Spotify has signed Merlin, the licensing agency representing independent labels and distributors, to its forthcoming AI remix and covers product, adding more than 30,000 labels to a catalog that already includes Universal Music Group. Co-CEO Gustav Söderström disclosed the deal on Tuesday's second-quarter earnings call, pitching the product as an opt-in, paid tool that lets fans generate covers and remixes only from artists who agree to participate. The service will launch as a paid add-on, creating a new revenue line for rights holders on top of streaming payouts.
The Merlin agreement is the second major licensing win for the product after Universal, and it fills the biggest hole in a consent-based generative music service: the long tail of independent labels. Between the two deals, Spotify can plausibly clear enough repertoire to make the fan remix experience feel like the real catalog rather than a limited demo. The company said a research preview will go to a subset of users first, and confirmed it will not require the full music library to launch.
Söderström framed the pitch on the call as being about "real artists, not fake artists," a direct contrast with the wave of fully synthetic music flooding streaming services. Co-CEO Alex Norström said the deal package covers consent, credit, and compensation — the three items missing from most current AI music pipelines.
“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.”— Alex Norström, Spotify co-CEO
Key facts
- 01Merlin brings more than 30,000 indie labels into Spotify's AI remix and covers catalog, joining Universal Music Group.
- 02The product will launch as a paid add-on, creating a new revenue line for participating artists.
- 03Deezer reported over 50% of daily track uploads are AI-generated, up from 10% in January 2025.
- 04Spotify said a research preview will roll out to a subset of users, with no launch date set.
- 05Participation is opt-in, with artist consent, credit, and compensation built into the licensing terms.
The scale problem Spotify is trying to get ahead of is now measurable. Deezer said more than 50% of daily track uploads to its service are generated with AI, up from 10% in January 2025 — a five-fold jump in roughly 19 months. That growth curve is what is forcing the majors and the indie-label aggregators to pick a lane: either fight generative music in court, or license into a channel that pays the underlying artists when their voice, style, or composition is used.
For Merlin's members, the calculation is straightforward. Independent labels have historically been the fastest to sign licensing deals on new formats, from streaming to short-form video, because they lack the leverage to hold out and because per-stream economics matter more to their margins. Adding 30,000 labels to the covers-and-remixes catalog gives Spotify negotiating cover with UMG and, more importantly, gives independent artists a first-mover position on a revenue stream that generative music startups are currently capturing without paying anyone upstream.
Söderström argued on the call that Spotify occupies a position no pure-play generative music startup can replicate: a two-sided marketplace with the underlying rights holders on one side and hundreds of millions of paying listeners on the other.
Norström's compensation point is the load-bearing one. Every major AI music lawsuit filed in the past 18 months has hinged on training data and output rights being used without permission or payment. A licensed remix product that routes payment back through Merlin and UMG's existing pipes turns that legal risk into a subscription line — provided artists actually opt in at scale.
The unknowns are the ones Spotify did not answer. There is no launch date, no disclosed price for the add-on, no revenue-share percentage, and no detail on how outputs will be attributed or whether they will appear inside the main Spotify catalog or a walled-off remix section. The company also has not said how it will handle featured artists, samples, or songwriter splits — three of the thorniest rights questions in any cover or remix.
The read for the AI music market is that the licensing model is now the moat. Suno, Udio, and the rest of the generative-audio field can produce impressive synthetic tracks, but none of them can offer a fan the ability to remix a specific charting artist with that artist's consent and payment. Spotify's willingness to build the plumbing — and Merlin and Universal's willingness to sign — suggests the major labels have decided the winning move is to license into the interactive-music wave rather than litigate against it, at least for opt-in derivative works. If the paid add-on converts at any material rate against Spotify's user base, the economics will pull the remaining holdouts in fast.
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