A new Citi Research report led by analyst Jason Bazinet examines how artificial intelligence could reshape the music industry by enabling consumers to become active content creators rather than just passive listeners. The analysis divides the ecosystem into three main groups: artificial intelligence centric music start-ups such as Suno, Udio and KLAY Vision, major record labels including Warner Music Group, Universal Music Group and Sony, and digital service providers such as Spotify, Apple and Amazon. The report explores how artificial intelligence tools can be deployed by artists, platforms and consumers, and concludes that consumer use is both the most interesting and the most disruptive because artificial intelligence makes all listeners potential creators.
The researchers see artificial intelligence music start-ups largely focused on content creation, either generating entirely new music or enhancing existing tracks. For these start-ups, licensing deals with record labels are central, as the major labels have been assertive in pursuing copyright infringement litigation. As artificial intelligence start-ups expand, labels face risks from potential market share loss and erosion of intellectual property value, but could also benefit from licensing revenues and music creation efficiencies. The report notes that Warner Music Group has signed licensing agreements with the three largest artificial intelligence music start-ups, signaling a relatively collaborative stance. Universal Music Group is described as having more artificial intelligence related agreements than other labels but with a more restrictive approach aimed at strong safeguards around intellectual property and content quality, while Sony is characterized as the most conservative, with limited licensing and partnership activity to date.
Before the rise of artificial intelligence, the industry value chain was straightforward: artists created music, labels promoted it, digital service providers distributed it, and consumers listened. The report argues that artificial intelligence tools now sit with artists, digital service providers and consumers, but not meaningfully with labels, and that this shift could alter value flows. The authors see labels as more exposed to downside risks, including monetization challenges and declining intellectual property leverage, and they see the risk reward balance skewing negatively for labels if artificial intelligence adoption is left unchecked. In contrast, digital service providers are expected to gain more than they lose, benefiting from content creation capabilities, user experience enhancements and cost efficiencies. Despite concerns that artificial intelligence generated music could flood streaming platforms, the report suggests that established digital service providers have a strong first mover advantage in distribution and that share loss to artificial intelligence focused competitors is likely to be limited.
The report highlights that digital service providers are already using artificial intelligence to improve research and development efficiency and to add new features for listeners. The authors expect artificial intelligence driven feature upgrades to boost engagement and retention, and they foresee the possibility that consumers who become creators will deepen their ties to streaming platforms and open up new revenue streams. Looking ahead, the report argues that digital service providers are better positioned than labels to acquire artificial intelligence music start-ups, particularly those centered on content creation. The reasoning is that digital service providers have clear incentives to integrate artificial intelligence to differentiate their services, while labels are more likely to focus on defending intellectual property, tightening licensing terms and limiting low quality artificial intelligence content. The full Citi Research report, titled “Artificial Intelligence May Turn Consumers From Passive Listeners to Content Creators,” is available to existing clients.
