The Generative AI Music Sweepstakes

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Today’s episode and memo is a deep dive into Suno, Udio, and generative AI music. These companies have raised a lot of money, captured attention, and raised several important questions. To break it all down,Tati Cirisano joined me from MIDiA Research.

This is a jam-packed ~30 min episode. You should listen to us here or read below for a few takeaways.

Permission, forgiveness, and incentives

Suno and Udio are the latest startups that reminded us of the inevitable decision that many businesses make. If your company is built to shake up an industry, is it better to ask for permission or forgiveness?

Startups operating in music face additional scrutiny from the industry given music’s turbulent history with disruptive technology. No executive wants to deal with another Napster. But Spotify and YouTube, two of the largest revenue contributors to recorded music, ruffled their fair share of feathers over the past twenty years. There’s nuance in those relationships.

But “playing nice” and asking for permission isn’t straightforward either. I’ve talked to many startup founders in music who try to do things the right way. They sometimes get ignored because they’re too small. Other times, the major labels want so much control that it would hinder growth.

If you’re a venture-backed founder, what sounds more attractive? Do things the right way, build slowly, and hope that the industry’s blessing pays off in the long run? Or take money from VCs with opinions that conflict with the copyright owners, especially when those same VCs have a track record of billion-dollar exits?

There are a handful of companies building in generative AI music that approached the opportunity with consent. But the two startups in this space that gained the most attention and funding are the ones that have raised questions. That’s not a coincidence.

This isn’t advocacy for breaking the rules. Instead, it’s a lens inside reality. Until the incentives shift, this dynamic will likely continue.

You can listen to the full episode here or read below for more highlights.

The royalty-free opportunity

Here’s a great quote from Expl.AI.nable’s Kevin Donnellan on the likely use case for these products:

“This community will deliver juvenile stuff like the above, and people creating musicial fan fiction where their favorite artist, against their will, continues to produce what they want. But it will mainly just be a replacement for royalty-free music with no clear path for earnings for anyone given how easy it is to create.”

We also discussed this in our episode. Companies like Epidemic Sound have reached unicorn status by selling access to royalty-free music and sound effects. That side of the music opportunity has gotten less airtime in the generative AI discussions but maybe the bigger area that products like this disrupt.

There’s huge demand for users of all levels for royalty-free music from users at all levels. From the creators who want background music for the b-roll during their TikTok videos, to the music supervisors who have a tight budget for their next project and need to get creative, there’s a market for Suno and Udio there.

Another similar area to disrupt is the beat marketplaces. In 2019, I bought the music and licensing rights for Trapital’s podcast intro and outro from one of those platforms. Would I need to do the same today, or would a free, generative AI music creation platform do the job?

A product or a feature?

I’ve tested out Udio, Suno, and Eleven Labs. The technology is cool and the use cases are quite broad. But are these products that will be the foundation of real businesses? Or are these product features that make more sense in an existing company?

If the inevitable focus is on helping music creators, how will these tools sompare with companies that already focus on that goal, like Splice or BandLab?

When Splice CEO Kakul Srivastava came on our show, she talked about how several users gave feedback that the company’s AI tools made its music creation too easy, so the company adjusted. If this is the same audience for these generative AI music tools, how does that line up?

But the audience may be more for the casual consumer. The industry has been eager for music to have its “Instagram moment” and see music evolve like photography has. But does that audience already live on social platforms like TikTok or DSPs like Spotify? What if those programs launch a similar tool?

We’re still early. We can be excited about the future of music but still ask the tough questions. Both can be true.

The FOMO is real

Water & Music’s Cherie Hu wrote about how Suno’s large round is a watershed moment:

“It not only reflects peak hype around generative AI, but also speaks to a new era of music-tech investment — moving beyond mass-market streaming into new opportunities for disruption around fandom, creativity, and artistry altogether.”

She’s right. For the past decade, the biggest music tech exits were mostly DSPs. Even Apple’s $3 billion acquisition of Beats Electronics fits that category. The headphones were still popular, but Apple wanted their nascent product, Beats Music, which became the foundation for Apple Music.

That watershed moment says a lot about the growth in music over the past decade, but also generative AI investing overall.

Here’s Fairly Trained’s Ed Newton-Rex on how Suno raised $125M:

I suspect the bigger driver of this investment is FOMO in the VC community. Most investors missed the opportunity to invest in OpenAI, who lead the pack in several AI verticals (music is the most obvious one they’re not in). Midjourney, the biggest AI image generation platform, has never needed venture capital investment, a fact that has many investors seething. They want to be in generative AI, but while there are lots of companies around, the unicorn hopefuls are few and far between. Enter AI music. Lagging around 18 months behind image generation, suddenly there are a couple of companies which, if you squint, could end up being the Midjourney of this space. They’ll certainly be saying they are in their pitch decks. If they manage it, the returns will be enormous – so the investor logic goes. So in flow the cheques.

This is real. Udio may have raised a relatively smaller round at $10 million, but I can guarantee that that bigger round is around the corner, and will likely happen for similar reasons.

Listen to the full episode for more on:

– the balance between innovation and regulation
– early use cases for Udio and Suno
– potential alignment with the gaming industry

Chartmetric stat of the week

NPR Tiny Desk is highly sought after and the numbers back it up. Since Ne-Yo’s April 26 performance, his Spotify monthly listeners have jumped from 35.8 to 37.4 million. Similarly, 311’s listeners have grown from 3 million on their March 11 concert date to over 4 million today. The concert series gets hundreds of pitches per week, and this is a big reason why.

Dan Runcie

Dan Runcie

Founder of Trapital

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