In a flurry of activity just hours before the company’s third-quarter earnings report on Thursday, Universal Music Group announced that it has settled its copyright infringement litigation against AI music platform Udioand that it has also entered into a strategic alliance with Stability AI to develop “the next generation of professional music creation tools.”
The announcements come against a backdrop of complex legal disputes over whether AI companies can “train” their products on copyrighted music without permission. Last year, the RIAA, acting on behalf of all three major record labels, sued Share and the Suno platform for “mass infringement” of copyright; the majors’ legal action against Suno continues.
At a time when music companies’ streaming revenues are leveling off and new sources of revenue are being sought, the threat to those revenues from AI is very real and alarming to shareholders; all three major music groups are public companies. The timing of UMG’s announcements – arriving at 8:30 a.m. ET Wednesday and 8:00 a.m. ET Thursday – suggesting a last-minute rush to complete deals (or strategic planning) in time for UMG’s earnings report, scheduled for 1:15 p.m. ET Thursday.
In the Udio announcement, UMG said the companies “will collaborate on an innovative, new commercial music creation, consumption and streaming experience” to launch next year. It also said that “in addition to the compensatory legal settlement, the new recorded music and publishing licensing agreements will provide additional revenue opportunities for UMG artists and songwriters.”
UMG noted that Udio’s existing platform will remain available in the months leading up to the launch of the new product, “with creations controlled in a walled garden and the service modified in several ways – including fingerprinting, filtering and other measures – before the launch of the updated service”, allowing users to stream, share and customize music in a “licensed and protected environment.”
UMG Chairman Lucian Grainge said: “These new agreements with Udio demonstrate our commitment to doing right by our artists and songwriters, whether that means embracing new technology, developing new business models, diversifying revenue streams or more.”
Andrew Sanchez, co-founder and CEO of Udio, added: “We couldn’t be more excited about this collaboration and the opportunity to work together with UMG to redefine how AI empowers artists and fans.”
In announcing Stability AI, UMG said the new music creation tools will be powered by “responsibly trained generative AI and built to support the creative process of artists, producers and songwriters globally.”
UMG said these tools will be powered by “responsibly trained generative AI and built to support the creative process of artists, producers and songwriters globally,” and that Stability AI’s research and product teams will “collaborate closely with UMG and its artists to explore artist needs and technical approaches for next-generation music creation tools.” In this effort, Stability AI will collaborate with UMG’s research and product teams to build software that is trained on licensed music catalogs.
Significantly, the partnership effectively allows UMG to create and develop the process in an effort to create “fully licensed, commercially safe AI music tools” that “support both artists and rights holders while preserving the integrity of the art form.”
Stability AI is facing several copyright infringement lawsuits, including one from the Getty Images photography service that claims the company illegally used 12 million images without permission or compensation.
UMG EVP/chief digital officer Michael Nash said: “This agreement is an extension of our fundamental focus that our artists and songwriters are the cornerstone of our business. With AI, as with everything else we do, we start with what best supports our work to help them achieve creative and commercial success and build from that foundation to create new and better commercial and creative opportunities.”
“And as we’ve made abundantly clear,” he continued, “we will only consider developing AI tools and products based on models that are trained responsibly.”
Stability AI CEO Prem Akkaraju added, “UMG has long been a leader in technological innovation in music. This partnership marks the next chapter of music creation. At Stability AI, we put the artist at the center and build AI around their unique needs because true transformation has always come from a combination of art and science.”
UMG has made similar AI-related deals with YouTube, TikTok, Meta, BandLab, Electronic Arts and others.
Universal Music Group’s third-quarter earnings report takes place Thursday afternoon. The company reported relatively small gains in the second quarter but stronger for the half year ended June 30, where its publishing division saw 11%-plus year-over-year gains in both categories. Overall for the quarter, UMG reported revenues of EUR 2,980 million, an increase of 1.6% compared to the previous year (4.5% in constant currency). For the first half of the year, revenues of €5,881 million were up 6.4% year-on-year, or 6.9% at constant currency.
