Spotify Announced an AI Cover Tool. The Product Does Not Exist Yet.

When the music industry opts into licensing AI covers, is it admitting that the streaming era already commoditized music into a product — and that AI is just the final, honest acknowledgment of what the industry had already become?

That is the uncomfortable question at the center of Spotify and Universal Music Group's announcement on Thursday that they have reached landmark licensing agreements allowing Premium users to generate AI-powered covers and remixes of participating artists' songs — a paid add-on feature that sent Spotify shares up 13% on the day of the announcement.

The announcement landed at Spotify's investor meeting alongside new 2030 financial targets: mid-teens compounded annual revenue growth, gross margins between 35% and 40%, and operating margins above 20%, up from 12.8% in 2025. Spotify ended Q1 2026 with 761 million monthly active users, including 293 million paying subscribers across 184 markets. Alex Norström, Spotify's co-CEO, framed the deal as a natural extension of the platform's history of navigating technological change. "Through each technological transformation," he said, "we have worked together to evolve the music ecosystem into a richer, more beneficial experience for fans and a more rewarding outcome for artists and songwriters."

Sir Lucian Grainge, chairman and CEO of Universal Music Group, called it "firmly artist-centric, rooted in responsible AI" and designed to deepen fan relationships. Artists and songwriters who opt in will share directly in the revenue generated from AI-driven covers and remixes on the platform.

But the announcement obscures a fracture in the industry's response to the same existential question. Universal Music Group settled its own copyright infringement lawsuit against AI music startup Udio in November 2025 and signed a licensing agreement with the company. Warner Music Group also settled with Udio in November 2025 and signed its own licensing deal. Sony Music is the only major still pursuing its copyright lawsuit against Udio for the exact same activity — AI music generation built on major-label catalogs without permission.

This is not a unified industry pivoting to AI. It is three of the world's largest music rights companies taking directly contradictory positions on whether AI music generation constitutes infringement, and all three positions are being held simultaneously. UMG is licensing the activity. Warner is licensing the activity. Sony is suing over it.

What Spotify and UMG announced is also not a finished product. The feature is not live. No price has been confirmed — Bloomberg reported in February 2025 that Spotify was considering up to $5.99 per month for a Music Pro tier that would include an AI remix tool, but that figure does not appear in any official announcement. No named artists have publicly committed to opt in. Gustav Söderström, Spotify's co-CEO, told analysts in February 2025 that the AI remix technology was "ready" but that "the absence of a rights framework" was the blocker. That framework now exists for UMG's catalog. Whether it constitutes a viable commercial product depends entirely on whether enough major artists enroll to make the feature worth Premium subscribers paying extra for it.

The deeper framing is this: streaming already broke the relationship between album sales and artist income, replacing it with per-stream micropayments that reduced the unit economics of a song to fractions of a cent. AI covers do not introduce commoditization to music. They make visible what was already true. The question the industry has been avoiding — whether recorded music is fundamentally a service or a product — has been answered in practice by the economics of streaming, and the AI cover announcement is the industry finally acknowledging that in the language of a product roadmap.

UMG and Spotify's licensing deal is significant precisely because it is opt-in. Artists who do not want their music used for AI covers can opt out. But opting out in a world where competing platforms — Udio, Suno, and others — are building unlicensed AI music generation tools means surrendering a new revenue stream to competitors who may not share proceeds at all. The deal creates pressure on artists to participate even if they are philosophically opposed to AI replication of their work, because the alternative is losing a new monetization channel while others exploit it.

The legal architecture is also unresolved. Sony's lawsuit against Udio is still active. A ruling in Sony's favor could establish that AI music generation trained on copyrighted catalogs constitutes infringement — a determination that would potentially invalidate parts of the UMG-Spotify licensing framework, since that framework is premised on the activity being licensable rather than infringing. The industry is building a product on a legal theory that one of its three largest players is actively contesting in court.

The announcement is real. The product is not. The contradiction is the story.