Spotify has signed a licensing agreement with Merlin — the digital licensing body that represents independent labels and distributors — to extend its AI-powered fan-made covers and remixes tool to the independent sector. The deal was announced on Tuesday, August 4, the same day Spotify reported its Q2 2026 earnings, including 300 million Premium subscribers crossed for the first time and 777 million monthly active users. Music Business Worldwide

The tool, described by Spotify and Universal Music Group as "powered by generative AI technology," lets fans create their own covers and remixes of songs from participating artists and songwriters. It will launch as a paid add-on for Spotify Premium subscribers, and Spotify says it will create an additional revenue stream for the artists whose work is used. Merlin members — independent labels and distributors that collectively represent a substantial share of recorded music outside the three majors — now join the programme.

Universal Music Group was first through the door. Spotify and UMG announced their licensing agreements on May 21, 2026, covering both recordings and publishing rights — meaning the deals span the sound recordings themselves and the underlying compositions. Spotify Newsroom Until the Merlin agreement, the tool had covered only UMG's catalogue.

Spotify first outlined the fan-made AI music plan in October 2025, when Sony Music Group, Universal Music, Merlin and Believe agreed to partner with Spotify on developing "responsible AI products" and direct licensing frameworks ahead of launching new AI features. Spotify Newsroom A separate agreement with the National Music Publishers' Association, announced on November 11, 2025, was designed to expand direct-licensing opportunities for independent publishers. Spotify Newsroom

The initiative rests on what Spotify calls "consent, credit and compensation" — meaning participating artists and songwriters must agree to have their work included, receive credit on fan-made creations, and earn money from the activity. Charlie Hellman, Spotify's SVP and Global Head of Music, said the Merlin agreement ensures participating artists are credited and compensated.

As of publication, Sony Music Group, Warner Music Group and Believe had not announced their own agreements for the tool. That leaves two of the three major label groups — Sony and Warner — plus Believe, one of the largest independent distributors, still outside the programme.

For fans, the pitch is straightforward: pay extra on top of a Premium subscription and get tools to remix or re-cover songs from participating catalogues. For independent labels and their artists, the deal opens a new licensing channel that, until now, was available only to UMG-signed acts. How many Merlin members opt in, and what the per-use payouts look like, will determine whether that "additional revenue stream" is meaningful or marginal — neither Spotify nor Merlin has disclosed specific financial terms.