Spotify Adds Merlin's 30,000 Labels to Its AI Covers and Remixes Push

Spotify Adds Merlin's 30,000 Labels to Its AI Covers and Remixes Push

Spotify used its second-quarter earnings call on Tuesday to widen the coalition behind its most closely watched new product in years: a paid, AI-powered tool that will let fans make covers and remixes of real artists' songs. The company announced that Merlin, the licensing body that represents more than 30,000 independent labels and distributors, has joined Universal Music Group in backing the effort, dramatically expanding the pool of music that could eventually flow through the feature.

The move stitches the independent sector into a framework Spotify first unveiled on May 21, 2026, when it struck a landmark recorded-music and publishing licensing deal with UMG built around what executives call the "three C's" — consent, credit, and compensation. With Merlin now on board, the indie world's largest collective licensing vehicle sits alongside the biggest of the majors, giving Spotify a licensed catalog that spans from global superstars to bedroom labels.

What Spotify Announced

Speaking to investors, Spotify's co-CEOs drew a hard line between their product and the wave of fully synthetic "AI slop" flooding streaming platforms. "We want artists to be consenting [to add] their work into this catalog, so people can play around with covers and remixes based on their art," said co-CEO Alex Norström. "We also obviously want to give them credit. And last but not least... we not only have the consent and give credit, but we also drive the compensation for this. So, really, we're talking about the first legal way to partake in this AI tailwind that we see coming for interactive music."

Co-CEO Gustav Söderström framed the tool as something only Spotify can pull off. "Our remix and covers I think is an incredibly exciting product again because there is no one else that can really do this," he said. "Normal generative music will happen with or without us. This product will not happen without us, and it needs to exist so that existing artists can participate in this." Söderström stressed that the feature is about "real artists, not fake artists."

The mechanics remain deliberately gated. Artists on any label covered by Merlin's Spotify agreement can opt in; those who participate get credit and compensation for the derivative works, and the tool is designed to route listeners back to original recordings. Spotify told investors a research preview would first reach a subset of users, and that it would not need a full catalog to launch. It did not give a date, and the product will arrive as a paid add-on — a fresh revenue line for both the company and participating artists.

Why the Timing Matters

The announcement landed on a day when Spotify badly needed a forward-looking story. The stock entered the print down roughly 33% from its 52-week high of $748.30, battered by fears over decelerating subscriber growth and rising AI and marketing spend. The quarter itself was solid but not spectacular: Spotify crossed 300 million Premium subscribers for the first time, reached 777 million monthly active users, and grew revenue 14% to 4.78 billion euros — a hair under the 4.80 billion analysts wanted. Gross margin hit an all-time high of 33.4%, and net income swung to 545 million euros from an 86 million euro loss a year earlier. A soft third-quarter forecast for users and operating income still sent shares down more than 6% premarket.

Against that backdrop, the AI remix and covers project — which management said is showing "strong momentum" — is the growth lever executives most want investors to focus on. It reframes AI from a cost center into a potential new revenue stream at a moment when the market is punishing the company for spending.

The Industry's Shifting Stance on Generative AI

The bigger story is what the Merlin deal signals about the music business's evolving posture toward generative AI. For two years the reflex was litigation: labels sued AI music startups, and the phrase "not raw material for tech companies to exploit without consent" became a rallying cry. Now the dominant players are increasingly choosing licensing over lawsuits. UMG and Warner reached settlements with AI music firms, and Merlin itself has since signed deals bringing AI companies inside a licensed, opt-in, revenue-sharing structure rather than fighting them in court.

That pivot is being driven by hard numbers. Deezer recently reported that more than 50% of daily track uploads to its service are now AI-generated, up from 10% in January 2025. With synthetic music already saturating catalogs, rights holders appear to have concluded that a controlled, consent-based, monetized channel is preferable to an unlicensed flood they cannot stop. Spotify's "consent, credit, compensation" language is, in effect, a bet that the industry can domesticate generative AI rather than ban it.

Adding Merlin is strategically crucial to that bet. A tool that only remixed UMG's roster would be a curiosity; one that can eventually draw on tens of thousands of independent labels starts to look like a platform. It also gives indie artists — long the group most exposed to AI's downside — a seat at the table and a potential new payout.

What to Watch

The open questions are the ones Spotify did not answer on Tuesday: when the research preview ships, how compensation is actually split, how many artists opt in versus opt out, and whether fans will pay for the add-on. Watch, too, whether Warner and the remaining majors join, and whether artist advocates view "consent, credit, and compensation" as a genuine floor or a fig leaf. If the economics work, Spotify will have converted its most feared disruption into a durable revenue engine. If they don't, the company will have spent political capital on a product the market was never sold on.

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Sources: [TechCrunch](https://techcrunch.com/2026/08/04/spotify-adds-merlin-to-its-ai-music-remix-and-covers-effort/), [Spotify Newsroom](https://newsroom.spotify.com/2026-05-21/universal-music-group-spotify-licensing-agreements-fan-made-covers-remixes/), [Billboard](https://www.billboard.com/pro/merlin-spotify-licensing-agreement-ai-remixing/), [Music Business Worldwide](https://www.musicbusinessworldwide.com/merlin-signs-spotify-licensing-deal-for-ai-powered-fan-made-covers-and-remixes/), [TIKR](https://www.tikr.com/blog/spotify-is-down-33-from-its-high-into-august-4-earnings-a-new-ai-deal-is-the-reason-to-look-past-the-print)