Spotify added 7 million Premium subscribers in the second quarter, crossing the 300 million mark, while total monthly active users (MAUs) reached 777 million. The company also announced a deal with Merlin that will let independent artists opt into its forthcoming artificial intelligence (AI) remixing tool.
Revenue rose 15% year-over-year (YoY) on a constant currency basis to €4.8 billion, but earnings per share of $2.61 missed analyst expectations of $2.76, sending shares down nearly 6%.
“We have a scale that few companies in history have reached, a business that is healthy and compounding, and opportunities only we are positioned to pursue,” Co-CEO Alex Norström said.
AI Remixing Tool and Merlin Partnership
Spotify has signed an agreement with Merlin, the independent label rights agency, that gives artists on Merlin’s member labels the option to participate in the company’s upcoming AI-powered fan remixing tool. The deal expands the training catalogue beyond the existing agreement with Universal Music Group (UMG).
“Giving our members’ artists the choice to make their music available as part of this exciting technology, while ensuring the opportunity to participate in an additional revenue stream, is exactly what Merlin is here to do. Spotify’s respect for our members’ and their artists’ rights is exemplary, making our decision to work on this project an easy one,” said Merlin CEO Charlie Lexton.
A research preview of the tool will launch first, using a limited catalogue and targeting fans of specific artists to remix songs. This phase will serve as reinforcement learning to help the AI understand what works. The full tool will be offered as a paid add-on, creating a new revenue stream for participating artists.
AI Features and Audiobooks Expansion
Co-CEO Gustav Söderström acknowledged scepticism around AI music but stressed that the remixing tool is centred on real artists and real music. “AI music is going to happen with or without us,” he added.
The company said 25% of Spotify users have engaged with AI tools such as the DJ feature, and new AI-generated “Personal Podcasts” are rolling out more widely. Söderström highlighted Spotify’s proprietary “Large Taste Model,” which he said has driven double-digit declines in autoplay drop-offs and increases in active listening days and track saves.
Beyond AI, Spotify reported that nearly 100,000 tickets were reserved through its Reserved fan-ticketing programme across initial US tours. The Jam real-time listening tool is now used by 50 million people. The company is also expanding its non-music catalogue with a new Audiobooks+ tier for power listeners and Narrated Articles, which are spoken long-form magazine pieces from outlets including Rolling Stone, Vogue and Wired.
Free Tier Adjustments
Co-CEO Alex Norström said Spotify is “adjusting elements like product optimisation and ad load” in certain markets to convert free users into paying subscribers. The strategy, he explained, “carefully increases friction in our free service with a goal of driving high music conversion and revenue growth down the line.”
Premium Subscriber Definition
Spotify’s 300 million Premium subscriber figure includes Individual, Duo (two people) and Family (up to six people) plan members, as well as users within 30 days of a failed payment. The company does not disclose how many Premium users are on Family or Duo plans. By comparison, Netflix estimated in 2022 that its 322 million paying households were sharing accounts with an additional 100 million households, indicating that a large share of Spotify’s Premium users may similarly be sub-members on Family or Duo plans.
