Universal Music Settles Udio Lawsuit, Partners With Stability AI to Develop ‘Next-Generation Music Creation Tools’

Universal Music Group unveiled two significant artificial intelligence agreements just ahead of its third-quarter financial disclosure. The world's largest music company has resolved its copyright lawsuit with AI startup Udio and simultaneously entered a strategic partnership with Stability AI. This dual announcement underscores the industry's drive to balance legal risks with commercial opportunity, focusing on the creation of advanced, professional music-making tools.

The legal backdrop for these moves has been contentious. The Recording Industry Association of America (RIAA)—representing the three major labels—filed suits last year against both Udio and Suno, alleging "mass infringement" for using copyrighted songs to train AI models. While the Udio case is now settled, the litigation against Suno continues. For Universal Music Group, Sony, and Warner Music Group, whose core streaming growth is plateauing, these AI collaborations are a vital push to unlock new revenue and reassure investors about future profitability. This pivot is especially critical as the industry seeks to monetize new technologies rather than simply litigate against them.

The timing of the announcements was strategic, released just hours before UMG’s 1:15 p.m. Eastern Time earnings call. An industry analyst noted, "This is a classic pre-earnings strategy. By showcasing concrete partnerships, UMG is shaping the narrative to show it is leading on AI, not just reacting to it." This approach aims to demonstrate proactive management of technological disruption to the financial community.

Under the Udio settlement, the companies will jointly launch a commercial music creation and streaming service next year. The agreement includes a financial payout and new licenses covering recorded music and publishing, which UMG states will open fresh income streams for its artists and songwriters. Meanwhile, Udio’s existing platform will function within a strictly licensed "walled garden," employing advanced fingerprinting and filtering to protect copyrighted works and ensure user compliance.

UMG’s partnership with Stability AI is focused on building "fully licensed, commercially safe AI music tools." Stability AI, a company already facing multiple copyright lawsuits—including a prominent case from Getty Images over the alleged unauthorized use of 12 million photographs—will work directly with UMG’s teams. Their joint effort will involve developing software trained exclusively on licensed music catalogs, a foundational measure designed to support artists and rightsholders while preserving creative integrity. This approach directly confronts the legal uncertainties that have plagued other generative AI models.

UMG Chairman-CEO Lucian Grainge emphasized the company's commitment to its artists, stating the partnerships reflect a dedication to embracing new technology and diversifying revenue. Udio's Co-Founder & CEO, Andrew Sanchez, expressed enthusiasm for the collaboration, aiming to "redefine how AI empowers artists and fans." Similarly, Michael Nash, UMG’s EVP and chief digital officer, described the Stability AI deal as an extension of the company's artist-centric philosophy, pledging to advance only AI tools built on "responsibly trained models." Stability AI CEO Prem Akkaraju echoed this, calling UMG a music technology pioneer and labeling the partnership the "next chapter of music creation."

These new alliances expand UMG’s growing portfolio of AI initiatives, which already includes collaborations with YouTube, TikTok, Meta, BandLab, and Electronic Arts. The company’s upcoming earnings will be closely watched for indications of how these strategies are translating financially. In the prior quarter, UMG reported revenue of €2,980 million, a modest 1.6% annual increase, while its first-half revenue reached €5,881 million, up 6.4% year-over-year. Its publishing division was a particular bright spot, posting robust growth of over 11%, suggesting that diversified revenue streams are becoming increasingly important to the company's overall health.