I honestly wonder if people would consume the music they know is AI generated. And by "honestly", I mean "I don't really know but I want to."

I've been watching videos of Guy Michelmore in youtube. Not because I will ever write any orchestral music, but because I like his energy and envy his shed. Would I bother if Guy Michelmore were an AI?

Entirely depends on how good it would become.

It could also have some interesting avenues, like feeding some variables to the AI from say a video game (number and type of monsters on screen, mood etc.) to generate music reacting to what is happening on screen

I would. Out of the bands I listen to maybe 5 of them I could name a single member. I'm a big reader but I couldn't tell you one thing about most of the authors other than their names.

It depends on how you define art. You can play music or shoot film or paint a picture. AI could do it as well. But the essence of what makes good art comes from soul, from experience by living, from relationships between us... that is created for stories that inspire.

That is not what AI would ever generate.

And absent some major technology changes Spotify in your example has no way to do credit assignment back to the training set for any attempts at royalties should they be so inclined.

Without copyright protection anyone could copy their entire library and set up a rival streaming service. It certainly wouldn’t be worth much investing in the AI part of the business.