Licensing pacts, royalty disputes, bot-driven scams, and a looming rate-setting showdown are reshaping how songwriters and labels make money
The music industry faces four converging crises: AI licensing deals are going live, publishers are challenging performing rights organisations, AI-powered streaming fraud is surging, and a royalty rate-setting showdown with the Copyright Royalty Board looms. NMPA has struck deals with Udio and Klay, Spotify partnered with UMG on AI remixes, and the first AI streaming fraud case ended in a guilty plea.TL;DR
The music industry descended on New York this week for Indie Week and a flurry of parallel gatherings. The conversations kept circling back to the same handful of anxieties: generative AI, streaming fraud, underpaid songwriters, and the organisations meant to protect them.
Four issues, in particular, dominated the agenda. Each one carries the potential to redraw the economics of recorded music for years to come.
Major labels have now signed deals with generative AI platforms including Udio, Suno, and Klay. Universal Music Group settled its copyright lawsuit against Udio in October 2025 and agreed to build a licensed AI music-creation platform, while all three majors inked a licensing agreement with Klay the following month.
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Spotify then raised the stakes. On 21 May, it announced a partnership with UMG that will let Premium subscribers remix and cover songs from within the app using AI, with a revenue-sharing model for participating artists.
On the publishing side, the National Music Publishers’ Association followed suit. At its annual meeting on 10 June, NMPA president and CEO David Israelite unveiled deals with Udio and Klay, calling them the first industry-wide AI licensing pacts for publishers.
Notably, Suno was absent from the announcement. The AI music generator remains in active litigation with Universal Music Group and Sony Music after settling separately with Warner Music in November 2025.
“We know that many songwriters use AI in their creative process,” Israelite said. “But I want to address the fear that exists among our community.”
“Songwriters’ work is being used every single moment to create new work without their permission and without compensation,” he added.
He added that “litigating against bad AI actors and licensing good AI partners is not in conflict,” and said NMPA members would soon receive details on opting in. The mechanics of the deals, including how songwriters will actually be paid, have not been disclosed.
It is also unclear whether songwriters will receive compensation comparable to recording artists, given the existing disparity in streaming payouts.
Performing rights organisations, or PROs, collect royalties for songwriters whenever music is played in public, whether in a restaurant, on the radio, or via a streaming service. This year, publishers voiced unusual frustration with the bodies meant to serve them.
Laurent Hubert, CEO at Kobalt Music, did not mince words. “I think there’s a normal arc where if you don’t bring any value to the ecosystem you take the risk of being displaced,” he said.
Hubert added that 30 percent of Kobalt’s income related to these organisations cannot be audited, a claim that could not be independently verified.
“I would certainly challenge some of the tech stack of those companies. I would challenge governance of those companies,” Hubert continued, suggesting that direct licensing could ensure more accurate payouts.
The tension is not confined to the United States. In October 2025, Elton John, Paul McCartney, Thom Yorke, and 15 other songwriters wrote to PRS For Music demanding a review of transparency, accuracy, and the proportion of royalties consumed by administrative costs.
The most dramatic illustration of the fraud problem arrived in a courtroom. Michael Smith, a North Carolina man, pleaded guilty in the Southern District of New York to conspiracy to commit wire fraud.
Smith used AI to generate hundreds of thousands of songs and bots to stream them billions of times. He collected more than $8 million in royalties from Spotify, Apple Music, Amazon Music, and YouTube Music before being caught.
Apple Music, meanwhile, reportedly flagged roughly two billion fraudulent streams on its platform in 2025 alone, according to Oliver Schusser, Apple’s vice president of music. The company has since doubled its fraud penalties.
“AI is being used to hypercharge streaming fraud,” Israelite warned. Bob Valentine, CEO at Concord, agreed: “It needs to be dealt with.”
Spotify introduced a 1,000-stream minimum threshold for royalty payouts a couple of years ago, but the measure has not kept pace with AI-generated content flooding the platform. The company recently launched additional fraud-prevention tools, including an Artist Profile Protection feature that lets musicians review releases before they appear on their pages.
The tool is designed to tackle a growing problem: uploaders fraudulently tagging AI-generated songs under established artists’ names.
Behind the scenes, another battle is brewing over how much songwriters and publishers are paid for streams. The Copyright Royalty Board, which operates under the Library of Congress, sets the statutory mechanical royalty rates that streaming services must pay.
The current rate period runs through 2027, with the headline rate climbing to 15.35 percent of a streaming service’s revenue. But negotiations for the next five-year cycle are on the horizon, and the outcome is far from certain.
Both the NMPA and the Digital Media Association, which represents Spotify, Apple, Amazon, and Google, have signalled a preference for a negotiated settlement. Neither side has publicly disclosed details of any active negotiation for rates beyond 2027.
History suggests a peaceful outcome is far from certain. Previous rounds have produced drawn-out legal proceedings before the CRB.
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