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The music industry is set to undergo a fundamental shift, partly due to generative artificial intelligence Goldman Sachsthe report said the new technology offers “significant opportunities” for the industry.
It designated five buy-rated stocks to ride the trend: field country, Warner Music GroupFrench digital music company believeChina’s neteaseand universal music group. All stocks are on their Confident Top Stocks list.
“Generative AI will enhance music creation and improve productivity,” Goldman Sachs analysts said in a June 28 note.Investors are concerned about AI-generated music, such as a track reportedly created using the technology Featuring “Fake Drake” They said the April figures were “overstated”.
Company such as Diesel Analysts note that Believe and Believe are using AI to detect when AI is creating music tracks, while publishers are partnering with streaming sites such as Spotify Record the artificially generated trajectories.
Goldman said the music industry is ready to protect intellectual property because it is dominated by three major companies that own most of the artist’s catalog.
The analyst added: “We believe the music industry is on the cusp of another major structural change given the continued under-monetization of music content, outdated streaming royalty payment structures and the deployment of generative artificial intelligence.”
Streaming means people have more access to music than ever before, but income doesn’t match consumption, analysts say. “For example, we estimate that revenue per audio stream has declined by 20% over the past 5 years, and that Spotify’s revenue per hour of streaming music is 4x lower than Spotify. Netflix,” the bank said.
Goldman likes event promoter Live Nation because it wants artists to tour more frequently because of what it calls the globalization of music. It added that younger generations becoming more aware of performers through social media would also drive the industry.
“We expect the company to continue to gain market share through its digital-first approach, especially in fast-growing emerging markets in Asia,” the bank said on Believe.
Meanwhile, the analysts say WMG is “one of the highest-quality long-term growth compounds in our coverage,” while rival UMG is on its Confidence List for Europe, which includes .
“We believe UMG has several competitive advantages, including its size, clear and consistent track record of breakthrough artists, the depth and breadth of its catalog, and its ability to spot new trends early on under the stewardship of an experienced management team,” analysts said.
Goldman Sachs chose NetEase, the Chinese internet company that owns the music streaming platform, because of the company’s use of artificial intelligence in its music creation tools.
— CNBC’s Michael Bloom contributed to this report.
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