The Spotify music app is seen on a phone in New York City on June 4, 2024.

Michael M. Santiago | Getty Images

Streaming music apps have been nudging users into the artificial intelligence era with a limited track record of success. But AI-based recommendation tools from Apple, Amazon and pure-play streaming company Spotify are moving ahead, with Spotify’s latest approach to the future of personal music discovery leaning into the AI prompt in multiple formats. Experts say these tech investments may be critical to Spotify’s ability to build a moat around its business as the core input, music, becomes commoditized across the streaming apps.

A new ChatGPT integration rolled out recently by Spotify allows users to connect their accounts directly to OpenAI’s generative AI chatbot. The launch is good for OpenAI in its broader effort to turn ChatGPT into a platform for third-party apps that function inside conversations. For Spotify, it’s a bet that personalized music and podcast recommendations will be improved through the now-familiar format of chatting with an AI and letting it know what you want.  

Spotify users can ask for songs, artists, albums, playlists or podcast episodes by mood, genre or topic. Results surface inside ChatGPT and open in the Spotify app for playback. Users can interact with the recommendation, and offer specificity beyond what is possible with a classic “like/dislike” feedback option. 

According to a Spotify spokesperson, the prompts are “an opportunity to uncover new tracks or revisit old favorites, or extend a ChatGPT conversation with a soundtrack that fits the moment.” 

Spotify said the integration is opt-in and that users can disconnect at any time. It also said it will not share music or podcast content with OpenAI for training purposes — addressing industry concerns around AI and copyrighted material.

Spotify also recently rolled out its Prompted Playlist feature inside the streaming music app, a “vibey” feature that allows users to tap into a feeling or memory in order to build a custom mix.

The rival streaming services connected to the big tech players are exploring similar AI features.

Apple has been gradually layering AI into Apple Music. The “Playlist Playground” beta feature is closest to what Spotify is doing, as it also focuses on chat-based AI interaction that allows users to tweak recommendations via chat. Apple recently introduced AutoMix, which uses AI to analyze songs and automatically blend tracks by matching tempo and beats, eliminating silence between songs, adding crossfades and so on. The company has also rolled out machine-learning tools such as lyric translation and pronunciation features. 

Amazon Music has offered a prompt-based playlist feature called Maestro since mid-2024, which allows listeners to generate playlists using text descriptions or even emojis. It remains in beta testing rather than full release.

Spotify executives have repeatedly described AI as central to the platform’s subscriber stickiness strategy. On a recent earnings call, leadership told investors that improvements in AI-driven discovery are central to keeping users engaged with the platform. “Our investments into personalization and AI are paying off,” said Alex Norström, co-chief executive officer. “It means people are spending more days in a month with us and across more moments,” he said.

Spotify’s interactive iDJ feature, introduced in 2023, has roughly 90 million subscribers using it as of the most recent earnings report, with users racking up over four billion hours of time spent on the app. Norström said Prompted Playlists as “instantly taken off with power users.”

“If iDJ is the chat interface to Spotify, where you can talk casually, Prompted Playlists is the Deep Research mode of Spotify,” he said. “It lets you describe and set rules for your own personalized playlists – literally writing your own algorithm. … There’s nothing else like it.”

Music catalogs commoditized, AI generates millions of songs

According to analysts who cover Spotify, the executive hype about AI may need to be the reality sooner rather than later for the company. Even though there are cases of musicians pulling music from specific apps from time to time as negative headline issues appear — it happened to Spotify most recently due to its founder and former CEO Daniel Ek’s defense tech investments — competitors including Apple Music, Amazon Music and YouTube Music offer largely overlapping catalogs and increasingly sophisticated recommendation engines.

“The catalogs at Amazon, Apple and YouTube are similar — nearly identical songs — to Spotify, just like Bing and Edge are nearly identical to Google,” said Michael Pachter, senior advisor, digital media, sports & entertainment at Wedbush Securities, who covered the streaming industry as research analyst for many years. (Wedbush has never had a rating on Spotify shares specifically.)

While Google’s search business faces its own AI threat, Pachter said it is also the best model for Spotify to look to in terms of how to maintain a user edge. “Google managed to widen its moat by offering a number of features that make the service stickier, including remembering my credit card and password info. I can’t even conceive of switching from Google Search, and I think that is what Spotify is trying to establish,” he said.

Switching costs may be subtle, but they can be significant. Users build libraries, curate playlists and train algorithms over years. Each additional integration, whether with a car dashboard, a voice assistant or now an AI chatbot — Spotify says it now connects to over 2,000 device types — can further entrench the ecosystem.

“I expect this ChatGPT integration will be widely used by Spotify users and wildly successful,” Pachter said. “Others may try to do the same thing, but the switching costs grow every time you make the effort to build your playlists on Spotify, and that’s what they are counting on,” he said.

Apple Music and other third-party apps do offer tools to export playlists when subscribers seek to change music services.

Others on Wall Street are less convinced than Pachter, but did come away from the most recent quarter more positive on the Spotify AI story and less worried about the risks it faces from AI music creation tools disrupting platforms like its own. Spotify’s stock price has slumped in the past year by close to 20%, though the stock has performed very strongly since its 2018 IPO.

“Spotify addressed this concern head‑on, arguing that AI supports rather than undermines its strategic position. By leaning into personalization, product innovation, and scale advantages, Spotify appears positioned to use AI to strengthen its platform, though the pace of adoption and industry alignment will remain key variables,” wrote Bank of America’s research team, which rates the shares a buy, in a February note after the most recent earnings.

Stock Chart IconStock chart icon

Performance of Spotify shares over the past five years.

Gustav Söderström, Spotify co-CEO, said during that earnings call that building a music app that users can talk to, and that fully understands each listener, will shift listening “from a passive experience to an interactive one.”

Mark Mulligan, managing director and analyst at MIDiA Research, a research firm that tracks the music market, says AI is going to be integral to streaming music behavior, but he is less convinced that the distinction between interactive and passive being made by Spotify is the likely result.

“Streaming music consumption has bifurcated between passive and active,” Mulligan said. “But this does not mean that the audience has split in two — everyone has. Even the most active music listeners spend more than half their time listening passively.”

In fact, he says the broader trend is toward more passive consumption through curated playlists, and also via features such as artist radio stations and AI DJs. “The direction of travel is towards more passive listening,” Mulligan said. Agentic features may represent a compromise, “a middle ground between passive and active listening,” he said. “It allows the user to expend a small amount of ‘lean forward’ effort in return for a large amount of ‘lean back’ listening.”

Typing a detailed prompt into ChatGPT may feel active, but Mulligan says “the more that the algorithm learns about the listener’s behavior and tastes, the better its recommendations get and therefore the less the user has to lean in, thus shifting the needle even further towards passive listening.”

In this AI interface-first model of streaming, the underlying content is important, but matters less to what ultimately makes the user feel rewarded. For example, an ability to explicitly exclude artists or narrow by subgenre could make AI-assisted discovery feel more tailored than traditional algorithmic playlists. If a listener enjoys some 1980s rock bands, such as Bon Jovi and Guns N’ Roses, but dislikes others from the same era, it’s easier to filter. Spotify can normally predict that if you like A and most people who like A also like B, then you’ll probably like B, but that doesn’t necessarily represent how user tastes are expressed. “With GPT, I could say ‘no Def Leppard’ and my lists would be scrubbed of them,” Pachter said.

Any predictions about the impact of AI on music, as with any industry, remain educated guesswork. But it is already very clear that AI is having an impact on the idea of a music catalog itself. According to a recent Rothschild & Co Redburn report, text-to-music platforms like Suno are reportedly generating around seven million songs per day, roughly equivalent to Spotify’s entire pre-AI catalogue every fortnight. “This is a deluge,” its analyst Ed Vyvyan stated.

Söderström hinted that it’s the dataset yet to come and not the deep tracks already in the stack that matter most to the future. “We are building a dataset that never existed,” he said on the recent earnings call. “We have had the song-to-song dataset, but no one had the language-to-song dataset. … You may think it is a canonical dataset, meaning there is a factual answer to, for example, what is workout music? There is no factual answer to what is workout music. … on average, for an American, it is usually hip hop. For a European, it is usually EDM. For many Scandinavians, it is something like heavy metal or even death metal. Then again, for a lot of Americans, millions at least, it is also death metal.”

“You cannot just have an LLM commoditize it as a fact, the way you can commoditize Wikipedia,” he said. “You actually need to have many, many hundreds of millions of listeners across the world’s markets constantly telling you what it means for that specific person.”

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In this photo illustration, the Spotify music app is seen on a phone on June 04, 2024 in New York City.

Michael M. Santiago | Getty Images

Spotify is minting music millionaires.

Nearly 1,500 artists generated over $1 million in royalties from Spotify in 2024, the company said Wednesday in its annual Loud and Clear Report.

Spotify said more than 80% of the artists in that pool didn’t have a song reach the app’s Global Daily Top 50 chart. To reach that million-dollar threshold, an artist would need to have around 4 to 5 million monthly listeners, or 20 to 25 million monthly streams.

“Spotify has helped level the playing field for artists at every stage of their careers,” the company said in the report. “Success in the streaming era doesn’t require a decade-spanning catalog nor a chart-topping hit.”

The news comes about a month after the company reported a fourth-quarter earnings beat that saw the Swedish music streamer record its first full year of profitability.

Spotify said the upper echelon of royalties, artists who generate more than $10 million, has soared 600% since 2017, reaching a total of 70 for 2024.

The company said it paid an all-time high of $10 billion in royalties to the music industry for 2024, a figure they claimed is “more than any single retailer has ever paid in a year, and over 10x the contribution of the largest record store at the height of the CD era.”

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Shares of Spotify plunged 13% in after-hours trading Wednesday after the streamer reported fourth-quarter earnings.

The numbers mostly beat expectations, but projections for user growth in Q1 were barely in line with analysts’ projections. There was also a broader selloff in tech shares after the bell, after Facebook (Meta) reported disappointing earnings.

Here are the key numbers:

• Loss per share: 21 euro cents vs 43 euro cents (24 cents vs 49 cents) expected, per refinitive
• Revenue: 2.69 billion euros vs 2.65 billion euros expected by Refinitiv

The streaming company posted 406 million monthly active users in the quarter, up from 381 million. That’s in line with its guidance of 400 million to 407 million and slightly beat analyst expectations, per StreetAccount. Spotify’s premium, or paid, subscribers grew 16% year over year to 180 million in the quarter, the company said. Spotify cited strong promotional campaign performance.

In the first quarter of 2022, Spotify expects to report 418 million monthly active users. Analysts anticipated guidance of 417.8 million, according to StreetAccount. It expects to report 183 million total premium subscribers.

The company added that “since the vast majority of our initiatives are multi-year in nature and measured as such, we no longer plan to issue annual guidance.” For quarterly guidance, the company said it would provide a “single estimate for each metric instead of a range of outcomes.”

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The company’s ad-supported revenue benefitted from strong demand. Spotify said that ad-supported revenue reached a record 15% of total revenues in the quarter.

Spotify reported a double digit increase in the number of monthly active users that engaged with podcasts in the quarter.

CEO Daniel Ek opened up the company’s call with investors by addressing the ongoing controversy over podcaster Joe Rogan in his report, which has led musicians to pull their music from the platform. Rogan has been accused by medical professionals that he has repeatedly spread conspiracy theories about Covid-19 on his show. Spotify, meanwhile, has been under fire for hosting the episodes. It bought the exclusive streaming rights to “The Joe Rogan Experience” in a deal reportedly worth more than $100 million.

The efforts have caused Spotify to add content advisories to any material mentioning Covid-19. It will also direct its users to public health sites for more information. But Ek said there’s still room to grow.

“There’s still work to be done,” Ek said.

Podcasts have been a key growth area for Spotify. At the end of the quarter, it had 3.6 million podcasts on the platform, compared to 3.2 million the quarter prior. Podcast share of overall consumption hours on Spotify also reached an all-time high.

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