Spotify has reached a licensing agreement with Universal Music Group to enable subscribers to create AI-generated covers and remixes of songs from selected artists. This marks the first time the streaming service will offer users the ability to produce AI-based music content directly through its platform.

The new feature will be offered as a paid add-on within Spotify’s app, targeting the company’s most engaged listeners and aiming to generate additional revenue streams for both artists and songwriters through increased royalty payments. According to Spotify, the initiative is designed with a focus on securing artist consent, credit, and compensation. Universal Music’s chief executive, Lucian Grainge, described the product as “firmly artist-centric” and rooted in “responsible AI,” emphasizing its potential to foster growth across the music ecosystem.

Spotify’s co-chief executive, Alex Norström, highlighted that the project is part of a broader strategy to develop “higher-Arpu” (average revenue per user) experiences, shifting growth efforts towards converting dedicated fans into higher spenders. This approach aligns with Spotify’s plans unveiled during its first investor day in four years, which included various premium offerings such as AI-generated personal podcasts, exclusive concert ticket access, and pricier audiobook subscriptions.

The launch positions Spotify in closer competition with emerging companies specializing in AI-powered music creation, such as Udio and Suno. While Spotify and Universal have not disclosed financial details or the list of participating artists, Universal Music represents some of the industry’s biggest names, including Taylor Swift, Ariana Grande, Drake, and Billie Eilish.

Despite industry enthusiasm, the use of AI in music has sparked significant debate. Some artists have voiced concerns over copyright, consent, and the impact of AI-generated works on the value of human-created music. Musician and Universal-affiliated songwriter Jack Antonoff recently criticized the technology, calling it a “new way you can fake making art.”

Spotify’s shares rose roughly 15 to 16 percent following the announcement as investors responded positively to the company’s forecast of delivering mid-teen percentage annual revenue growth and improving gross profit margins, which increased from about 25 percent in 2023 to 33 percent in the first quarter of 2026.

The rollout of AI-generated music tools reflects Spotify’s efforts to diversify beyond traditional music streaming, seeking new growth opportunities by leveraging emerging technologies and expanding monetization options for both the platform and its content creators.