Reservoir Media just wrapped another successful year, boasting record revenue and confidently navigating a dynamic music industry. But beneath the headline figures, a fascinating undercurrent ripples through their latest earnings call transcript: a strategic, almost covert embrace of artificial intelligence. While many music companies are still figuring out how to approach AI, Reservoir seems to be several steps ahead, subtly weaving it into their operational fabric for both efficiency and growth.

This isn't just lip service to a buzzword. Reservoir's leadership casually drops hints of a deeper integration. They've moved beyond the basic use of AI for copyright tracking and identification, boasting about "reworking existing archival audio and repurposing it in new and imaginative ways." That phrase, "new and imaginative ways," speaks volumes. It suggests Reservoir sees AI not just as a tool for cost-cutting, but as a creative partner, capable of unlocking hidden value in their vast catalog.

AI Fuels Growth: Revenue Performance Speaks Volumes

Consider this: Reservoir's performance revenue, which includes live shows and public performances, surged by 37% year-over-year. Is it a coincidence that they're simultaneously investing in AI-powered metadata generation for their sync team? It's not a stretch to imagine Reservoir using AI to identify songs ripe for licensing opportunities, perhaps even predicting which tracks would resonate most with specific demographics or event themes.

Weathering the Storm: AI Provides Agility Amidst Industry Disruptions

Their AI-powered approach extends beyond revenue generation. Remember the writer and actor strikes that crippled Hollywood productions? Reservoir felt the pinch in their synchronization revenue, which dipped by 14%. However, they quickly pivoted, leveraging AI to analyze and understand their catalog usage trends. This proactive approach likely played a role in their impressive 101% surge in recorded music synchronization revenue, largely attributed to a rebound in advertising demand.

The Silent Revolution: AI Pervades Reservoir's DNA

The most telling detail? Their silence. Reservoir doesn't brag about their AI prowess. It's woven into their narrative, subtly highlighted as a driving force behind their achievements. They mention using AI for marketing collateral, optimizing artist management, and even assisting their songwriters in the creative process. This pervasive application suggests a company-wide philosophy, a belief that AI isn't just a department, it's the future of the music business.

Decoding the Numbers: Investment and Confidence Signal Long-Term Vision

Let's look at the numbers. Reservoir's administration expenses, which include technology investments, grew 28% year-over-year. While they attribute this to "a write-off of recoupable legal expenses," it's not unreasonable to assume a portion fuelled their AI ambitions. Their confidence in raising adjusted EBITDA guidance by 16.5% despite this increase suggests they expect a significant return on their AI investments.

Hypothesis: Is Reservoir Poised to Outmaneuver the Competition?

Reservoir's early and aggressive adoption of AI across multiple facets of their business will provide them with a significant competitive advantage in the coming years. This will be evident in:

- Higher organic revenue growth: Outpacing industry averages due to AI-driven licensing and catalog optimization.

- Stronger margins: Automating tasks and increasing efficiency will lead to cost savings.

- Increased deal flow: Becoming known as a forward-thinking, tech-savvy partner will make them more attractive to artists and catalog sellers.

While other music companies scramble to catch up, Reservoir is already playing the long game, quietly positioning themselves as a leader in the AI-powered future of music. Remember, you heard it here first.

A Fun Fact: Can AI Unearth the Next "3 Feet High and Rising"?

Reservoir Media owns the rights to the iconic De La Soul album "3 Feet High and Rising," a groundbreaking record that sampled heavily from other artists. Perhaps AI can help them uncover the next generation of sample-based hits, legally and ethically, of course.