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Universal Music Group (UMG) has officially settled its copyright infringement lawsuit against AI music startup Udio, turning what began as a courtroom clash into a groundbreaking collaboration. Filed in New York federal court, the case accused Udio of using copyrighted songs to train its generative AI models without authorization.

In a surprising twist, UMG announced Wednesday that it will partner with Udio to launch a licensed AI music service in 2026, signaling a pivotal shift in how the world’s largest record label engages with artificial intelligence. The agreement includes a compensatory element, though financial terms were not disclosed.

UMG described the new platform as a subscription-based service that allows users to “customize, stream, and share music” built from a catalog of licensed tracks—a clear departure from the legal gray area that sparked the lawsuit in the first place.

Turning Controversy Into Collaboration

UMG CEO Lucian Grainge framed the deal as both a victory and a vision for the future.

“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, or diversifying revenue streams,” Grainge said in a statement.

Meanwhile, Udio CEO Andrew Sanchez celebrated the partnership as a transformative moment for both creators and fans.

“What we're pioneering with Universal will help make that possible in ways that directly empower artists and songwriters,” Sanchez said. “In partnership with UMG, we’ll bring your favorite music to the platform while giving artists control over how AI is used.”

Udio’s existing product will remain available during the transition but will soon include “fingerprinting” and “filtering” mechanisms to ensure proper licensing compliance before the full rollout of the new service.