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Buy entertainment and music stocks to play the direction of artificial intelligence

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according to Goldman Sachswho described the new technology as offering “tremendous opportunities” to the industry.

Five long-rated stocks have been earmarked to play on this trend: live nationAnd Warner Music GroupBelieve, a French digital music company, a Chinese company neteaseAnd Universal Music Group. All shares are included in the list of accounts for the most important shares.

According to Goldman analysts in a note dated June 28, “generative AI will significantly enhance music creation capabilities and improve productivity.” In April they suggested investor concerns about music generated by artificial intelligence, such as a track created with the technology and “overdone” with “Fake Drake”.

Analysts point out that companies like Deezer and Believe are using AI to detect if a piece of music is AI-generated, while publishers are working with streaming sites like Spotify To remove artificially generated paths.

The music industry is well organized to protect its intellectual property given that it is controlled by three large corporations that own the majority of the artists’ catalogs, according to Goldman.

The analysts added, “We believe the music industry is on the cusp of another major structural transformation given persistent weaknesses in music content monetization, legacy royalty payment structures, and the launch of generative AI.”

Analysts point out that streaming means it’s easier for people to access music than ever before, but revenue hasn’t matched consumption. For example, we estimate that revenue per podcast has fallen 20% over the past five years and that revenue per hour streamed from Spotify music is four times less than Netflixsaid the bank.

Goldman likes event promoter Live Nation because he expects artists to tour more frequently due to what he calls the globalization of music. She added that raising awareness of the performers among the younger generations through social media will also boost the industry.

“We expect the company to continue gaining market share with its digital approach, particularly in the fast-growing emerging markets of Asia,” the bank said bluntly.

Meanwhile, WMG is “one of the best long-term growth attributes in our hedge group,” according to analysts, while its competitor, UMG, is on its list of convictions for Europe, which includes.

“We believe UMG has several competitive advantages, including its size and clear and consistent roster of emerging artists, the depth and breadth of its catalog, and its ability to quickly spot new directions, under the guidance of an experienced management team,” analysts said. announce.

Goldman chose Chinese internet company NetEase, which has a music streaming platform, to use artificial intelligence in its music composition tools.

— CNBC’s Michael Blum contributed to this report.

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