Spotify has struck an AI deal with Taylor Swift's music rights owner. Shares soared

Shares of music streaming service Spotify rose 13% in trading on Thursday, Ma. 21. The company held its first investor day since 2022, where it talked about its deal with Universal Music, one of the world's largest artificial intelligence labels, and shared positive goals.

The agreement with Universal Music Group will allow Spotify to launch a new feature: users will be able to create their own covers and remixes using a catalog of artists and songwriters who agree to participate in the program. The tool will be a paid add-on for Spotify Premium subscribers and will create a new revenue stream for musicians, the company claims.

"Existing [remix] creators had no way to participate [and put their work on Spotify] because there was no legal licensing system," the company's co-CEO Gustav Cederström told CNBC. Musicians who have collaborated with Universal Music Group include stars such as Taylor Swift, Lady Gaga and Billie Eilish, for example.

The streaming music service also said during its first investor day since 2022 that it expects to grow revenue to $100 billion and increase the number of subscribers to 1 billion, calling those benchmarks its "Polaris," CNBC reports. Through 2030, Spotify hopes to achieve double-digit revenue growth rates (at around 14-17%), profitability of 35-40% and operating margins above 20%, Bloomberg reports.

The company also introduced a new Reserved feature for Premium subscribers. The service will identify the most loyal fans of artists and reserve two tickets to concerts for them before official sales begin. The service will launch this summer and will start selling tickets for individual music tours.

The deal answers Wall Street's biggest concerns about Spotify and artificial intelligence: the service has been working with the music industry to realize the power of artificial intelligence and consumer interest in it, Bloomberg writes.

Thursday's presentation was aimed at reassuring investors and proving to them that Spotify is still capable of innovation, according to Bloomberg. Wall Street had doubts about the service's ability to control costs and still stay ahead of the competition, especially when it comes to AI, the agency writes. Because of these concerns, Spotify's stock was down 25% YTD before rallying on Thursday.

The average target price for Spotify securities, according to analysts, is $501.4, implying a potential upside of only 2% relative to the closing price on Ma. 21. The majority of analysts on Wall Street, however, recommend buying Spotify securities (37 Buy and Overweight ratings out of 44 total). The remaining seven have a Neutral stance with a Hold rating.

This article was AI-translated and verified by a human editor