Sony Music Group Chairman Rob Stringer simply added his title to the rising variety of music {industry} leaders elevating critical considerations over streaming fraud.

Throughout Sony Group Company’s annual presentation to traders on Wednesday (Might 24), Stringer referred to as for more durable enforcement by digital service suppliers (DSPs) – plus, doubtlessly, an anti-fraud-minded change to a brand new music streaming royalty payout mannequin – to handle what many see as a rising downside of illegitimate streams taking income away from artists and rights-holders.

“Fraud on key DSPs is an issue that should be eradicated by means of aggressive enforcement by these DSPs and distributors, or by altering cost strategies [i.e. royalty payout models] to raised cut back the motivation for fraud,” Stringer stated throughout his presentation.

Stringer’s feedback are available in the identical month that Spotify eliminated a considerable variety of tracks – many created by way of AI music-making platform Boomy – from its service, citing “potential instances of stream manipulation”.

By way of apps like Boomy, streaming fraudsters can create a big quantity of cheap-to-produce audio content material and add it to DSPs; they then goal to rack up large numbers of performs of this content material by way of bot-driven ‘streaming farms’.

In line with the Monetary Occasions, tens of hundreds of tracks created on Boomy – representing some 7% of the overall quantity of music distributed from the platform to Spotify – have been pulled by Daniel Ek‘s firm in its newest anti-stream-fraud transfer.

In response to the Boomy/Spotify story, MBW argued that the present dominant ‘professional rata’ streaming royalty mannequin is left significantly open to gaming by less-than-scrupulous actors.

Streaming fraud actually wasn’t the one factor on Rob Stringer’s thoughts throughout right now’s Sony investor occasion, which noticed a wide-ranging presentation from the exec along with a Q&A session with analysts.

Beneath, MBW runs by means of 5 extra of Stringer’s key feedback/speaking factors from the day…

1) Getting extra money from TikTok

Okay, so he didn’t point out TikTok particularly. However Rob Stringer clearly referred to as for higher compensation from short-form video platforms (learn: TikTok) for the usage of copyrighted music.

Stringer advised traders that Sony Music Group was “aggressively leaning into quite a few alternatives for our artists and songwriters” with the “largest [of these opportunities] being in short-form video”.

“Younger customers are gaming-first of their leisure orientation, and extremely engaged in creating and viewing huge quantities of content material,” he continued. “This interprets into heavy use of short-form video, which is amassing whole views effectively into the trillions.

“Overwhelmingly, [young consumers] need music to be a part of all these experiences. [Yet] with this transformation, correct compensation of artists and songwriters is required.”

TikTok has lately been in talks with main file firms over the revenues it pays to rights-holders for the usage of music on its platform.

“It doesn’t take a scientist to comprehend that we’re being underpaid by a few of these content material suppliers.”

Rob Stringer

Stringer added: “Among the short-form video suppliers are comparatively new, however we’re clearly monitoring their progress, and it doesn’t take a scientist to comprehend that we’re being underpaid by a few of these content material suppliers.

“As [our] negotiations go on, that will likely be our place till we’re glad that we now have been paid correctly.”

Stringer provided a suggestion for widespread short-form video providers: Committing to a subscriber-based music sister service, to which they might then push customers of free content material – just like the way in which YouTube Music sits alongside the principle YouTube app.

TikTok does have a sister premium-music app, after all – Resso – however proper now it’s solely out there in three markets: India, Indonesia, and Brazil. (Resso lately lower its free tier and went premium-only.)

“The enhancements in relationship with YouTube have been extraordinarily constructive over the previous few years, and we’ve constructed up a relationship the place YouTube agreed to construct a subscription mannequin [in music] to match the massive quantity of ad-supported content material,” stated Stringer.

“We want to see different short-form content material suppliers construct a correct subscription mannequin, which values our content material appropriately,” Stringer added, one that might permit rights-holders to get “paid in the identical proportion as a number of the greater streaming platforms.”

2) A constructive outlook on AI

One of many standout quotes from Stringer’s presentation right now got here proper on the finish of his dialogue with analysts.

The Sony Music Group boss was requested whether or not defining new traits within the {industry}, together with AI-assisted music-making, would pose a menace to main music firms within the three years forward.

“The fixed theme [when you run a major in recent years] is [people say] we will’t do one thing within the subsequent chapter [of the business] – but we hold proving that we [can],” stated Stringer.

“our revenue margins are increased than ever; our market share is constructive; and we’re having extra hits than [we’ve had in any year over] the earlier 20 years.”

Rob Stringer

“I utterly perceive [why some say] that the sheer quantity of content material [being uploaded] in streaming is a menace to us. But our revenue margins are increased than ever; our market share is constructive; and we’re having extra hits than [we’ve had in any year over] the earlier 20 years.

“So [whatever disruptions are thrown at Sony Music] I feel that we’ll discover a solution to take care of it. We is not going to be smug, we will likely be humble about it – like we’ve been during the last chapter. However I imagine that our firm will discover a means of coping with any threats.”

Some of the talked-about potential threats to main music rightsholders proper now, after all, is generative AI know-how.

When questioned concerning the matter by analysts, Stringer was bullish about its potential positives, whereas additionally noting the significance of sturdy copyright safety within the period of ‘pretend Drake’.

Stringer confirmed that Sony Music is at present exploring know-how that may allow it to raised hint its copyrights, ought to they be utilized by AI fashions – for instance – to create replicated vocals of one among its artists.

Mentioned Stringer. “AI guarantees to supply us instruments in order that our artists and writers can create and innovate. It additionally heralds higher ranges of perception by means of machine studying, in addition to potential new licensing channels and avenues for business exploitation. There’s loads of alternative on this space to be enthusiastic about all through our firm.

I feel AI will turn into a particularly constructive device within the artist growth course of. I feel it can assist the most effective creators make wonderful content material.”

Rob Stringer

“We’re enormously conscious of the challenges forward too. We’ll shield our creators on each stage attainable whether or not or not it’s artistic, monetary, or authorized in foundation.”

Having referred to as for a “distinctive new set of artist and songwriter protections industry-wide”, Stringer later reiterated: “We’re significantly fascinated by how we tag our content material in order that we all know when our content material is being utilized in all of the [AI] processes concerned. We’re enthusiastic about this chapter, but in addition we’re extremely protecting of our rights.”

He added: “I feel AI will turn into a particularly constructive device within the artist growth course of. I feel it can assist the most effective creators make wonderful content material. However proper now we’re [mainly] apprehensive concerning the lowest widespread denominator, which is [AI’s role in] flooding platforms with limitless content material of a substandard nature.”

3) A constructive outlook on different issues, too…

Inside his presentation, Stringer made clear that Sony – “in line with analyst predictions” – is projecting a “mid to excessive single digit” share CAGR (Compound Annual Progress Price) for annual commerce revenues in each recorded music and music publishing over the subsequent 4 years (2023 inclusive, see under).

Stringer advised analysts that he was “extraordinarily optimistic” concerning the medium-term future for Sony Music Group, following successes previously few years which have included:

• (i) Market share progress within the frontline information enterprise within the US;
• (ii) Fast worldwide growth in markets like Latin America and Asia; and
• (iii) The spectacular progress of Sony’s indie artist and label distribution companies by way of The Orchard and AWAL.

The latter two of these three successes have partly been pushed by two current nine-figure acquisitions by Sony: The $255 million buy of Brazil’s Som Livre, and the $430 million deal that noticed Sony Music purchase AWAL.

“We have been very aggressive with funding through the pandemic,” stated Stringer, nodding to the Som Livre and AWAL acquisitions. “We [came] out the opposite facet of that period with a stronger firm.”

Stringer’s presentation famous that Sony Music was the No.1 recorded music firm in Latin America in calendar 2022 when it comes to market share (helped by that Som Livre deal), and the No.1 main music firm (vs. Common and Warner) in India (see under).

Confirming that Sony Music Group now homes 70 separate workplaces/operations around the globe, Stringer stated: “I actually really feel that we’re in very, excellent form. I really feel, in comparison with loads of firms, our portfolio is basically sturdy.”

Stringer pointed to particular person artist/songwriter successes for Sony within the earlier 12 months that included Harry Types, Beyoncé, Unhealthy Bunny, SZA, Tainy, and Ashley Gorley.

“you all the time want hits, and it’s loads cheaper to develop these hits organically than to purchase them as catalog at a later date.”

Rob Stringer

He additionally challenged feedback made by different senior figures within the music enterprise who’ve questioned the persevering with stage of funding from main music firms within the so-called ‘hits enterprise’ – i.e. charting frontline repertoire – versus the long-tail of catalog.

Mentioned Stringer: “Regardless of the very fact I learn some firms speaking concerning the significance of catalog and that majors spend an excessive amount of time on hits, I’d say one factor which form of [goes against] that logic: right now’s hits are tomorrow’s catalog.

“So that you all the time want hits, and it’s loads cheaper to develop these hits organically than to purchase them as catalog at a later date.”

4) How main file firms battle The ocean of content material

Rob Stringer’s presentation got here in the identical week that US-based market monitor Luminate confirms that 120,000 separate audio and video music recordsdata at the moment are being uploaded to digital providers every day – a phenomenon partly pushed by DIY artists, and partly pushed by AI-assisted content material creation.

This example clearly presents a problem to an organization like Sony Music: On the one hand, by way of distribution and providers arms like AWAL and The Orchard, Sony is increasing the variety of unbiased artists and labels it really works with (Stringer famous that The Orchard now distributes some 30,000 indie labels); however, based on Stringer, Sony refuses to work with what he termed the “low-end” of music when it comes to perceived high quality.

“We’re satisfied that customers need the identical high quality and stay involved that DSPs are watered down by low high quality and meaningless quantity which negatively impacts music followers and actual artists.”

Rob Stringer

“At Sony Music our consideration is on figuring out high quality, and never purely amount, as we face competitors from many traders and new firms wishing to capitalize on this sheer quantity [of music],” stated Stringer.

“We’re satisfied that customers need the identical high quality and stay involved that DSPs are watered down by low high quality and meaningless quantity which negatively impacts music followers and actual artists.”

Stringer added: “I don’t assume there’s something we will do essentially to downplay the sheer quantity of content material going up onto the platforms. However we predict we now have a accountability to take care of the standard [and] we predict the DSP platforms have the identical [responsibility], that we have to completely be sure that the buyer is getting the most effective expertise attainable with the best high quality content material.”

5) Streaming providers elevating costs

Stringer additionally urged extra music streaming providers to lift their costs (he didn’t point out Spotify by title, but when we needed to guess we’d counsel that was the probably goal of his remarks).

Whereas some DSPs akin to Apple Music have elevated the value of their flagship choices within the US over the previous 12 months, streaming big Spotify has maintained its month-to-month particular person premium subscription value within the US, UK and key European markets at $9.99/£9.99/€9.99 for greater than a decade.

“Final 12 months, the [global] variety of paid customers of premium providers improved by almost 16%, reflecting the broadening world attraction of those choices,” Stringer stated throughout his presentation.

“Not too long ago, we now have seen value will increase from quite a lot of our digital companions which have been lengthy overdue, and we look ahead to extra DSPs recognizing that the worth of music continues to rise.”Music Enterprise Worldwide