Spotify to the Majors: We Don't Need All of You to Launch AI Remixing
Spotify signed Merlin and said out loud it can roll out its AI covers tool without every major. Here is why that shifts the power.
· 4 min read
If you are an indie label owner or a manager sitting on a catalog, here is the question that should be running through your head this week: who actually holds the leverage in AI licensing now? For a long time the answer was simple. The majors did. A DSP could not move on a big product without them. That assumption just cracked.
On August 4, Spotify announced a licensing deal with Merlin, the trade group representing thousands of independent labels, that lets Spotify give paying subscribers the ability to remix songs from Merlin members using its coming AI covers and remixing tool. Artists on Merlin labels can opt in, and Billboard reported that participation is a choice, not a default.
That part is expected. The part that should get your attention is what Spotify said about the majors while announcing it.
Co-CEO Gustav Söderström, speaking on the earnings call, said Spotify plans to launch the product when it is ready and good enough, and then added, per Digital Music News, that "we do not need a deal with all the majors." DMN read that as a message aimed squarely at Sony Music, which has not signed on.
Translate that from earnings-call diplomacy into plain English: Spotify is telling holdouts that the train is leaving with or without them.
How the wedge works
Spotify first announced the AI tool in May, with Universal Music Group as the first label to sign, covering both recorded music and publishing rights, as Billboard noted. One major plus a giant pool of independents is enough to build a real product. You do not need unanimous major buy-in to hit critical mass.
Alex Norström, the other co-CEO, spelled out the math on the call. Following the UMG and Universal Music Publishing Group agreement in May, the Merlin deal "adds 30,000 [in our] network the opportunity to partake in this new product," he said, per Billboard. That is 30,000 labels' worth of catalog joining one major's.
This is the shift. Independents used to be the last piece a DSP added after the majors set the terms. Here they are the wedge that lets Spotify proceed unilaterally. The majors who withhold deals are not blocking the product. They are choosing to sit outside a product that already has momentum.
And Spotify has the leverage to say it
The reason Spotify can talk like this is the number it posted the same day. Music Ally reported that Premium subscribers grew 9% year over year to 300 million, with 7 million net additions, while monthly active users climbed 12% to 777 million. Total revenue rose 15% in constant currency to 4.8 billion euros.
That 300 million figure puts Spotify in the same room as Netflix, Microsoft, and Apple. When you are that big, a single holdout label is a gap in your catalog, not a veto. (Worth noting, as we have argued, that Premium counts include Duo and Family sub-members and lapsed users up to 30 days, so the raw number flatters the story.)
Norström was blunt about squeezing more out of free users too, telling analysts, per Music Ally, that Spotify is "carefully increas[ing] friction in our free service" to drive conversion. This is a company optimizing for revenue from a position of strength, not one negotiating from need.
What this means for the indie side
The upside for Merlin members is real, and it is worth saying so. The tool launches as a paid add-on, which Spotify says opens an additional revenue stream for participating artists. Merlin CEO Charlie Lexton called Spotify's respect for members' rights "exemplary" and said the decision to work on the project was "an easy one," per Music Ally.
Spotify's Charlie Hellman framed the pitch around consent, credit, and compensation, the "three C's," and said every creation should drive listeners "back to the original work," as Billboard reported. There is a fair version of this where remixes become discovery funnels and a new royalty line. New money is new money.
But read the mechanics before you cheer. A research preview comes first, using a limited catalog, to gather what Söderström called reinforcement learning. That means Merlin members' music helps train the tool. We still do not know the split. DMN asked the obvious question and had no answer: just how big a piece of the revenue pie do artists get? Until that number exists, "additional revenue stream" is a promise, not a rate.
There is also the strategic cost of being the wedge. When independents sign first, they normalize a product before the terms are fully tested, and they hand Spotify the leverage to tell the majors to catch up or get left behind. That is great for Spotify. Whether it is great for the indie community depends entirely on the economics nobody has published yet.
The old rule was that nobody moved without the majors. The new rule, as of this week, is that the majors move faster because the independents already did.
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