Key Points
- Barclays warns the music industry is in a “danger zone” due to sophisticated AI-generated music.
- The primary threats are lost revenue, market share decline, and a massive increase in new, unskilled creators.
- Financial models show outcomes ranging from a 15% drop in profits to a 15% gain, depending on how labels adapt.
- The rise of popular AI artists and an increase in sophisticated, AI-driven piracy are growing concerns.
Barclays is sounding the alarm about artificial intelligence, warning that it poses significant risks to the global music industry. The bank says record labels could be entering a “danger zone” as AI-generated songs become better and more common.
In a recent note, the brokerage said that advances in generative technology threaten to reduce revenues and cause market-share losses for record labels. While there are some new growth opportunities, labels will need to act fast to adapt. The brokerage noted that when OpenAI developed a music-generation tool, it worried investors, causing Universal Music Group (UMG) shares to drop.
Barclays admitted this is a change from their original view back in May 2023. Back then, they thought AI songs wouldn’t have much impact because the quality was poor, and people still valued human connection. Now, the brokerage believes AI music will eat into labels’ share for three reasons: quality has improved significantly, AI enables 300 million new creators to make music without musical skills, and piracy is becoming more advanced.
Barclays created a few financial models to show what could happen. In a worst-case scenario, labels could lose half their revenue from usage and 10% of their market share, slashing UMG’s core profit (EBITDA) by 13% and WMG’s by 18%. A more likely scenario shows a smaller drop, while a best-case scenario—if labels make smart licensing deals and create “super fan” products—could actually boost profits by up to 17%.
The rapid rise of AI artists is a clear sign of this shift. Acts like Enlly Blue and Xania Monet are already attracting millions of monthly listeners on Spotify, making it “arguably hard to differentiate human music and AI music,” the analysts said.
Piracy is another major worry. Deezer reported that 28% of its daily song uploads were fully AI-generated, and Spotify removed over 75 million “spammy tracks” last year. Barclays warned that smarter AI-driven piracy will likely cost labels market share.
Still, it’s not all bad news. The analysts see new ways for labels to make money, like licensing AI-generated content and creating special tiers for dedicated fans. “We think AI would bring DSPs a viable way to finally bring superfan tiers to life with remix and mashup AI features,” the brokerage said. UMG CEO Sir Lucian Grainge also sees potential, saying AI could help connect artists with fans in new ways.
Barclays concluded that “it’s too early to be definitive, so that that execution will be key,” and that 2026 will be a critical year for seeing how AI changes the power balance in the music world.
