Spotify Turns AI Fan Covers Into Artist Paychecks

Spotify and Universal Music Group have built a rights framework for something that has been happening without one: fans using artificial intelligence AI to cover and remix songs.

The deal, announced Thursday (May 21) at Spotify’s 2026 Investor Day, covers licensing agreements for recorded music and publishing rights, giving Spotify the legal foundation to launch a generative AI remix tool for participating UMG artists and songwriters. It will be a paid add-on for Spotify Premium subscribers. No launch date has been set.

Spotify Co-CEO Gustav Söderström told CNBC the platform is “still firing on all cylinders” and described generative AI as a growth driver. Spotify has 761 million users and 293 million Premium subscribers across 184 markets.

Co-CEO Alex Norström said in the release the framework is “grounded in consent, credit and compensation for the artists and songwriters that take part. UMG Chairman and CEO Lucian Grainge called it “firmly artist-centric, rooted in responsible AI.”

A Revenue Model, Not Just a Feature

The deal creates a new income layer for participating artists on top of existing Spotify royalties. UMG’s roster includes Billie Eilish, Taylor Swift, Sabrina Carpenter and Post Malone. Participation is opt-in. Financial terms were not disclosed.

The groundwork for the deal stretches back to last fall, when Spotify announced it was building AI music products with all three major labels alongside independent licensing agency Merlin and music company Believe. UMG is the first rights holder to reach a licensing agreement. Spotify paid more than $11 billion to the music industry in 2025, up more than 10% year over year, with total all-time payouts now exceeding $70 billion.

The commercial logic is straightforward. AI-generated covers using an artist’s voice have existed largely outside any rights framework and without compensation to artists. Spotify is building a licensed version of that behavior and charging for access to it.

The Flood That Made the Deal Necessary

Thursday’s announcement comes as the volume of unlicensed AI music already on streaming platforms is growing. PYMNTS reported that Deezer received more than 60,000 fully AI-generated tracks daily, with synthetic content making up roughly 39% of all music delivered to the platform each day. Up to 85% of streams on AI-generated music were fraudulent in 2025, used to manipulate royalty payouts rather than reflect genuine listener demand.

Spotify’s position has been to avoid policing creative tools. PYMNTS reported that Söderström said at the company’s February earnings call that the platform should not decide what tools artists use. But he acknowledged listener demand for transparency and said Spotify has been working with the industry to surface metadata about how music was created.

The UMG deal is a different kind of response. Rather than labeling AI music after it arrives, Spotify is building a licensed channel for it from the start. The deal establishes a rights structure before the tool launches, rather than negotiating after the fact. Artists set the terms of participation. Labels retain rights control.

Whether other major labels follow is the next question. Sony Music Group and Warner Music Group were part of the October 2025 intention-to-license announcement. Neither has announced a deal.