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Transcript38 lines
- [00:00]
Carlita Higginson
Foreign.
- [00:08]
Dan Runcy
I'm Dan Runcy, the host and founder of trapital, and today I'm going to share another conversation with you from our trapital Summit. If you've been listening to this show long enough, you know that one of the ongoing themes that has always interested me is that tension between permission and forgiveness. It's that constant push and pull that startup founders and investors try to push for. When they want to see innovation, they want to see new developments happen in the space. But there's also understandable concerns from the rights holders and the incumbents in the space that want to make sure that they are being A fairly compensated and B, partnering with companies that they feel are going to be here for the long term. While this debate, frankly, is a bit more of a feature, not a bug, to how the ecosystem works, I still always felt like there could be a way to do it better. So one of the conversations that I wanted to have at the summit was talking to someone on the other side of the table. We've had conversations with a lot of the startup founders themselves, but I wanted to hear it from the rights holders themselves. And that's why we were grateful enough to have the Chief Digital Officer and Executive Vice President from Warner Music Group, Carlita Higginson, to join us. She's seen it on both sides of the table as an attorney that has represented rights holders in this space and at YouTube and then now at Warner Music. So it was great to have her have a conversation with our friend of the show, Tatiana Sirisano, the senior consultant and analyst from Media Research, and they sat down and had an ongoing discussion about AI Music, what Warner Music Group's development looks like, how the label looks at that ongoing tension between permission and forgiveness, and if that can give us an indication on what to expect moving forward. Really, really enjoyed this conversation, and I hope you do, too. Let's dive in and next to the stage for a conversation about AI and music. I'd like to introduce Carlita Higginson, the Executive Vice President and Chief Digital Officer for Warner Music Group, and Tati Sirisano from Media Research. Welcome.
- [02:10]
Tatiana Sirisano
Thank you for being here, Carlita. You know, I think it's never a dull moment in the music industry, but I feel like you joined at a particularly interesting time at Warner or just for the music industry, as someone in your position. Everyone was still kind of reeling from this feeling of what is AI going to do to our business? So I'd really just be curious, first of all, to hear how's your first year been? And congratulations.
- [02:31]
Carlita Higginson
It's Been a very interesting time. The first year has been, you know, frankly, I feel like an incredible one. There are a lot of things that we're thinking about as I think about sort of the job in that first year and what the priorities have been. First and foremost, it's, you know, my position is about driving revenue for the company. And so, you know, I think a lot and spend a lot of time on how do we think about our strategic approach for the next 10 years and what are we thinking about in terms of optimizing revenue and our deal performance and how do. How do our models need to evolve in this world where streaming is evolving and monetization is evolving, and so optimizing performance of our existing deals as well as, you know, thinking about new deals and new opportunities in this space, which include AI as, you know, sort of another place where there's been a lot of evolution. Certainly AI as another one of the priorities and something that's been, you know, I've spent a lot of time on during this first year as we think about both the litigation aspect, the regulatory aspect, and the commercial opportunities that are within that AI space. Thinking about all of these things holistically, existing business, incremental business, evolving our business models has been what's kept me very busy in this first year.
- [03:50]
Tatiana Sirisano
And I know, too, that your role is a little bit different from how it would function at a different company and also to tell us about how it's different from the same role at other companies.
- [04:00]
Carlita Higginson
So the way that my role is structured, which is unique, I don't know that there is any other music company that's sort of set up like this, certainly not the other majors where I am going across our artist side of the business as well as our songwriter side of the business, as well as our global commercial partnerships. And so as we think about that, it means driving revenue both for artists as well as songwriters. And thinking about that holistically across recorded music and publishing, the way that we think about it from a Warner perspective is there's so much opportunity, when you think about things holistically, to figure out how do you want to leverage the sort of opportunities that we have as a whole in terms of our company. Having come over from YouTube, both Robert and I understand that, you know, you need both sets of rights, that the service providers need both sets of rights to make the music content available. Publishing has an enormous reach with respect to where, you know, all of the different content that it touches. The recorded music side has, you know, significant revenue opportunities. And so when we're facing and going into these negotiations, having the ability to think about it very holistically and really think about what are the opportunities to come together and approach the streaming services. It has been a great sort of place and opportunity for us to have, which is something that's unique because in most places, the sort of publishing side of the business and the recorded music side of the business, from a digital perspective, in terms of the deals and the licensing framework tend to be almost like church and state, where they're not speaking to each other.
- [05:40]
Tatiana Sirisano
It makes it harder to make the sorts of deals happen that you're looking at in the emerging tech.
- [05:45]
Carlita Higginson
And there's just like a missed opportunity for really thinking about how do you bring your full leverage as a company to the table in those negotiations.
- [05:54]
Tatiana Sirisano
And it's such a unique vantage point for you and Robert and much of the newly installed leadership having sort of been on the other side of the negotiating table between emerging platforms and rights holders. And a question that I love to ask people in this position is what do you think that each side doesn't understand about the other?
- [06:10]
Carlita Higginson
I would say that one of the things that we, we are acutely aware of, having been on the other side for quite some time, is that the incentives that are in the deal matter. And the DSPs, the Digital Service providers particularly now, are really concerned about margin. How do they improve their own margins? What does this look like? And so thinking about it in a way where we're thinking not only how do we grow our business, but how do we ensure that entity is growing their business, but not at the expense of music, if they are not incentivized to grow it in a way that's going to help the entire pie, then we're not really going to grow. And we're seeing changes in the industry, right? We're seeing changes in terms of content that isn't music content. How do we ensure that there is continued growth in music from a pricing perspective? What are the right ways that we structure the deal that incentivizes them to increase pricing and think about our models differently, how do we think about the royalty pool? And so having had that background from a YouTube perspective and understanding some of the pressures that they're having, as one example, and Meta is very different and Spotify is very different and TikTok can be very different, but there is certain commonality there. And so the importance of having that conversation, collaborating early and often, I think is something that sometimes has been missed in the industry.
- [07:44]
Tatiana Sirisano
And especially what you, what you said about Incentives. Because I think one of the elements of this that's coming up with, with AI, but comes up every time that there's new technology is this forgiveness versus permission difficult. Where you know, there's often new platforms that ask for forgiveness rather than permission when building platforms that may encroach on, on rights. And obviously they should be asking permission, but we also know isn't necessarily well set up for that. There's platforms that say, well, if I don't do this, someone else will do it and you know, beat me to it. Or we need the music to get the users, but we need the users to pay for the music. So it sort of feels like the whole system isn't really working. So I'm curious, like, how do you think we can foster more of that, more collaboration between these two sides instead of being at odds?
- [08:34]
Carlita Higginson
You know, the way that we approach it is very much we need to protect, right, we need to protect our Warner artists, we need to protect how they, you know, what the structure looks like. But there is also a tremendous opportunity here. I go back and think about it from when I started my music career. I was a litigator. I worked at a law firm prior Cashman and then I was a partner at Jenner and Block. And at that time, when I came out and first started practicing, it was a time of significant digital disruption because it was the Napster era. It was a time where from you go and the record industry and how they were functioning and how they were operating, all of a sudden all of this content was everywhere. It wasn't clear what the rights landscape should look like. The copyright statute was something that had been developed a very long time ago. All of a sudden content is everywhere, nobody's paying for it. And that was a time when it was super important. And we, you know, I was again representing the rights holders during that time and said it's super important to litigate so that we have the framework that's, that's out there and we're setting up the right guardrails and establishing the right precedents for the businesses to figure out what needs to happen. And it was a while before, you know, the businesses started to catch up and the Spotify's came into existence and the, and the YouTubes came into existence. When you see that it then became, you know, as those businesses, as a result of some of the litigation that was happening and as a result of some of the regulatory proceedings that were going down, these businesses started to say, all right, how do we partner with the industry? And what should that partnership look like? I think the industry was then like, all right, how do we not put that genie back in the bottle because it's out, and think about ways to monetize content and what are the particular opportunities that may be established from having this, you know, very significant disruption that has happened in the industry. And it was at that I went over to YouTube and started to work on the partnerships. When I went over there, there wasn't even a subscription business that was in play. And so starting to think through and work with the industry on what could this look like, what should this look like in terms of user generated content and the ability for the music industry to monetize that content. How do we identify that content? What are the systems that we've built and what do users want on that? And I think when I think about that journey and what has happened there and what's happening now, you know, from an AI perspective and I know and understand and YouTube was one of them, there was a lot of others where it was like, you know, we need to go out, we need this competitive advantage. The legal landscape may not be that clear in terms of what's required or what's not required and how is our behavior, you know, what's happening with our behavior. It goes back to this position of there is a need to embrace the technology because it's here and it's happening and we can do that in various ways. The ability to partner early gives us the ability to think about and structure what are the ways that we can provide monetization opportunities, control to our artists from a name, image, likeness and voice perspective, an attribution back to their content and their original content. All of those things happen. Oftentimes it will happen fastest when you're dealing with the DSPs directly and you're starting and there's a partnership where that's allowing that ability to define the rules of the road. Now that said, that doesn't necessarily have to happen in isolation to litigation to protect your rights, where you have actors who are just not going to, you know, not going to take the steps necessary to get the licenses that, you know, we believe that they need. And so, you know, there's, there's going to be that angle from a litigation perspective, there's going to be that angle from a regulatory perspective in terms of working with governments and policies to make sure that the right policies are defined. But then there's also the importance of getting in early and embracing it from a partnerships perspective, because that's really what is going to also help drive this.
- [12:52]
Tatiana Sirisano
And I feel like there is widespread agreement, at least at this point, that, like you said, you can't put the genie back in the bottle.
- [12:58]
Carlita Higginson
I feel like I hear that phrase.
- [12:59]
Tatiana Sirisano
All the time from people in the music industry. But it's a good thing because it shows that, like, we're here. And the tone has kind of shifted with that. Where it's more about, all right, this is where things are going. How can we protect our rights but also innovate on that? So it does seem like the tone has definitely shifted.
- [13:15]
Carlita Higginson
Definitely. And I mean, innovation has always happened in the context of strong legislation and policy. I mean, those things, the fact that there are. Those pieces of it certainly haven't been a bar to innovation. And I think that there are a lot of innovative ways and uses of the technology, both from a generative AI AI perspective as well as, you know, for other business practices and other uses that, you know, can help foster that human creativity, that. That can really help drive that human artistry. But when you think about that, again, to do it within the context of providing artists and songwriters with control over name, image, likeness and voice, all of those things are critical for that balance to work in the way that it should.
- [14:02]
Tatiana Sirisano
Here's a question I've been dying to ask you because let's say that hypothetically, everything works out in the rights holder's favor, and there's now these AI training models that come to you and want to give you an agreeable sum to train on your catalog. Then you have to go to the next step of, okay, how can we make sure that our artists and songwriters are able to opt in to that, not just have to opt out. How do we actually build a system to make this work? I'm sure that's something that you've had to start thinking about. Can you share any insight on that?
- [14:31]
Carlita Higginson
Definitely started to think about how all of this works. Right. Again, I think having come from a place, from a YouTube side where we didn't really know what the systems were going to look like and we didn't know how this was going to work, we think that there is, like, systems out there where you look at content ID and you figure out how has that worked in terms of identification of content, monetization of content, and providing the ability to control what's in there by asserting certain rights. Those types of systems need to be evolved to apply into this type of framework. It is a different framework, but providing a framework which allows for artists and songwriters to have control on anything that is Implicating their name, image, likeness and voice from an output perspective allows for us to set up a system where again, if we work early on with digital service providers and others in other technology companies in this area and to start to build out through technology that allows for that in a scalable way is one of the things that we're thinking about and thinking through. I think from a training perspective, again, it's a fundamental core belief of ours that you need you entity engine out there, you need a license to train on our data. And so providing that license and providing the right ability to opt out or opt in in certain instances, whether we're, and it'll depend on whether you're talking about the input or the outp use case. But anything, certainly anything that is from an output perspective implicating those name, image, likeness and voice rights absolutely require the consent.
- [16:12]
Tatiana Sirisano
And we talked a little bit about the tone shifting of kind of more openness in the music industry now. Is there anything else? Because I'm curious, we've been through so many of these sort of hype cycles before, and I'm curious what you think is different this time around and what's kind of the same?
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Carlita Higginson
I think, is this a hype cycle? Maybe it's a hype cycle. I don't mean to like label it.
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Tatiana Sirisano
I look at the, the hyp around.
- [16:34]
Carlita Higginson
It, certainly like it's at a peak, right? I mean, OpenAI, they're, I don't know, based on their last round of funding, it was something like $157 billion as their valuation. There is a lot of investment that's going into this space. I think one of the things that's different about this is we're approaching this early on, right? Early on in terms of thinking about negotiations and thinking about approach. I think when you think about AI generally, there are lots of different use cases and applications with respect to AI. And so the potential for disruption or the potential for opportunity comes and will impact a lot of different industries. Right. Whether it's the medical industry, whether it's internal tools. It's not all generative from an AI perspective. Right. So, you know, this is, I think that this is technology that is evolving, that will be applicable in a whole host of ways that, you know, every day, you and I and so many others, you know, it will impact how we do business and what that business looks like now, whether that means or that will lead to a complete transformation of what the music industry looks like. There isn't technology that's happening that is going to replace Artists, right? You know, that. Or songwriters, you know, that's certainly not something that we see coming or whatever now. Does it change how they operate? Does it change how they are in the studio? Does it, you know, and the tools that are available, available to them. Does it change how fans interact with their content or different opportunities to have fans lean in and engage, bringing it back to that original content? Does it have the potential and the opportunity to have artists and songwriters reach different and new audiences and do that in a different way? I think absolutely no.
- [18:24]
Tatiana Sirisano
And on that note, let's talk briefly about the YouTube Dream Track partnership, because that was one of the few examples we have of an authorized, you know, a generative AI product that is licensed with a major label. Based on the timing, it seems like that might have been in the works before you joined, but I'm sure, you know, you could speak to both sides of it. Both sides of it, yeah.
- [18:45]
Carlita Higginson
I was at YouTube at the time that we were sort of developing the product and thinking about it and thinking about that particular experiment and the use case and starting to talk to rights holders about, you know, this opportunity. And then I was at Warner as we were closing out our deals to, you know, allow for the experimentation in that world. I think that it was a. YouTube approached it in the right way in terms of we had, on the Warner side, we had four artists, I believe, participate in that particular experiment. They consented to being a part of that and to seeing how that technology was going to evolve and what types of potentials would come out of that. What I would say is that. And one of the learnings I would say that, that we see from that is that it was a very on rails experiment. And so it was limited in terms of the number of creators who could access the tool. It was limited in terms of the ability for creators to create the content using the sort of synthesized voice of the artist. So there were a lot of limitations that frankly, I think ultimately led to being. To making it a difficult place to really assess and evaluate whether this was a good opportunity, whether this is something that we should expand or they should do further or whatever. I think one of the learnings on something like that is we've got to strike the right balance on going out small, but then figuring out how do we allow for a bit more flexibility and a larger scale operation to really be able to. To analyze the findings and whether or not this is the thing that artists, songwriters or users really want. But I think that kudos to YouTube for coming and approaching it in the Right way. And there are certainly other opportunities and experiments that they're contemplating. And I think that we were also with them, involved in an artist incubator project where our artists go in and provide feedback and provide comments on what are the types of uses that they are looking for and what are the types of things that they think might help build their audience or drive different creative aspects of their work.
- [21:20]
Tatiana Sirisano
That's so interesting because it just speaks to what we're here to talk about, which is that balance as a major label of control versus innovation. I realize I didn't explain in case you haven't had a chance to check out DreamTrack. This feature allowed fans to generate 30 second clips of songs sung in the voices of artists like Charli XCX. And so it was just 30 seconds. So you have that element of control. But then how do you actually evaluate whether this was successful or not if fans don't have the full ability? So it is very, you know, that's a perfect example of that balance we're trying to talk about. And I think there are so many ways that AI can be used to help people be even further engaged with the music they already love. And there's other projects that Warner has been on, like the Edith Piaf animated film and the Randy Travis first song in a decade. I mean, can you speak to some of those? Because they're really amazing.
- [22:13]
Carlita Higginson
The Randy Travis is one of my favorite examples of it because it was using AI technology. So Randy Travis is an award winning country musician who lost his voice after a debilitating stroke. And so he was without his voice. He used AI technology to be able to recreate his voice. He brought in the producers from previous albums to work with him on this and create new content. And if you see the video of him listening to it for the first time, this ability to create new content in his own voice that was lost through this tragic, you know, sort of tragic event that happened in his life. It was incredible, right? It's incredible to see and to think about the power of AI to foster that further creativity. The Edith Piaf is another great example. It's, you know, we worked with her estate on creating content for a biopic that is happening. So. And again, in both of those instances, you're talking about control, right? Like, you know, the control of the artist to think about how they want their content to be used and what that looks like and what the ultimate output looks like. There are gonna be a ton of additional, I mean, so many more than we could even sit here Today and think about. And articulate. But other uses like that, right? I mean, think about the ability for an artist, for example, to go tour in whatever country and let's say they go to France and they go tour in France and for their voice to come out and be singing a song in French and tap into an audience that way, or for a user who is wherever to tap in and allow for that artist to consume that artist's music in their native language. Those are some opportunities when you think about the ability for the technology to be used to enhance that creativity.
- [24:18]
Tatiana Sirisano
And I'm curious, are these projects coming from, Are these the artists coming to you and saying we want to do this? Is it Warner Push? I guess it's a combination of.
- [24:26]
Carlita Higginson
It's a combination, it's a combination of where the technology is going and how it's evolving. And so, you know, those will be the platforms and the, the AI engines themselves that are coming to us and saying, here are some opportunities. They are a result of us talking to our artists and songwriters about, you know, what are the types of things that you're looking for. Because a lot of these are also abilities for, from a composition standpoint, from the, from a songwriter perspect perspective, the ability for their works to get used in a wholly different way and in a way that engages them with it, allows them to sort of have exposure to a different audience. And so there, it's a sort of two way street as that technology is evolving now there are other artists and songwriters who want nothing to do with it. Right. And that's fine too. And striking that balance and ensuring that the ones who want nothing to do with it are protected and have the ability to opt out. And then the ones who do want to lean in and engage the ability to do that and have controls over that and have monetization as, as we think about, you know, their livelihood there.
- [25:32]
Tatiana Sirisano
And we've sort of alluded to this. But I also just wanted to ask you directly, with all of the headlines and investment that we're seeing going into AI, are your expectations in line with the amount of money and hype around this or what, what is sort of realistic, I guess, to expect?
- [25:49]
Carlita Higginson
I think it's realistic to expect that things are going to continue to evolve. There is a significant amount of money that's being poured into, you know, into those technologies. Again, I don't know what that's going to ultimately mean for us in our industry. I know that we need to get in early and we want to be in early, but in Terms of, you know, whether it's the right level of investment or not, it's hard to say until we start to see what are the particular use cases that are involved. How do we think about leveraging that, you know, to the best of our.
- [26:25]
Tatiana Sirisano
Ability as it relates to AI or the other things that you're, you're looking into. Where do you kind of see Warner a year from now?
- [26:33]
Carlita Higginson
When I see the business and I see where we are from a music industry perspective, particularly from the seat that I am in, which is, you know, about driving revenue for the company, I think that there is, there is a significant amount of continued potential. From a streaming perspective, streaming continues to drive a significant amount of revenue. But we are at the point where our models need to evolve and we need to rethink what that's looking like. And if we don't rethink what that's looking like, along with our partners to structure things in a way that incentivizes further pricing optimization and growth, we would get left behind and we don't want that. And I think that there is lots of ways for this to be rebalanced in a way where we're continuing to grow and looking at the markets. When we think about subscription, while we've gotten to a point where there's some subscribers fibersaturation in certain markets, in certain mature markets, there's still a lot of opportunity for pricing in those markets. Then there's still a lot of opportunity for further subscription growth outside of those mature markets. And so when I think about predictions for the future, I think it's an evolution of our models from a music industry, certainly from a Warner specific perspective, the evolution of our royalty models. Because I think we're going to continue to see all of this content. Right. You know, we talk about all of this AI content and one of the things that's unique about it is the fact that you can create so much content, you know, so much content can come in and flood the market again. Unlicensed content. Right. That could come in. And how do we think about that and what should we be doing to protect against dilution as we think about the industry? And so I think that that evolution of what, what the economics and the structure looks like for the market over the next year is going to be, you know, the area where there's going to be the most change.
- [28:36]
Tatiana Sirisano
Well, thank you so much, Carlita. Thank you for your transparency and sharing your knowledge with us. This has been awesome.
- [28:41]
Carlita Higginson
Thank you.
- [28:41]
Tatiana Sirisano
Give it up for Carlita Higginson.
- [28:44]
Dan Runcy
If you enjoy this episode, please share it with a friend. Send it to one or two people you think would really get value out of listening to this episode.
- [28:52]
Carlita Higginson
It.
- [28:52]
Dan Runcy
And while you're at it, if you could rate Interview the show, that would be great. Rate the podcast on Apple Podcasts, Rate the podcast on Spotify. Rate the podcast wherever you listen to podcasts. That helps make sure that the word gets out about trapital and what we're building here. Thanks again for listening. Talk to you next time.