TLDR: Fitch Ratings has issued a warning that the rapid proliferation of AI-generated music poses a significant risk to artist royalties and the stability of music intellectual property (IP) asset-backed securities (ABS). The rating agency highlights that AI tools are enabling an unprecedented volume of music creation, intensifying competition on streaming platforms and potentially diminishing demand for human-created content. While streaming platforms like Deezer and Spotify are implementing measures to control AI content and protect artists, Fitch notes a potential conflict if platforms themselves become creators or owners of AI music. The report emphasizes the need for tighter controls, transparency, and diversification to safeguard future revenue streams for artists and investors.
Fitch Ratings has sounded an alarm regarding the burgeoning landscape of artificial intelligence (AI) generated music, cautioning that its rapid growth could gradually erode demand for content created by human artists and consequently impact royalty-backed music intellectual property (IP) asset-backed securities (ABS). The warning, issued on October 17, 2025, underscores a critical challenge facing the music industry.
According to Fitch, AI tools are empowering users to produce and distribute music at an unprecedented pace, leading to a saturation of digital service provider (DSP) platforms. This influx of AI-generated content is intensifying competition for listener-based revenues, a trend that could ultimately lead to a reduction in royalty payments that underpin music IP ABS.
Despite AI-generated tracks currently constituting a relatively small fraction of total streams, major streaming platforms are already taking proactive steps to address the issue. Deezer, for instance, has been excluding such content from its recommendations and playlists since January. Spotify is also tightening its anti-impersonation rules and introducing sophisticated filters to detect spam, mass uploads, and duplicate tracks. Fitch views these measures as crucial for promoting transparency and prioritizing artist-created content, which could help in safeguarding royalty flows.
However, the rating agency also points out a potential area of concern: if streaming platforms themselves venture into creating or owning AI music, they could leverage this to reduce costs and capture royalties as the rights holders. This scenario could further complicate the revenue landscape for independent artists and traditional music IP holders.
Industry stakeholders are largely in agreement on the necessity for more stringent AI controls to protect copyright holders. Fitch emphasized that for the stability of music IP ABS cash flows, diversification across genre, geography, artist, and vintage remains paramount. Furthermore, legal developments and innovative licensing agreements are emerging as potential avenues for new revenue streams. An example cited is the deal between ElevenLabs and Kobalt Music, where artists receive compensation for the use of their copyrighted music to train ElevenLabs’ AI model for its ‘Pro’ product. While such agreements demonstrate a path for durable new revenue streams, Fitch notes that the specifics of royalty distribution under these contracts are still unclear.
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The report highlights a pivotal moment for the music industry, balancing technological advancement with the imperative to protect human artistry and ensure fair compensation in an evolving digital ecosystem.
