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03/01/2023
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AI Is Creeping Into the ‘Functional’ Music Market — What Happens Next?

In fall 2022, the music industry was fixated on the volume of new tracks being uploaded to streaming services — some executives believed it had crossed 100,000 tracks a day. But what if that number were to increase a thousandfold?

That’s the future envisioned by Alex Mitchell, founder/CEO of Boomy, a company that offers aspiring musicians the chance to make songs in seconds with help from artificial-intelligence (AI) tools. He describes a scenario in which crafting a tune for friends could be as quick and easy as snapping a cellphone shot and posting it on Instagram, and he speaks about his company’s future in blocks of 100 million tracks. “We see a huge market with many billions of original unique songs, similar to photos,” Mitchell says.

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That tidal wave of billions of new songs may not lead to a corresponding number of hits — after all, how many of the photos on Instagram actually attract widespread attention? But one sector that could be easily transformed is functional music, which is not driven by hits or even distinctive artists.

“Functional music” is a rangy label. Oleg Stavitsky, co-founder/CEO of AI-driven functional sound company Endel, defines this type of audio as something “not designed for conscious listening” — instead, it’s engineered to help people achieve “a certain cognitive state.” It’s often encountered on popular playlists designed to promote sleep, studying or relaxation, and it can encompass the pitter-patter of rainfall, warm baths of ambient electronics and the laid-back wing of instrumental hip-hop known as lo-fi.

“There’s a lot of money” in this corner of audio, according to Kieron Donoghue, founder of Humble Angel Records and former vp of global playlists strategy at Warner Music Group (WMG). Endel conducted research regarding the size of the functional audio market early in 2022 and estimated that it was earning around 120 billion streams annually. For comparison’s sake, Taylor Swift’s entire catalog did around 8 billion streams through all of 2022, according to Luminate; Endel’s estimate of functional music’s size is 15 times that and equates to over $630 million annually for recording rights holders. And it’s worth noting that another music executive with extensive experience studying this corner of the market believes that functional music is even bigger.

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The continued growth of functional audio can cut into major-label market share — imagine over a dozen Swifts running around without any links to the big record companies — which has already fallen noticeably on Spotify in five years. And it makes it harder for both established and new artists to compete for listeners’ time and attention. Universal Music Group (UMG) chairman/CEO Lucian Grainge wrote to staff recently that “great music” is under threat from “a flood” of “lower-quality functional content that in some cases can barely pass for ‘music.’ ”

“The model right now, whether you’re an independent artist or on a major label, really sucks when rain and white noise is eating into market share,” agrees one executive at a distribution company. “That’s not music.”

When companies upload hours-long playlists of rainfall with the goal of earning nighttime streams, “it’s hard to argue that there’s any composed thought in that — there doesn’t seem to be a creative act,” says Philip Sheppard, founder/CEO of LifeScore, which uses AI to “create unique, real-time soundtracks for every journey.” He adds, “Some aspects of that look like a cynical money grab.” Put more simply, functional music’s gain could be part of the majors’ loss.

It’s no surprise, then, that all of the majors have tried to establish a presence in this corner of the streaming market. In 2019, Donoghue wrote about a playlist called Sleep & Mindfulness Thunderstorms put together by Filtr, a playlisting company owned by Sony Music: a downpour cut into hundreds of minutelong snippets. (A royalty payout is triggered after 30 seconds of listening.) UMG has partnered with the Calm app on 60-minute sleep remixes of tracks in its catalog.

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WMG entered a distribution deal with Endel for 20 albums (including Rainy Night and Foggy Morning) in 2019. And WMG owns the Alternative Distribution Alliance, which has a deal with Strange Fruits, founded by Dutch electronic producer Stef Van Vugt. Strange Fruits has created a series of background-music brands — Chill Fruits Music, LoFi Fruits Music and Sleep Fruits Music — that rack up streams. The first two churn out instrumental covers of classics (a version of “Gangsta’s Paradise,” for example, is a more modern form of Muzak), while the third specializes in tranquilizing ambience. Together, the trio currently earn around 7 million daily Spotify streams, according to the Spotify for Artists tool. (That exceeds $15,000 a day, with some estimates putting the figure north of $30,000.) For comparison’s sake, Omar Apollo and Latto, two recent best new artist nominees, earn a little over 3 million streams a day on Spotify combined.

Of course, the streaming services have also moved to capture the demand for functional audio. Spotify playlists like Peaceful Piano, Sleep and Deep Focus have 15 million-plus followers between them. (They individually lag behind Strange Fruits collection LoFi Fruits Music — Lofi Hip Hop Beats To Study, Relax & Sleep To, which has over 7.4 million followers.) Endel just announced a partnership with Amazon Music to create an eight-hour sleep playlist; LifeScore has its own partnership with Deezer to create “adaptive music and audio experiences for sleep and relaxation.”

It’s likely that these connections will deepen and multiply: Stavitsky says the company is “in talks with all major music labels” about finding additional ways to collaborate. “We can process the stems [the audio building blocks of a track] from Miles Davis’ Kind of Blue and come back with a functional sleep version of that album,” he offers by way of example.

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And the company isn’t just interested in working with back catalog. Artist James Blake gave Endel stems that the company turned into a soundscape using its AI; the result, Wind Down, was officially released in 2022 and co-credited to Blake and Endel. (Grimes did the same for a sleep soundscape, though it hasn’t been put on streaming platforms.) “There’s a strong market in working with artists to adapt music” so that it “changes according to how you’re walking or driving or sleeping,” Sheppard says.

Stavitsky envisions a future in which labels fully “embrace” the functional ecosystem. “There’s a new album coming out by, say, Sia,” he explains, “and then there’s a companion sleep or relax soundscape released alongside that. It’s part of a rollout strategy.”

There is precedent for this kind of adaption. Historically, the major labels have frowned on unauthorized remixes of their music. But recently, homemade reworks — often sped up or slowed — have become popular on TikTok, driving the creation of videos and ultimately boosting consumption for the originals.

Rather than swatting these versions down, labels have been encouraging their proliferation, either by paying TikTok remixers to speed up tracks or releasing official versions for users to put in their clips. An accelerated version of Thundercat’s funk workout “Them Changes” recently propelled the single onto the Billboard charts for the first time, spurring the bass virtuoso to drop an official uptempo rework. The same goes for Miguel’s flirty hit “Sure Thing,” which just climbed past its 2011 chart peak (No. 36 on the Billboard Hot 100) thanks in part to a sped-up remix; the R&B singer put out his own official sped-up version in January.

Stavitsky sees the functional-music equivalent of this practice becoming widespread: “This is a new way to make money for everyone.”