Artificial intelligence could disrupt this industry — and here’s a company that’s leading the charge.

It’s no secret that artificial intelligence (AI) tools are poised to disrupt the music industry. The examples are already stacked. The Beatles released a new song this week, using AI-powered audio analysis tools to break down a muddy old Lennon demo into clear and perfectly distinct piano and vocal tracks. In the MusicLM experiment, Alphabet It allows you to write short pieces of music that aren’t too bad based on a simple text description. And the beating continues.

This does not necessarily mean a changing of the guard. Indeed, some of the established leaders of the modern music business are leading the charge into an AI-powered future.

I was especially impressed Spotify (Spot 0.18%). The Swedish music-streaming and podcast-distributing veteran has been working on AI ideas for years, and his efforts have only grown since the launch of OpenAI’s ChatGPT, which shined a remarkable spotlight on the AI ​​platform.

I’m looking at what Spotify is doing with AI and why these innovative efforts are causing game-changing disruption.

How Spotify is shaping music discovery with AI.

When ChatGPT hit the spot, Spotify responded quickly. Three months later, with AI buzz reaching an all-time high, Spotify introduced an AI-driven personal playlist generator for DJs. This service selects songs based on your listening history — right? Sirius XM Radio‘s Pandora — but improves the experience based on song-skipping actions and other feedback. That’s a form of supervised machine learning, a very effective way to refine results from AI-based recommendations.

If that sounds like another copy of Pandora, AI-based innovation doesn’t stop there. The service will likely include some of Spotify’s AI-related patents, such as the ability to control ambient sounds around a user to tailor song recommendations. The DJ also explains the selection with an AI-generated audio narration.

What is the AI ​​system behind that feedback, you might ask? Well, it’s Chat GPT’s creator of OpenAI’s creative AI engine combined with Spotify’s user data and industry expertise. And the sound comes from Spotify’s acquisition of Sonnet, announced in the summer of 2022.

Tracing Spotify’s AI roots beyond recent innovations

Oh, but Spotify’s interest in AI didn’t start with the DJ service or the Sonatic acquisition. What about the ReadSpeaker deal, a 2021 acquisition that will provide custom AI voices for Spotify’s Car Thing media player? Nice try, but AI still goes way back.

The interest in Spotify AI started in 2018. I would argue that in 2011 the company partnered with a song label specialist. SoundHound AI. Spotify took that crucial step more than a decade before AI became cool, and only three years into the company’s history.

Spotify’s AI-powered future

And Spotify’s involvement in AI technology continues.

In September 2023, the podcasting platform gained the ability to translate audio presentations into Spanish, German or French while preserving the voice of the original speaker. The list of AI translated podcasts is very short but will grow over time and Spotify plans to add more languages.

The company is currently hiring PhDs in machine learning and natural language processing to continue content recommendations and curated playlists. The future is digital and heavily patented.

The main idea is to facilitate the interaction of every Spotify user with the platform. Better recommendations drive more and longer listening sessions that support Spotify’s ad sales. At the end of the monetization rainbow, Spotify’s most loyal users will convert to paying members to unlock the full functionality of the service and skip those annoying ad breaks.

AI-based tools will help Spotify achieve these goals, giving the company plenty of motivation to buy, build or license more and more AI and machine learning systems.

From Innovation to Revenue: The Economic Side of Spotify’s AI Adventures

For investors, the big question is how Spotify’s AI advances will translate into financial performance. While these innovations promise to improve user experience and increase subscriber numbers, they come with additional research and development costs. Investors must carefully balance their excitement for AI-driven features with how these investments will impact Spotify’s profitability, user retention, user acquisition and overall market share.

Critical to Spotify’s continued success is the delicate balance between generating revenue and maintaining a healthy bottom line. But you can be sure that Spotify is chasing the potential benefits of its industry-leading AI commitment.

Alphabet executive Susan Frey is a member of The Motley Fool’s board of directors. Anders Bylund has positions in Alphabet. He has positions in the Motley Fool and recommends Alphabet and Spotify Technology. The Motley Fool has a disclosure policy.

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