Universal Music & Udio’s AI Deal: Music Industry Reactions

On Oct. 29, Universal Music Group (UMG) announced a landmark deal with AI music startup Udio. As part of the agreement, Udio, which UMG was suing for widespread copyright infringement along with the two other major music companies, offered a compensatory settlement with UMG, effectively ending UMG’s part of the lawsuit and paving the way for a new version of Udio, set to release in 2026, which would be a “new commercial music creation, consumption and streaming experience” that would remunerate participating UMG artists. 

To survey the industry’s reaction to the deal, Billboard spoke with professionals who have been following the development of AI music closely from various vantage points, including labels, investment firms, AI music start-ups, the songwriting community and consultancies.

“This deal is beneficial for the music industry,” one label professional tells Billboard. “My question is, though, is it beneficial for Udio? In the short term, they’re going to go through some tension as they do a reset, but this could be great. It’s early.”

To most who spoke to Billboard for this story, the timing of the deal wasn’t entirely surprising. One label executive points out that news of the agreement was cleverly released just hours before UMG’s Q3 earnings call. Still, Sean Power, CEO of Musical AI, says he “expected a deal in Q1 of 2026, not now.” 

Since this summer, reports have circulated that the majors have been discussing settlements with Suno and Udio, leading many to believe the talks were getting close. But as the year wore on, some grew skeptical that settlements would be reached by the end of the year. Though the UMG-Udio deal represents the start of reconciliation, these lawsuits are far from over — Warner Music Group and Sony Music are still pursuing their claims against Udio, and all three majors are still pursuing their lawsuit against Suno.

Vickie Nauman, founder of music-tech consultancy CrossBorder Works, says she’s been watching out for this deal since Lucian Grainge, UMG’s chairman/CEO, released a letter on Oct. 13 expressing the company’s plans to pursue AI deals. “I saw that as Lucian putting a stake in the ground about AI,” Nauman says. “When I read that, I thought, ‘He wouldn’t say this unless he’s pretty sure he will reach a deal soon.’ That letter exuded confidence.”

As part of the deal with UMG, Udio is pivoting its offerings, launching a new version of the service in 2026 that will be focused on building fandom and encouraging engagement with existing music, rather than just offering brand-new songs at the click of a button, as it does now. The new version of Udio will feature a number of tools that will allow users to remix, mash up and riff on the songs of participating UMG artists. Users will also be able to create songs in the style of participating artists and use some artists’ voices on songs.

One investor, who has not invested in Suno or Udio and spoke to Billboard on the condition of anonymity, said that he fears Udio will run into the same problems as AI film company Runway, which signed a deal with Lionsgate to adapt their intellectual property — a partnership that, one year later, has yet to produce results. “The Lionsgate catalog is too small to create a model,” a person familiar with the situation told The Wrap. “In fact, the Disney catalog is too small to create a model.”

A label executive, who spoke under the condition of anonymity, adds: “I’d like to see Udio succeed, because I think they’re trying to get on the right side of history. Do I think this deal puts them in a little bit of a box, though? Yes.” 

Songwriter/producer Oak Felder raised another point in my TikTok comment section: “The question is: how does [this deal] affect catalogs that are split between Universal and Sony or any other publisher without a deal[?] Udio can’t utilize a song in Universal’s catalog that’s split between writers on non-Universal publishers, right?” (A UMG rep declined to provide specific details on that point.) 

Udio and UMG’s deal allows artists to opt in with “granular” controls, as Udio CEO Andrew Sanchez told Billboard shortly after the deal was announced, over which parts of the new Udio service they want to participate in — seen as a win for artists’ autonomy. But the investor asks: “How many of these artists are actually going to opt in?” 

Another possible challenge for Udio: there are already multiple companies offering, or planning to offer, remixing and fan-focused AI features. This includes MashApp, Hook and Spotify, which recently announced that it’s working on AI music products, including remixing features, with the consent of the majors and some large independent music companies. 

“It’s a calculated risk,” says Nauman about Udio’s decision to pivot, but she notes that trying to build a business that allows everyone to create quick songs was a risk, too. “I think that just the idea of being able to prompt a few songs easily is kind of a fad, so this [new Udio service] could be interesting. But users will be the ultimate arbiter here.”

Executives interviewed for this story were mixed on how they think Udio’s deal with UMG will impact Suno. “If I were Suno, I would be feeling a lot of pressure after this deal,” says Power. “But also, I don’t imagine that its investors are scared of litigating this to the end.” 

Barclays Research recently pointed out that Suno’s fundraising better insulates it from the impact of these lawsuits with the majors than Udio: “Even a [tough] settlement…would likely only mean the disappearance of Udio, while…Suno may have the necessary financial firepower.”

The anonymous investor adds, “One thing that helps Suno here is they will capture all the Udio users that are going to unsubscribe,” given that Udio is pivoting to become a different service. As part of the UMG deal, Udio prevented its users from exporting their work from Udio, effective immediately. This led to backlash among users, who felt they should’ve been warned about the change. Soon after, Udio allowed users to export their work during a 48-hour window. 

Nauman says the UMG-Udio deal “puts every single AI music company, including Suno, on notice. I’ve already seen a number of comments from people in music who are saying Udio is very impressive and friendly. That’s an important piece to this. When engaging with rights holders and licensing, it’s both incredibly transactional but also very relationship and trust-driven. Udio is in a strong position by earning that trust.”

Most interviewed for this story saw the deal as an important step forward for the music business. But does it make Warner and Sony more likely to come to the table? “What Sony and Warner do here, I’m not exactly sure,” says Power. “I’m going to be very interested to see where things land, and I’m really thinking about Universal here. They’re now the ones who can say they made the big move.”