In This Issue

1. Our Top Story - AI & Music Royalties

2. News Roundup

‼️ TOP STORY
Is AI The Biggest Threat To Music Royalties?

In Comes Generative AI

The emergence of ChatGPT just over a year ago has kicked off a tsunami of generative AI content that no one was really quite prepared for. Like other creative mediums, music has not been spared.

In April, a new single from Drake and The Weekend began trending. It reached 600K streams on Spotify, 15M views on TikTok, and nearly 300K views on YouTube before being removed. You see, that single wasn’t actually from either artist. It was created by “Ghostwriter” using generative AI.

It’s not the only instance either. Other AI-based songs using voice clones of major artists have gained traction elsewhere. A similar song with Bad Bunny’s voice has over 1.2M views on YouTube, for example.

So, What Should We Do?

This is what many people and companies are currently asking themselves. So far, there’s no real consensus.

On one front, there’s a strategy of attempting to contain and control the fallout.

The ASCAP is effectively petitioning the US Copyright Office for greater protections. They want AI models to have to license content for training. Additionally, they’re also seeking increased “right-of-publicity” laws that would restrict the use of an artist’s voice without their permission.

Rights Holders are also trying to contain the spread of these “deepfake” songs across streaming and social media platforms. However, Sony Music reports that platforms are reluctant partners in this process.

Removing content (especially popular content) is not generally in the best interest of companies like Spotify or YouTube. In this case, the right-of-publicity laws are not as strongly protected. Billboard reports that there are no federal laws that would obligate these platforms to remove the songs and that right-of-publicity protections vary from state to state.

On the other front, there are artists that want to embrace this new technology. If someone can create hit songs with their voice and they can get paid for it - that sounds like a potential win-win, right? No new effort, but new income.

Unfortunately, not even that is straightforward. In many cases the “ownership” of an artist’s voice is a complicated legal topic for anyone that’s signed on with a record label. The record label may effectively own the rights to the artist’s voice, limiting their options. In other cases, the contracts may be unclear leaving them in a legal gray area.

How It Affects The Asset Class

First, there is a lot of uncertainty as to how this will play out. That lack of clarity is a bit of a stain on an asset that is valuable, in part, due to the predictability of songs’ earnings.

Since there is so much uncertainty, we can only speculate on how things might play out. But there are concerning scenarios for investors.

Attention is where the money is. A flood of new AI-generated songs getting uploaded to platforms every day is only going to make it harder to capture and monetize the attention of listeners.

If fans are barraged with a mix of “authentic” content from artists as well as AI-generated content, at some point, will they stop being able to tell the difference? What’s real and what’s fake? Will the distinction even matter to future generations? That could lead to less time spent listening to existing tracks and lower earnings.

What about personalization? 

Today every service has a recommendation algorithm intended to keep people listening and watching as long as possible. One of the limitations these algorithms have is that they can only recommend content that exists.

What if the perfect song for a given user at a given moment to keep them from closing Spotify is a Taylor Swift rap song or Lady Gaga singing in Portuguese? Even if the algorithm could theoretically figure that out, if those songs don’t exist then it has to look for other next-best options that do.

With AI, those algorithms could have access to an ever-growing library of music that covers the bounds of imagination. Maybe they could even generate the songs themselves.

Conclusion

How do you invest in royalties in a world where everyone just listens to a hyper-personalized individual universe of music? Where there aren’t mass hits, but only individual hits with every variable available for the tweaking?

Honestly, I don’t know. And that is why I wonder if AI-generated content is the biggest threat to music royalties as an asset class.

There’s still a ton of uncertainty to how both laws and industries will adapt to the rise of AI. Some of those adaptations may mitigate or resolve these issues. However, there’s enough cause for concern that investors should be attentive to how things continue to develop.

ALTERNATIVE INVESTMENT NEWS ROUNDUP
🏠 Real Estate

Arrived Homes

Arrived, a leader in fractional real estate investments has expanded their offerings to include a new investment fund.

The Single Family Residential Fund (SFRF) is now available and provides different investment characteristics to the individual properties that they have offered so far. Here are the biggest ones:

• The SFRF is always available for investment (does not require waiting for new property offerings to drop).

• There is potential liquidity available on a quarterly basis, after a 6-month holding period has been met.

• One investment can be spread over a range of different properties and markets through the fund. This makes it easier to diversify on the platform, especially for newer accounts that are generally investing smaller amounts.

While this is a somewhat predictable next step for the company, it’s still good to see Arrived expanding their offerings for investors.

Yieldstreet & Cadre

Sometimes when there’s smoke, there’s fire. The previously rumored Cadre acquisition has been officially announced by Yieldstreet. The announcement notes that the combined company has received over $5B in investments so far. It also calls out Cadre’s institutional and high net worth clients.

The deal was rumored to be making progress back in August. At the time it was reported that Cadre would be sold for just $100M. That’s less than the $133M they reportedly raised in funding and well below their peak valuation of $800M.

It’s hard to know what to read into this with so many of the details of the deal undisclosed. However, selling at 1/8th your peak valuation is never a good sign.

🎵 Music Royalties

Quick Hits

ANote Music has now distributed more than 500K Euros in music royalty payments since their launch.

MasterExchange shared on X that Korean music royalty platform Musicow has over 1 million users.

While some of their users may be international, that would represent somewhere around a 2% penetration into South Korea’s ~52M residents. That may make it one of the largest alternative investment platforms for retail investors in the world and represents a success story many companies would be happy to replicate.

Royalty Exchange is working on improving their listings pages to provide more information. This is an example of the new format.

💡 Equity Crowdfunding & Startups

Quick Hits

The Republic Note began trading on December 6th. The company has positioned the offerings as the only fund of startup investments that are available to non-accredited investors.

Hubtas has reported that StartEngine Private has crossed over $2M in investments raised so far. They’ve had a hard time keeping up with demand for their Airtable offering with over $1.35M in investments there alone.

EquityZen added support for Stripe Financial Connections on their platform to make investing easier.

🎨 Other Assets

Quick Hits

AcreTrader recently put out a survey to investors to gauge interest in future investment offerings. Included on the survey were things like real estate, infrastructure, and carbon sequestration. This suggests that AcreTrader is keeping an open mind to how they might expand their offerings.

A plane using sustainable aviation fuel (SAF) has crossed the Atlantic Ocean for the first time. The fuel was a mix of fats and plant sugars. SAF currently makes up only ~0.1% of fuel used for aviation today, but could be a big part of a more sustainable industry in the future.

That future demand for SAF will have to be satisfied with an ample supply of crops to both meet demand and keep prices low. That will have to be grown somewhere, potentially increasing demand for productive farmland and providing a tailwind for future appreciation.