Universal Made €3.39 Billion Last Quarter. Then It Spent the Earnings Call Warning That 90,000 AI Tracks a Day Are Coming for the Payout

The biggest record company in the world had a good quarter and wanted to talk about something else. That's the short version of Universal Music Group's third-quarter earnings call, as reported by the trade outlet Music Ally.

The numbers matter for every rapper and R&B singer on a UMG label. Revenue rose 12.3% year over year to €3.39 billion, about $3.8 billion at current exchange rates, Music Ally reported. That figure includes Downtown Music, which UMG did not own in the same quarter last year. At constant currency, revenue grew 11.7% with Downtown and 5.3% without it.

The parts of the business closest to fans were stronger. Recorded-music subscription revenue rose 19.2%, which UMG said was "supported by wholesale price increases and continued healthy subscriber growth." Physical sales, the vinyl, CDs and cassettes that labels keep insisting are a niche, rose 17.4%.

The figures suggest streaming price increases are paying off for the label and that physical formats are still selling. Even so, the call was not a victory lap.

Chairman and CEO Sir Lucian Grainge cited figures from the streaming service Deezer showing more than 90,000 fully AI-generated tracks are being uploaded to streaming services every day. "The volume is growing faster than the safeguards," he said. "Many of our DSP partners are also taking meaningful steps, and we welcome that progress, but the scale of the problem is still outpacing the guardrails."

He gave an example: on blues charts at some big streaming services, "as many as five of the top 10 albums are attributed to AI-generated acts without clear labelling or disclosure," Grainge said. "This is not harmless clutter." He said UMG would "enforce our contractual protections and insist on clearer labelling across the ecosystem."

Then he went after the way streaming pays. "The uniform application of pro-rata payments makes the problem worse. By treating AI slop as the same as the greatest songs in the world by some of the greatest artists, it incentivises industrial-scale content production and dilutes the compensation earned by real talent," Grainge said. "Put plainly, unethically generated AI tracks should never be compensated on the same basis as music that creates real and lasting demand. And why would a music service even want to host them?"

That last line is the tell. Music Ally read it as a hint that UMG could push streaming services not just to stop recommending fully AI-made tracks but to stop paying for them, or remove them.

The stakes for working artists are direct. Under pro-rata payouts, the streaming money goes into one pool and is split by share of plays. Every stream that goes to a mass-produced AI track is a sliver that doesn't go to a human artist. A label arguing that those tracks should be paid differently, or not at all, is making an argument that, if it worked, would put more of the pool back with people. It's also an argument that happens to help the label that owns the most human-made catalog. Both can be true.

Chief digital officer Michael Nash praised recent moves by Spotify, Deezer and Apple Music and then said, "But this is not sufficient. I want to underscore this." He described "ecosystem pollution at a massive scale" and said, "Clearly, the ecosystem is damaged by this flood of infringing content."

Music Ally pointed out that this is a change in tone. On earlier calls, Nash had played down the effect of AI on UMG's business, and in March a lobbying group backed by the AI music company Suno used those comments to argue against label lawsuits. Nash addressed that directly: "We had presented data that was focused on the developments in FY 2025 on earlier earnings calls. Our comments today describe what is happening to the ecosystem around us three quarters later."

"The dilution threats are growing, fraud threats are growing, and these harms are not confined just to the platforms," Nash said. "They extend to artists, songwriters, and rights holders whose works have been taken without authorisation or compensation to train competing AI products."

In this writer's analysis, UMG is building a public record. When a company that profits from streaming tells investors AI is diluting the pool, it's laying groundwork for both its lawsuits and its next round of negotiations with the services.

What we still don't know: which services UMG will press first, whether any will actually demonetize fully AI tracks, and how those tracks would be identified.