IAO (International Artist Organisation) expresses deep concern over recent reports that major record labels are negotiating licensing agreements with generative AI music companies, such as Suno and Udio, which include not only royalty terms but also demands for equity stakes in these platforms. This mirrors earlier developments in the streaming sector, where major labels secured ownership in Spotify in exchange for catalogue access. Universal Music Group’s equity in Spotify, now nearing USD 5 billion in value, highlights the immense financial benefit labels have extracted from platform deals, with limited evidence of redistribution to the artists whose work underpins that value.
While frameworks for AI licensing are necessary to regulate use and enable remuneration, the structure and strategy of these agreements raise significant concerns about artist rights, market integrity, and legal compliance.
Key Concerns
1. Conflict of interest
When labels hold ownership stakes in AI or distribution platforms, their commercial interests may diverge from those of the artists they represent. This raises structural concerns about how licensing decisions are made and whose interests they ultimately serve.
Such arrangements risk creating incentives for labels to favor platforms they are financially invested in, rather than those offering fairer terms or broader access for artists. This undermines trust, transparency, and a level playing field in the market.
2. Distortion of competition
Equity-based deals can distort the market by disadvantaging independent and emerging platforms. Preferential licensing or access conditions may reduce diversity and innovation, ultimately limiting artists’ bargaining power and audience reach.
3. Suppression of artist remuneration
Experience from the streaming economy shows that equity gains for labels are rarely shared with artists, despite being derived from their work. Prioritizing platform valuation over licensing income risks further eroding artists’ earnings in the AI economy.
4. Legal overreach regarding performer rights
Labels may be entering into AI licensing agreements without having the legal or contractual authority to license artists’ performances. In many jurisdictions, performers hold exclusive rights in their recorded performances, and the use of those performances for AI training or generative purposes typically requires explicit, prior consent.
In addition, most artist contracts do not account for AI-related uses, meaning that such exploitation may fall outside the scope of what the label is authorized to license. Even in markets where performers have limited statutory protection, contractual approval clauses often grant artists the right to approve or reject new, non-standard uses of their recordings, particularly for commercial or third-party applications.
Licensing AI-related uses without such consent risks violating both legal protections and contractual terms, and may expose licensors to disputes or legal claims.
5. Lack of transparency and accountability
These deals are being concluded without public scrutiny or transparency regarding:
- What rights are actually being licensed
- Whether artists have been consulted or can opt out
- How financial benefits, including equity gains, will be shared
Robust fingerprinting, attribution, and auditing systems remain underdeveloped. Without enforceable transparency, artists are left unaware of how their work is used, and excluded from the value it generates.
IAO’s Position
IAO believes that the following principles must guide AI licensing practices going forward:
- Artists must give informed, explicit consent before their recorded performances are used for AI training or generation.
- Labels do not have the right to license uses they do not control, including performances and underlying compositions. Any attempt to do so without proper consent constitutes legal overreach.
- All financial gains from licensing, including equity, must be transparently reported and fairly distributed to the artists whose work is being monetized.
- Equity-based licensing models must be subject to oversight to prevent conflicts of interest and anti-competitive behavior.
- Transparent tracking, attribution, and auditing systems must be implemented, allowing creators to monitor usage and ensure fair remuneration.
- CMOs and performers’ rights organizations must be involved in any AI licensing structure to ensure legal validity and protection of rights across territories.
IAO urges policymakers, regulators, and the broader music and tech industries to ensure that AI licensing is developed in a way that centers creators, respects rights, and distributes value fairly.
Artists must not be excluded from decisions that shape their future, nor from the wealth their creativity continues to generate.
International Artist Organisation (IAO)
June 2025