"Billionaire Investor Steps In" — Universal Music Group M&A Prospects Emerge as AI Reshapes the Music Market

‘Little Buffett’ Bill Ackman Signals Intent to Acquire Universal Music Group
Rapid shifts driven by generative AI, with monetization of AI-generated music now underway
Universal Music Group partners with AI music platforms, integrating them into existing rights frameworks

Pershing Square Capital, led by U.S. billionaire investor Bill Ackman, is moving to acquire Universal Music Group (UMG). The plan is to boost UMG’s undervalued share price—relative to its music business performance—through measures such as a listing on the New York Stock Exchange (NYSE). The market is closely watching whether Pershing Square and UMG can drive “innovation” in an industry thrown into disarray by the emergence of AI-generated music.

Pershing Square’s M&A Strategy

According to the investment banking (IB) industry on the 15th, Pershing Square CEO Bill Ackman announced in a statement on the 7th (local time) that he had proposed acquiring UMG, the world’s largest music company. Founded in the Netherlands in 1934, UMG is considered one of the “big three” global music labels alongside Warner Music Group and Sony Music Entertainment. The company oversees recording production, producing, distribution, and marketing, and has launched numerous global stars including Taylor Swift, Adele, and Bob Dylan.

In the statement, Ackman said, “UMG has delivered strong business performance while cultivating and maintaining a world-class artist roster,” adding, “However, its share price has underperformed due to various issues unrelated to its core music business, and this transaction can resolve all of them.” Factors cited for the undervaluation include uncertainty surrounding Bolloré Group’s stake, delays in U.S. listing, and “suboptimal” shareholder communication. If the acquisition is completed, Ackman plans to shift UMG’s listing from the Euronext Amsterdam to the NYSE, which he said would enhance share value and improve trading liquidity.

The deal is structured as a merger between UMG and a special purpose acquisition company (SPAC) established by Ackman. Pershing Square has valued UMG at approximately $70 billion and plans to offer existing shareholders $6.3 in cash and 0.77 shares in the new entity per share held. The proposal also includes selling UMG’s stake in Spotify for around $1.9 billion.

AI-Driven Upheaval in the Music Market

The market has expressed concerns over Pershing Square’s acquisition attempt, as the industry is undergoing a seismic shift driven by generative AI. Recently, AI music generation services that automatically create music from simple prompts have rapidly proliferated worldwide. Representative platforms include Suno, which generates lyrics and vocals simultaneously; Soundraw, which produces customizable background music; and AIVA, which specializes in classical and film composition. These services typically produce fully composed tracks within seconds based on inputs such as mood, genre, and lyrics, with easy style adjustments available through a few clicks. The low barrier to entry allows users to create music without formal knowledge of music theory or composition.

Fueled by such convenience, the AI music generation market has already reached industrial scale. The global AI music market, valued at $5.2 billion in 2024, is projected to expand to $60.4 billion by 2034. Monetization structures have also taken shape. Instead of focusing solely on songs, companies register trademarks such as artist names, logos, and brand-identifying titles, and use contracts and licensing agreements to manage collaboration, distribution, and revenue-sharing frameworks. AI-generated music is currently sold in various forms, including background tracks for YouTube and TikTok content, advertising and gaming soundtracks, and freelance composition services. Its near-zero production cost enables mass production and recurring revenue generation.

However, structural distortions are also rapidly intensifying alongside market expansion. A prominent example is streaming fraud. According to French streaming platform Deezer, as much as 70–85% of AI-generated music streams on its platform are estimated to be bot-driven fake plays. Deezer excludes such streams from revenue-sharing calculations. In the United States, an individual was caught generating hundreds of thousands of AI tracks and using bots to stream them billions of times, illicitly obtaining more than $10 million in royalties.

Universal Music Group Partially Embraces AI-Generated Music

Given the data-intensive nature of generative AI, copyright disputes have been unavoidable. AI music platforms argue that AI-generated content falls under the principle of fair use, emphasizing a broader social value of enabling anyone to become a composer. Fair use allows copyrighted material to be used without permission under certain conditions for public benefit. Some also argue that since AI creates new compositions rather than reproducing existing works, it is difficult to classify such output as copyright infringement.

In contrast, major record labels initially filed a series of lawsuits against AI firms, alleging unauthorized use of existing music for training. Recently, however, there has been a shift toward cooperation, with companies pursuing licensing agreements rather than outright bans. This indicates that AI-generated music is gradually being incorporated into the traditional rights framework of the music industry. Universal Music Group is a leading example of this approach. Last year, UMG entered into a strategic partnership with AI music platform Udio, aiming to create additional revenue opportunities for its artists and composers based on existing recording and publishing rights.

UMG plans to allow remixes and customized track generation and playback only for artist-approved works, while ensuring compensation for artists. However, this model presupposes a transition to closed platforms where rights can be controlled. AI-generated music on such platforms will face restrictions on free downloads and external sharing. Ultimately, the key to monetizing AI music will lie in converting users into actual listeners within a controlled distribution environment.