fact that some other rights holders see it differently – they see AI developers as having primary responsibility.

For example, several authors have filed lawsuits against OpenAI, arguing that the company behind the ChatGPT app violated their copyrights when its AI algorithm used their copyrighted books as part of its training.

The music industry should take a cue from Netflix when it comes to pricing

Despite everything AI-related, pricing is arguably the biggest issue on music industry insiders’ minds this year.

The ever-louder chorus of voices calling for DSP price increases was finally heard this summer when Spotify announced a rate increase for its individual Premium subscription.

Still, many in the industry, including Kyncl, are calling for recurring price increases, especially given increased inflation in recent years. In its question-and-answer session on Wednesday, Kyncl suggested that the industry should look to Netflix for inspiration when raising prices for subscription entertainment services.

“I think it’s a smart decision for all of us to take a cue from Netflix,” Kyncl said, citing DSP’s “pricing innovations” in recent years.

“I think the main responsibility lies there [for AI content] lies with the consumption platforms… particularly the open consumption platforms where the content will end up.”

Robert Kyncl, Warner Music Group

Netflix has been systematically increasing prices in the US market since around 2013. Its first streaming-only standard plan (which excluded the shipping service for movies) launched in 2011 for $7.99 per month. Since then, the price has gradually risen to $15.49 through seven separate price hikes, an increase of almost 94% in just over a decade.

However, it has since introduced a lower-cost “Basic” option that only allowed one stream on one device at a time, and a family-oriented Premium option that allowed simultaneous playback on up to four devices, as well as 4K streaming. Both plans saw gradual price increases – although the price of the Basic plan fell when it became ad-supported in 2022.

“The work and innovation effort surrounding price optimization [at] Netflix is ​​incredible,” Kyncl said. “And I think we can all learn a lot from it and should embrace it.”

Musical talent is becoming more diverse and global, and WMG is capitalizing on that

Kyncl echoed the comments of a number of other music industry insiders – notably Live Nation founder and CEO Michael Rapino – in his observations about the rapid cultural changes in music, particularly how the Internet is globalizing the sources of musical talent.

“I grew up in a small country in Europe, [in] Czechoslovakia. “Any small country that can benefit from a global market is an incredible thing,” Kyncl said.

“And I think that’s reflected enormously in the music. The music industry used to really exist [a] a very Anglo-American industry that…exported its content everywhere and virtually all areas of marketing became weapons for that content.”

He continued: “What you see today because of the internet is that there is such a thing [a] There is a tremendous amount of talent around the world that resonates with people all over the world, not just in their own countries.

“For me, that’s the exciting part when you start unleashing creativity everywhere. And I think the real task now is to find the big talent that will not only resonate in his country, but expand around the world and punch above his weight class. And that’s exactly it [WMG] started focusing on it a few years ago. That’s why we invested in various companies around the world and it paid off.

“And you see markets like India, Africa and MENA growing [the] 40s, 30s and 20s… or So obviously there is [a] huge growth – smaller base, lower ARPUs, [but] still important.”music business worldwide