AI Royalties Are Reshaping Music: SONY, WMG, and UMG Could Unlock Billions for Investors

The times, it seems, they are a-changin’. Again. Less than a year after suing AI startups Suno and Udio for copyright infringement, the world’s biggest music labels are now negotiating licensing deals with them. Universal Music Group (UMGNF), Sony Group Corp (SONY), and Warner Music Group (WMG) are shifting from litigation to collaboration. These talks could mark the start of a new revenue stream that mirrors the early 2000s pivot to digital streaming.

Possible Agreements and Numbers

Suno and Udio use generative AI to create music from text prompts. Their tools require large volumes of audio data, which triggered legal disputes in 2024. Now, licensing agreements are in advanced stages. These deals would allow AI startups to access label catalogs in exchange for fees and attribution, with fingerprinting technology helping track how original music is used. Artists may also be able to opt out.

_{As AI enters the music throne room, even Beyoncé’s crown may come with licensing terms.}

While specific terms have not been disclosed, there are clear market signals. The global AI music market is projected to reach $6.2 billion by the end of 2025. Of that, generative AI music accounts for $2.92 billion. If major labels secure even a 20% to 30% share of that segment, they could generate between $584 million and $876 million in new annual revenue. Some proposals suggest rights holders could receive as much as 70% of AI-generated content revenue, echoing the revenue-sharing structure of early streaming deals with platforms like Spotify (SPOT) and Apple Music (AAPL).

This opportunity is expected to grow. One industry analysis estimates a cumulative $42 billion in licensing potential by 2028. For investors, this suggests the licensing model could eventually rival or exceed the financial impact of the original shift to streaming.

Long-Term Upsides

From a bottom-line perspective, these deals could lower legal costs and streamline royalty tracking. Labels would benefit from recurring high-margin income while reducing exposure to copyright risk. If equity stakes in AI startups are included, the upside may expand even further.

Short-term investor reactions have been cautious, with concerns about AI-generated content competing with human artists. But long-term, licensing could restore confidence. For TipRanks readers tracking UMG, SONY, and WMG, the ability to monetize the AI transition may be key to sustained earnings growth as the market evolves.

Using Tipranks’ Comparison Tool, we’ve assembled and compared Wall Street’s notable players in the music industry. This enables retail investors to gain a more comprehensive understanding of each stock and the industry as a whole.