How AI-Generated Tracks Are Exploiting Streaming Platforms’ Royalty Systems | Bloomberg Businessweek

Why It Matters

AI‑generated music threatens to divert billions in royalties away from human creators, forcing the industry to establish legal and technical safeguards to preserve revenue streams and artistic integrity.

Key Takeaways

• AI‑generated tracks flood streaming services, many lacking copyright protection.
• SoundExchange reports AI uploads may represent up to 10% of streams.
• Fraudsters use bots to monetize AI songs, siphoning royalties from creators.
• U.S. law deems wholly AI‑created music ineligible for royalty payments.
• Industry seeks guardrails, licensing deals to protect human creators while embracing AI.

Summary

The Bloomberg Businessweek interview spotlights a growing threat to the music‑royalty ecosystem: AI‑generated songs that flood streaming platforms and evade traditional copyright rules. Michael Huppy, president and CEO of SoundExchange, explains how the nonprofit, which collects and distributes digital performance royalties for over 800,000 creators, is now confronting a surge of AI‑produced tracks.

SoundExchange estimates that AI uploads could account for anywhere from 1% to 10% of daily streams, with some services reporting up to 75,000 new AI recordings each day. In parallel, fraudsters deploy bots to artificially inflate play counts, diverting payments that would otherwise go to human artists and labels. Because U.S. law does not recognize wholly AI‑created works as protectable, these tracks generate no royalty revenue for creators.

Huppy notes that while the quality of AI music has improved—citing a New York Times test that impressed listeners—the industry must draw a line. He references recent prosecutions in the Southern District of New York and compares the current moment to the Napster era, emphasizing that today’s record companies are actively negotiating licensing agreements with AI firms to safeguard human creativity.

The discussion underscores the urgency for clear guardrails: legislation, industry standards, and licensing frameworks that ensure AI tools augment rather than replace human creators. Without such measures, the royalty pipeline risks being siphoned by automated content, eroding revenue for artists and reshaping the economics of the recorded‑music market.

Original Description

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Eighty-five percent of recorded music revenue in the U.S. now flows through streaming, and 100,000 AI-generated tracks are being uploaded to those platforms every single day. Because royalties come from a shared pool divided by total streams, every AI track added dilutes what human artists get paid. Napster was about unauthorized distribution — taking music without paying for it. AI goes further: it uses recorded performances to generate competing content that can displace the originals entirely. AI isn't the only threat to the royalty pool — AM/FM radio has operated the same way for decades, playing music without paying performers a cent. The American Music Fairness Act would close that loophole; session musicians, backup singers, and studio players deserve to be paid, the same way every streaming and satellite service already does. And the U.S. is one of the only countries in the world that doesn't require broadcasters to pay performers, so American artists forfeit overseas royalties that end up flowing to foreign artists instead. AMFA would fix that and keep American earnings in American pockets.

For more on AI generated music, Carol and Tim Stenovec spoke with Michael Huppe, President and CEO of SoundExchange, the organization designated by the U.S. government to administer digital performance royalties.

See omnystudio.com/listener (https://omnystudio.com/listener) for privacy information.

Carol Massar and Tim Stenovec bring together the latest news from the world of business and finance and the interesting stories of global technology, politics, economics and more by harnessing the power of Bloomberg Businessweek reporters and editors.

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