MBW Explains is a series of analytical features in which we explore the context behind major music industry talking points – and suggest what might happen next. Only MBW+ subscribers have unlimited access to these articles. MBW Explains is supported by Reservoir.
Spotify announced on Thursday (October 16) that it plans to develop “responsible” AI music products in partnership with all three major music companies, as well as Believe and indie rep Merlin.
The streaming giant stated that it is “making significant investments in AI research and product development” and has already begun building a “state-of-the-art” generative AI research lab and product team. Spotify aims to onboard additional rightsholders and distributors over time.
The announcement arrives just over two weeks after Spotify unveiled a suite of new policies for managing AI-generated content on its service as part of a crackdown that resulted in the deletion of 75 million “spammy” tracks from its platform over the past year.
Rival platform Deezer revealed in September that fully AI-generated music now constitutes 28% of all tracks delivered to its platform each day – over 30,000 fully AI-generated tracks daily.
According to Spotify, all products developed through its newly announced collaboration with major and indie rightsholders “will put artists and songwriters first” through four key principles: partnerships with record labels, distributors, and musicpublishers; choice in participation; fair compensation and new revenue; and artist-fan connection.
While Spotify’s announcement focused heavily on artist protection and responsible AI development, several elements of the company’s plans suggest the streaming platform may be laying the groundwork for new revenue streams that could potentially tie into rumored superfan tiers and higher-priced subscription offerings.
Here are three things you might have missed about Spotify’s AI announcement:
Giorgio Trovato via Unsplash
1. Spotify promised ‘wholly new revenue streams’ – not just incremental improvements
When discussing fair compensation principles, Spotify made a specific commitment that goes beyond simply protecting existing revenue models.
“We will build products that create wholly new revenue streams for rightsholders, artists, and songwriters, ensuring they are properly compensated for uses of their work and transparently credited for their contributions,” the company stated.
“We will build products that create wholly new revenue streams for rightsholders, artists, and songwriters, ensuring they are properly compensated for uses of their work and transparently credited for their contributions.”
Spotify
The emphasis on “wholly new revenue streams” – rather than improvements to existing streaming royalties – suggests Spotify is developing AI-powered features that could generate fresh income beyond the traditional per-stream payment model.
This language aligns with recent reports around a higher-priced “super–premium” or “MusicPro” subscription tier.
Spotify has made recent Premium upgrades, including a playlist mixing tool and the launch of lossless audio for paid subscribers – but not as part of a rumored higher-priced “super–premium” or “MusicPro” tier as suggested in reports earlier this year.
Spotify also launched a direct message feature inside its app for both Free and Premium users last month.
The unspecified AI-powered products in development could potentially be gated behind a higher-priced tier, but they could also carry additional one-off purchase or recurring subscription fees.
It’s worth looking at how Spotify monetizes its other audio formats for an idea of potential revenue models it could use.
Take audiobooks, for example. Some Spotify Premium plans include 15 hours of monthly audiobook listening time, but the platform lets you purchase additional listening time via a) Audiobooks+, a recurring add-on subscription that gets added to your bill, and b) a one-off audiobook ‘top-up’ purchase.
Spotify also lets podcast creators offer exclusive content that’s only available for paid subscribers to that specific podcast. Subscriber-only episodes have a lock icon next to the play button in the Spotify app.
Credit: miss.cabul / Shutterstock.com
2. The focus on “artist-fan connection” could point toward interactive features
Spotify’s fourth principle centers on deepening relationships between creators and listeners through AI technology.
“AI tools we develop will not replace human artistry,” the platform stated. “They will give artists new ways to be creative and connect with fans. We will leverage our role as the place where more than 700 million people already come to listen to music every month to ensure that generative AI deepens artist-fan connections.”
The emphasis on connection and creativity, rather than purely consumption, suggests Spotify could be exploring interactive AI features to appeal to superfans willing to pay more for enhanced engagement with their favorite artists.
“AI tools we develop will not replace human artistry. They will give artists new ways to be creative and connect with fans.”
Over in China, Tencent Music Entertainment‘s Super VIP tier – which costs approximately 2.5 times more than a standard premium subscription – offers a glimpse of how platforms are monetizing superfans through tiered features.
3. Major labels endorsed the approach immediately – suggesting commercial terms could already be in place
The speed and enthusiasm of major and key independent music company endorsements for Spotify’s AI announcement are notable.
All three major music companies issued statements on the same day as Spotify’s announcement, with language suggesting substantive commercial discussions have already taken place.
“This is an acknowledgement that direct licensing in advance of launching new products is the only appropriate way to build them and demonstrates how a properly functioning market benefits everyone in the ecosystem and fuels innovation,” said Rob Stringer, Chairman of Sony Music Group. “We appreciate and applaud Spotify’s leadership at this critical period.”
Sir Lucian Grainge, Chairman and CEO of Universal Music Group, added: “It is essential that we work with strategic partners such as Spotify to enable Gen AI products within a thriving commercial landscape in which artists, songwriters, fans, music companies and technology companies can all flourish.”
Warner Music Group CEO Robert Kyncl stated: “We’ve been consistently focused on making sure AI works for artists and songwriters, not against them. That means collaborating with partners who understand the necessity for new AI licensing deals that protect and compensate rightsholders and the creative community.”
“AI is the most consequential technology shift since the smartphone, and it’s already reshaping how music is created and experienced. At Spotify, we want to build this future hand in hand with the music industry, guided by clear principles and deep respect for creators, just as we did in the days of piracy.”
Gustav Söderström, Spotify
The coordinated messaging and references to licensing deals suggest commercial frameworks are already being negotiated or established – potentially including how revenue from AI-powered features would be split between Spotify and rightsholders.
Spotify emphasized that the company “will develop new products for artists and fans through upfront agreements, not by asking for forgiveness later” and that “artists and rightsholders will choose if and how to participate to ensure the use of AI tools aligns with the values of the people behind the music.”
With major labels now publicly supporting Spotify’s AI development approach – and emphasizing the importance of upfront licensing agreements – the streaming platform appears to have cleared a significant hurdle toward launching new AI-powered features that could form part of higher-priced subscription offerings.
Gustav Söderström, Co-President and Chief Product and Technology Officer, Spotify, said: “AI is the most consequential technology shift since the smartphone, and it’s already reshaping how music is created and experienced.
“At Spotify, we want to build this future hand in hand with the music industry, guided by clear principles and deep respect for creators, just as we did in the days of piracy. Our company brings deep research expertise to this opportunity and we’re actively growing our AI team and capabilities to drive the continued growth of the entire music ecosystem.”
