Universal Music settles with AI firms, pivots to licensing partnerships

Universal Music Group has settled its copyright lawsuit against AI music platform Udio and formed a strategic partnership with Stability AI to develop professional music creation tools. The dual announcements, made just hours before UMG’s third-quarter earnings report, signal a significant shift in how major record labels are approaching AI music generation amid ongoing legal battles over copyright infringement.

The big picture: These deals represent UMG’s strategy to monetize AI music technology rather than simply fighting it, as streaming revenue growth stagnates and shareholders seek new income sources.

• The timing suggests last-minute deal completion to bolster UMG’s earnings presentation, with announcements arriving at 8:30 p.m. Wednesday and 8 a.m. Thursday before the 1:15 p.m. earnings call.
• UMG continues its legal fight against Suno, another AI music platform, while embracing partnerships that provide licensing revenue and creative control.

Key details about the Udio settlement: The companies will launch a new commercial music creation and streaming platform next year, with Udio’s existing service operating under strict controls until then.

• Udio’s current platform will function within a “walled garden” with fingerprinting, filtering, and other protective measures before the updated service launches.
• The settlement includes both compensatory payments and new licensing agreements that will generate revenue for UMG artists and songwriters.
• Users will be able to stream, share, and customize music within a “licensed and protected environment.”

The Stability AI partnership: UMG will collaborate on developing AI music creation tools trained exclusively on licensed catalogs, giving the label direct involvement in the development process.

• The tools will be “powered by responsibly trained generative AI and built to support the creative process of artists, producers and songwriters globally.”
• Stability AI’s research teams will work directly with UMG and its artists to understand creative needs and technical requirements.
• The partnership aims to create “fully licensed, commercially safe AI music tools” that protect both artists and rightsholders.

What they’re saying: UMG executives emphasized their artist-first approach while embracing controlled AI development.

• “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 chairman-CEO Lucian Grainge.
• “We will only consider advancing AI tools and products based on models that are trained responsibly,” added UMG EVP/chief digital officer Michael Nash.
• Udio Co-Founder & CEO Andrew Sanchez said: “We couldn’t be more thrilled about this collaboration and the opportunity to work alongside UMG to redefine how AI empowers artists and fans.”

Broader context: UMG has been actively forming AI partnerships across the tech industry while maintaining aggressive litigation against unauthorized AI training.

• The company has struck similar deals with YouTube, TikTok, Meta, BandLab, and Electronic Arts.
• Last year, the Recording Industry Association of America (RIAA) sued both Udio and Suno for “mass infringement” of copyright on behalf of all three major record companies.
• Stability AI faces multiple copyright lawsuits, including one from Getty Images alleging illegal use of 12 million images without permission.

Financial backdrop: UMG’s recent earnings show modest growth, with Q2 revenue of €2,980 million up 1.6% year-over-year, while its publishing division posted 11%-plus gains in the first half of 2024.