In This Newsletter
AI Changing the Entertainment Industry
Tokenization and the Future of Music
Ticketmaster, Taylor Swift, and the Macroeconomy
AI Changing the Entertainment Industry
Since its inception, a critical issue in the entertainment industry has been the equitable participation of artists. Equal pay, intellectual property rights protections, and the equitable distribution of royalties have long been financial issues for artists and creators, particularly women and creators of color. At the 2023 Global Conference session The FinTech Movement: Social Economic Mobility Strategies, Jay Brown, co-founder and vice chairman of Roc Nation and partner at Marcy Venture Partners, shared his experiences working with creators of color in the music industry and their co-ventures, like Rihanna's Fenty Beauty. He talked about the ongoing need among artists for better access to financial planning solutions, the importance of financial mentorship in the music industry, and the hurdles that systemic racism poses in advancing financial literacy.
Many of these same questions about equal ownership and equitable compensation for artists are being raised as artificial intelligence is being deployed into the entertainment industry. AI has long been a component of the modern streaming industry. Algorithms curate playlists, recommend what to watch next, and even enhance streaming quality by monitoring a user's internet connection and tailoring playback.
The entertainment industry is experiencing a new artificial intelligence shake-up due to the widespread availability of new generative AI technologies. The past six months have seen AI-generated audio surge in popularity on short-form video platforms like Instagram Reels and TikTok. Tech Crunch reports that ByteDance, TikTok's parent company, has capitalized on this trend to launch a new AI-enabled music creation and audio editing app called Ripple.
More controversially, AI voices trained on thousands of hours of source material are creating new songs in the voices of iconic artists. The Financial Times reports that AI-generated voices have brought back to life Biggie Smalls and Tupac Shakur, made Beyoncé covers in the voice of Rihanna, and spawned Eminem EDM. Also notably, an AI trained with Drake and the Weeknd's combined discography created a new single in their voices titled "Heart on My Sleeve" that took off on social media, NPR reports. The Universal Music Group, which represents the two artists, responded to the song by saying, "The training of generative AI using our artists' music (which represents both a breach of our agreements and a violation of copyright law) as well as the availability of infringing content created with generative AI on DSPs [Demand Side Platforms], begs the question as to which side of history all stakeholders in the music ecosystem want to be on: the side of artists, fans and human creative expression, or on the side of deep fakes, fraud and denying artists their due compensation."
This surge in AI-generated music has artists and record labels asking questions about the future of the music industry. Record labels are considering who owns the rights to reproduce or reimagine their music catalogs digitally, who has the right to train AI with data from their collections, and how to license or monetize those data potentially. Musicians are concerned that music labels or the public may use their likenesses to make music and profit without the musician's permission.
This conversation is a microcosm of a broader debate in Hollywood about the role of AI and the fair treatment of the artists that drive the industry's prosperity. This issue is at the heart of the ongoing WGA and SAG-AFTRA strikes, which have listed among their demands to management clear guidelines about the use of AI in the writing process and limitations on the use of AI to replace actors on screen. The two unions' demands see AI as an existential risk to their professions as studios experiment with generative AI tools in production. At the 2023 Global Conference session A Conversation with Snoop Dogg and Larry Jackson, Snoop Dog shared his thoughts on the rapid rise of AI, the technology's role in the WGA strike, and AI's relation to the royalties paid to writers and artists.
An indication of how seriously SAG and WGA consider the issues at stake, the two guilds have not simultaneously been on strike since 1960, when SAG was under the leadership of Ronald Reagan. Despite the mounting costs of work stoppages to both sides, the strikes are poised to continue. The potential economic impact of the combined SAG-AFTRA and WGA strike could cause $4 billion or more in damage, according to Kevin Klowden, the chief global strategist for the Milken Institute, CNN reports. Any eventual settlement will set an enormous precedent for how AI tools are governed in the entertainment industry.
Tokenization and the Future of Music
A new class of digital asset startups is working to change how the music industry, artists, and fans participate in the ownership of music rights and royalties. Some artists choose to mint NFTs tied to a share of their royalties, enabling holders to participate in song revenues.
Blockchain technology makes it easier to track and distribute small shares of royalties to a broader set of investors in secondary markets. Artists, producers, and recording companies can tokenize their work with smart contracts tied to NFTs, creating a transferable digital certificate of ownership that can be bought and sold in secondary marketplaces. Musicians benefit from the ability to tokenize their future earnings, allowing them to access liquidity and funds upfront. The smart contract's governing rights can also be programmed to enable customized revenue sharing. For example, an artist could receive a share of the sale each time their NFT changes ownership.
Blockworks reports that this February marked the largest NFT-based offering of music royalty rights to date. The startup AnotherBlock offered tokenized royalties of a Rihanna song, which sold out within minutes of the NFT's announcement. The deal was made with a producer of the song, Jamil "Deputy" Pierre, who sold a fraction of his royalty rights to the song via 300 NFTs. The NFTs were listed for $210 each and provided their owners via smart contract with ownership of 0.0033 percent of the streaming royalties to the song, paid as Ethereum to the holder's wallets. This deal shows that while the music NFT space remains nascent, there is interest in experimentation with this new form of ownership.
This push to tokenize music rights is part of a larger trend in the digital asset space to tokenize real-world assets in markets that lack liquid, accessible, efficient secondary markets. CoinDesk Magazine reports that institutional investors, governments, and major financial institutions have been exploring the potential benefits of tokenizing artwork, gold, real estate, carbon credits, sovereign debt, and other risk-weighted assets that lack real-time settlement and have high transaction costs. The music industry is one area where complex intellectual property rights could be digitized.
Ticketmaster, Taylor Swift, and the Macroeconomy
Last year, following the announcement of Taylor Swift's Eras Tour, Ticketmaster was the subject of controversy as the site struggled to process tens of thousands of concertgoers. According to Rolling Stone, fans crashed the site and waited in 2,000-person online queues for tickets with prices approaching $5,000. The widely publicized technical difficulties and large price tags caught the attention of policymakers, who reopened conversations that date back to 2010 about whether Ticketmaster is operating with undue monopoly power. The incident could see the justice department file an antitrust lawsuit by the end of this year, Politico reports, which could potentially lead to the breakup of Ticketmaster from its parent company, concert organizer Live Nation.
Interest in the fair operation of online ticket marketplaces from policymakers underscores the surprisingly large economic force that marquee live performances carry in the modern economy. The economic impact of Taylor Swift's Eras Tours exceeds tens of millions of dollars to restaurants, transit services, retail, and taxes. A Colorado Common Sense Institute study estimated that the tour's two Denver shows brought $140 million into the state's GDP. The Wall Street Journal reports that the Country Music Hall of Fame welcomed 114,000 guests during the month of Swift's shows in Nashville and that Cleveland's tourism board estimated that Swift's stop in the city created $50 million in economic activity.
Headline events like the Eras Tour drive thousands of young consumers into downtown areas struggling to rebuild economic vibrancy since the COVID pandemic. In an acknowledgment of the economic significance of the live entertainment industry, the Federal Reserve Bank of Philadelphia noted in its July 12 Beige Book that "Despite the slowing recovery in tourism in the region overall, one contact highlighted that May was the strongest month for hotel revenue in Philadelphia since the onset of the pandemic, in large part due to an influx of guests for the Taylor Swift concerts in the city." As policymakers and technologists see the impact of America's return to in-person events, there will be continued interest in incorporating consumer protections into ticketing and concert promotion platforms.