Spotify and Universal sign licensing deal for AI covers and remixes

Premium subscribers will be able to generate AI versions of songs by participating UMG artists. The financial terms were not disclosed.

Spotify and Universal Music Group have signed licensing agreements that will let premium subscribers generate AI covers and remixes of songs by participating UMG artists, the two companies said on Thursday.

It is the first time the streaming service has formally licensed generative AI on top of its catalogue, and the most concrete answer the major-label system has given so far to the question of how AI-made music should be paid for.

The product, which the companies described as launching as a paid add-on for Premium users, has no public release date. UMG and Spotify said the model is built around “consent, credit, and compensation,” with artists and songwriters opting in and receiving a share of revenue from the AI-generated versions of their work.

Which UMG artists have signed on was not disclosed; the label’s roster includes Taylor Swift, Ariana Grande, Drake and Billie Eilish, though that does not imply any of them have agreed to participate.

Markets read the deal as material. Spotify shares rose around 14-16% on the day, on the view that AI-generated remixes give the company a new revenue line at a moment when its core subscription business is maturing.

The companies did not disclose financial terms, including how the revenue split between Spotify, UMG, and individual artists will work.

The licensing model is significant for what it tries to settle. AI music tools have spent the last two years operating in a grey zone, with services such as Suno and Udio facing lawsuits from the major labels for training on copyrighted catalogues without permission.

By licensing the rights at the platform layer and letting users generate inside Spotify rather than upload AI tracks to it, the two companies are sketching a structure in which the label, the artist, the songwriter, and the platform all collect on the same generated file.

The risk Spotify needs to manage is the one it has been criticised for not managing well in the past. The platform has been accused of letting AI-generated tracks proliferate on the catalogues of dead artists without estate approval, and of being slow to label or detect AI music in general, a contrast TNW covered in detail last year.

A licensed creator tool, with the rights cleared upstream, is a cleaner story to tell investors and regulators than an enforcement system trying to police uploads after the fact.

Whether it is a cleaner story for artists depends entirely on terms that have not been published. Songwriters have historically received the thinnest slice of streaming revenue, and the unanswered question is whether the new licensing tier corrects that or simply layers another revenue category on top of an existing imbalance.

The deal also lands the same week that Spotify’s catalogue of AI-generated content remained, by its own admission, unlabelled. The remix product, when it launches, will be the first AI music on the platform with paperwork attached. The rest of the catalogue is still the harder problem.