Spotify hit 777 million total users and 300 million paid premium subscribers in the past quarter, company executives shared in an earnings release on Tuesday, along with an AI-driven increase in expenses.
Spotify has been upping its experimentation with artificial intelligence recently, banking on a slew of new AI-driven product features to continue the rise in paid subscriptions.
“There is plenty of industry debate about AI investment and costs,” Spotify co-CEO Gustav Söderström said on the company’s earnings call. “Our view is that being an AI beneficiary means winning on the cost side too.”
Earlier this summer, the company rolled out a new feature called “Talk to Spotify,” allowing Premium users to interact with the platform more conversationally via a chatbot interface.
“I feel like Spotify is coming alive, and you can literally start talking to it,” Söderström said. “You can literally talk to Spotify now, and you get very good answers about the music, about who played in what band, when they’re touring, what the song is about. These are better answers than you get from any LLM, certainly within our domains about podcasts and books and music.”
Another splashy AI initiative includes embracing AI-generated music. Although much of the music industry remains wary of AI-generated songs, Spotify is embracing the technology. The company is partnering with Universal Music Group on a tool that would let users create AI-generated remixes and covers of songs by participating artists. On Tuesday, Spotify announced that Merlin, a digital rights licensing partner representing independent labels and distributors, was also joining to support the feature.
Spotify argues their way of doing AI-generated music is just different, and better, than how other AI music generators go about it.
“While you can see that there is skepticism around net new artificial music by many people out there, what we’re doing is something different, and artists see that our products are about real artists, not fake artists, and in the case of remixes, real artists with real voices,” Söderström said. “So you’re listening to real people. That’s a very different proposition, which is why we’re focusing on this.”
Söderström’s co-CEO Alex Norström agreed.
“What we’re trying to do is very considerate and planned out,” Norström said on the call.
Norström says the company is looking at the 3Cs while building out the feature: consent from artists, credit to artists, and compensation for artists.
“We’re talking about the first legal way to partake in this AI tailwind that we see coming for interactive music,” Norström said.
The tool has yet to launch, but when it does, it will be a paid add-on. Though the timing on that is still murky; on the call, Söderström said that the feature will first launch as a “research preview” but only “when it’s ready” and is actually appealing to consumers, without giving a specific time frame.
While Spotify is spending all this money on creating better paid features, executives say they are simultaneously and “carefully” introducing “some friction” in the free tier to drive users to paid subscriptions, including some limitations and more ads than before.
At market close, Spotify’s stock price was down 8%.
