Deezer starts labeling AI-generated music to tackle streaming fraud

Deezer is labeling albums containing AI-generated tracks to combat streaming fraud, as approximately 18% of daily uploads are now AI-generated, with 70% of their streams suspected to be fraudulent. These tagged tracks will be excluded from editorial playlists and algorithm-based recommendations, and fraudulent streams will be filtered out of royalty payments. Deezer's move comes amid industry-wide discussions on AI's impact on copyright and potential licensing deals between major labels and AI startups like Udio and Suno, who are currently facing copyright infringement lawsuits.

Analysis

Deezer is implementing a labeling system for AI-generated tracks to combat streaming fraud, noting that 18% of daily uploads (over 20,000 tracks) are AI-generated, with an estimated 70% of their streams being fraudulent. While AI-only songs currently constitute just 0.5% of total streams, Deezer highlights their rapid growth and the industry-wide challenge they present. The company's strategy includes excluding tagged AI tracks from editorial playlists and algorithmic recommendations, and filtering fraudulent streams from royalty payments, aiming to increase transparency and safeguard artist earnings. Deezer's commitment is further evidenced by two patent applications for its AI detection technology reportedly filed in December 2024. This initiative unfolds as major music labels, including Sony Music Entertainment, are reportedly in licensing discussions with AI startups like Udio and Suno, which are concurrently facing copyright infringement lawsuits from these same labels, indicating a pivotal moment for AI and copyright in the music sector. The market's moderately positive sentiment and cautious tone towards Deezer's announcement reflect an appreciation for its proactive measures amidst the broader uncertainty and legal complexities surrounding AI's integration into the music industry.

Key Decisions for Investors

• Investors should monitor Deezer's execution of its AI content strategy and the efficacy of its AI detection technology, as successful implementation could enhance its competitive positioning and user trust.
• The ongoing legal battles and potential licensing agreements between major labels like Sony Music Entertainment and AI music startups represent a critical inflection point; outcomes could significantly reshape royalty frameworks and the valuation of music intellectual property.
• Consider the dual impact of rising AI-generated content: potential pressure on royalty payouts for streaming platforms due to fraudulent activity, versus opportunities for new revenue streams if AI tools are responsibly integrated and licensed.
• Evaluate investments in music-related entities based on their proactive measures to address AI-driven fraud and copyright challenges, alongside their strategies for leveraging AI in legitimate content creation and discovery.