Key Takeaways
- Spotify stock rose 6% today after a report that it plans a paid AI remix and cover service for early 2027, at a possible $4 to $5 a month extra.
- The add-on would let Spotify charge for AI, which investors have seen as a threat.
- Universal Music Group has signed on, while Sony Music and Warner Music Group are still negotiating.
- Nothing is priced or launched yet, and the price and timing could still change.
Spotify Technology (SPOT) stock is up 6% today, while the Invesco QQQ fund fell 3%. The Financial Times reported early this morning that Spotify aims to launch a paid AI remix and cover service in the first quarter of 2027, possibly around the Grammy Awards in February.
It’s reportedly considering charging “an additional $4 to $5 a month.” Universal Music Group, the indie-label group Merlin and French music company Believe have signed on, while Sony Music, part of Sony Group (SONY), and Warner Music Group (WMG) are still negotiating.
Spotify gets paid for AI
Investors have worried that AI agents could come between Spotify and its listeners. Jefferies analyst James Heaney pushed back this month, calling the platform “highly defensible against AI disintermediation fears.”
A paid add-on goes further: subscribers pay extra for the AI. And $4 to $5 a month is roughly a third on top of Spotify’s $12.99 US individual plan.
Spotify could use the lift. Management guides Premium revenue per user to grow 4.5% to 5% at constant currency in the fourth quarter, down from 7.5% in the third, as it laps its price rises.
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Sony and Warner still have to sign
Both come to the table with streaming growing. Warner’s streaming revenue rose 12% in the quarter ended June 30, helped in part by better terms from streaming services. Sony’s recorded-music streaming revenue rose 10% in dollars over the same quarter.
Remix royalties would reportedly flow back to the original artists, so the labels would earn once they sign. Warner is open to AI, too: Suno launched AI music models with it in September.
Sony reports in early November and Warner in mid-November. Will holding out win them a bigger cut of that $4 to $5?
The add-on isn’t in the numbers yet
Analysts expect Spotify’s revenue to climb from €17.2 billion in 2025 to €25.5 billion in 2028:
Jefferies’ base case counts no AI revenue, and a plan with no price yet shouldn’t move these estimates.
The stock traded at 35x forward earnings at yesterday’s close, near the low end of its range since early 2024 (as high as 69x). At today’s price, it’s a bit higher.
Licensing is the risk: Spotify already pays most of its revenue to rights holders.
My take: today’s gain makes sense. Spotify has found a way to charge for AI, with Universal already signed. Of course, the fourth-quarter report in early February is the next checkpoint.
So what is Spotify stock actually worth?
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