Universal Music Group has settled its lawsuit with AI-music startup Udio, and the pair are planning to launch a “music creation, consumption and streaming” service together in 2026.
All three major labels sued Udio (as well as rival firm Suno) in June 2024, in lawsuits filed by US labels body the RIAA. The accusation was of copyright infringement “on a massive scale” in the way both companies had trained their AI-music models.
Last month, the RIAA amended its lawsuits to include accusations that both Udio and Suno had sourced the music from “illegal scraping of copyrighted sound recordings from YouTube”.
However, soon after a report claimed that both firms were among a group of AI companies in talks with two of the three majors: UMG and WMG. For Udio, those talks have now resulted in a set of “strategic agreements” with the first of those.
“In addition to the compensatory legal settlement, the new license agreements for recorded music and publishing will provide further revenue opportunities for UMG artists and songwriters,” revealed UMG in its announcement of the agreements.
“The new platform, which will be launched in 2026, will be powered by new cutting-edge generative AI technology that will be trained on authorised and licensed music. The new subscription service will transform the user engagement experience, creating a licensed and protected environment to customise, stream and share music responsibly, on the Udio platform.”
Until then, there will be what UMG described as a “transition period” for Udio while it builds the new service.
“Udio’s existing product will remain available to users during the transition period with creations controlled within a walled garden and the service amended in multiple ways—including fingerprinting, filtering, and other measures—before the launch of the updated service,” it said.
“These new agreements with Udio demonstrate our commitment to do what’s right by our artists and songwriters, whether that means embracing new technologies, developing new business models, diversifying revenue streams or beyond,” said UMG boss Sir Lucian Grainge.
“This moment brings to life everything we’ve been building toward – uniting AI and the music industry in a way that truly champions artists,” added Udio CEO Andrew Sanchez. “Together, we’re building the technological and business landscape that will fundamentally expand what’s possible in music creation and engagement.”
“We look forward to working with Andrew who shares our belief that together, we can foster a healthy commercial AI ecosystem in which artists, songwriters, music companies and technology companies can all flourish and create incredible experiences for fans,” added Grainge.
The Wall Street Journal broke the news, and talked to UMG’s digital chief Michael Nash. While he did not reveal any financial terms from the settlement, he did talk a little about the plans for Udio’s new platform.
“The label and artists who opt in will be paid for music used for training the model,” reported the WSJ. “They will also be compensated when songs are used by subscribers to create new works.”
That phrase “artists who opt in” is important. It strongly suggests that they will also be able to NOT opt in if they don’t want their music to be used to train Udio’s new model. That’s a right that management bodies have been pressing for.
The WSJ also talked to Udio’s Sanchez about the ‘walled garden’ aspect of the new service, confirming that while people will be able to share songs within it “it is important to protect artists by keeping those creations within the platform”.
“Artists will set permissions for what and how you can create, allowing you to make new music in their distinct style,” he wrote. Users will also be able to “reimagine your favorite song in a new genre, blend it with a different artistic style, or begin experimenting with covers.”
That includes mash-ups. “Take your favorite artists, songs, or styles and combine them in novel ways. In our internal experimentation, the team has gotten some truly remarkable and unusual results that will definitely delight,” wrote Sanchez.
He also confirmed that as of today, Udio users cannot download the tracks they have made on its existing service. The walls of the garden have gone up already.
“I understand this represents a significant sacrifice, and I hate eliminating functionality for our users. We make this change with a heavy heart, but it is necessary to help achieve the vision we’re working towards,” he wrote.
Naturally there are several more questions that flow from all this. First, will Udio soon announce a similar settlement and partnership with Warner Music Group? How about Sony Music, which wasn’t named in that recent report about talks being ongoing?
Second, will UMG soon announce a similar settlement and partnership with Suno? That company is reportedly raising a $100m funding round at a $2bn valuation, which would certainly give it a healthy pot of settlement cash.
Is Suno on the verge of striking other deals with majors too? Where does independent music fit into all this: will the AI-music firms make licensing agency Merlin – recently in the news for its pioneering licensing deal with ElevenLabs – a priority too?
Will Udio need its own sizeable funding round to cover settlements, licensing deals and development on its next-gen platform? How will the opt-in / opt-out process work for artists signed to UMG, and will it extend to songwriters signed to the major’s publishing arm too?
Finally, UMG’s announcement of its strategic agreements with Udio described the new platform as a collaboration, raising the question of whether UMG will have more influence on its development, guardrails and business model than rivals.
Oh, and while we’re here: the agreements cover “recorded music and publishing”, but it remains to be seen what that means for publishing works whose rights lie partly with Universal Music Publishing Group and partly with other publishers. How will opting in (or out) work for those companies?
Lots of questions, eh? But the sight of Udio signing its first deal with a music rightsholder does feel like a domino moment for the GenAI music sector, with more deals surely following in quick succession in the coming weeks and months.
Settling lawsuits may unlock the next rounds of funding for the bigger startups in that sector too, as well as new players who emerge in 2026, from any investors who were feeling jittery about the litigation.
We’ll leave you with a final thought on the bigger picture. Udio is working on a new service for people to create GenAI music, but also to share and stream it. Meanwhile, Spotify recently announced partnerships to build ‘artist-first AI music products” with the three majors, Merlin and Believe.
UMG’s announcement today makes it clear that the intention is for music created on Udio to stay within Udio – and so NOT make its way onto Spotify and other commercial streaming services.
So, we could be looking at the latest bifurcation in the digital music world. GenAI creation and streaming services over there, with their walled gardens containing only GenAI tracks made by their communities.
And then mainstream DSPs over here, with the full commercial music catalogue, and GenAI features that – reading between the lines of Spotify’s announcement – may be more about remixing and mashing up those tracks than creating brand new ones.
(Although judging by Udio’s blog post, that’s a feature that it’s also building into its next-generation service.)
We’re used to thinking about Spotify’s main competitors being YouTube Music, Amazon Music and Apple Music. Now think of the big GenAI players like Udio, Suno, Stability AI and co as the new competitors.
Our take is that UMG is making a bet here: that if the dividing line between these two groups are clear, they can be complementary. Udio’s next-gen platform may be a streaming service, but it’ll only be for GenAI music – so people won’t be cancelling their Spotify subscriptions for it.
Whether that dividing line stays clear is another question. We’re already seeing music created on Suno used for virtual-artist projects like Xania Monet that are getting traction on mainstream DSPs, for example.
Will there be scope in Udio’s deals for its most talented ‘music designers’ (a phrase we’re still not sure will catch on, but it’ll suffice for now) to take their tracks out of the walled garden – with royalties still flowing back to the original, human music that trained the model.
So many questions. But as we said, this feels like a domino moment for GenAI’s intersection with the music industry. We await the next deals with keen interest.
