STOCKHOLM, Sweden: Spotify and Universal Music Group announced a new partnership on May 21 that will allow premium Spotify subscribers to create AI-generated song covers and remixes, marking the streaming platform's first major move into user-generated AI music creation.

The agreement introduces new tools that will let users produce AI-assisted music content directly on Spotify, putting the company in closer competition with startups such as Udio and Suno, which already offer AI-powered music generation services.

The companies did not disclose the financial terms of the deal or specify which artists would participate in the feature. Universal Music Group represents major artists including Taylor Swift, Ariana Grande, Drake, and Billie Eilish.

Spotify shares rose about 16 percent following the announcement.

The companies said the new feature is designed to create additional revenue opportunities for artists and songwriters beyond existing royalty payments on Spotify.

"What we're building is grounded in consent, credit, and compensation for the artists and songwriters that take part," Spotify Co-Chief Executive Officer Alex Norström said in a statement.

The deal comes as major music labels seek stronger licensing arrangements to protect their catalogs amid rapid growth in AI-generated music, which has become increasingly difficult for listeners to distinguish from human-created songs.

Last year, AI music startups Udio and Suno faced legal challenges from record labels over copyright concerns. Udio later signed agreements with Universal Music Group and Warner Music Group to settle copyright disputes, while Suno also settled with Warner Music Group.

However, both companies continue to face class action lawsuits filed by more than 1,800 independent artists, who claim the startups' actions "were an attack" on some of the music industry's "most vulnerable and valuable members."

Spotify has already introduced several AI-powered tools aimed at improving user engagement and retention. These include an AI DJ that uses voice interaction to personalize music recommendations and playlist-generation tools that respond to natural-language prompts entered by users.