Owning the Algorithm: What the UMG – Udio Partnership Means for AI Creators

It also comes within hours of the announcement that UMG has entered into another strategic alliance, with Stability AI, to co-develop AI music creation tools.

While technology disruption and the music industry are no strangers to each other, the relationship between UMG and Udio, and Stability AI (and the licensing agreements which underpin them) will surely come to define how music rights and AI intersect in the coming years.

However, to those who have been in the music licensing game for a minute, the Udio deal coming off the back of a heated lawsuit alleging copyright infringement, may not come as a complete surprise.

Since the demise of the CD and the advent of the internet, music rightsholders have taken a protectionist stance against technology companies, from the era of Napster, Limewire and the Telcos, to battles around licensing music for the iPod. The UMG-Udio deal signals that this historic aversion to being quick to partner with technological disrupters, and bringing alleged infringers from the courtroom to the boardroom, may be giving way to more openness in this new industrial revolution.

The planned service, launching in 2026, will be built on licensed music from UMG’s catalogue. Within this framework, artists and songwriters will be able to opt in to have their works used for AI training, and will receive compensation not only when their recordings and songs are used to train the platform’s algorithms, but also when fan-generated derivatives of their music are made.

However, these new creations won’t be freely distributable across the internet; they’ll only be accessible within the new platform, a common ‘walled-garden’ approach which enables the tracking of creation and usage (and therefore revenue flows) of existing music and the new derivative works being created.

While the structure of these commercial arrangements doesn’t depart significantly from music industry market norms, the end product created by the UMG-Udio deal poses legal and regulatory questions as to how these new derivative works will be protected by law, a question which permeates far beyond music to every industry which has intellectual property at its core. While the new subscription-service platform will use training data which has been derived from licensed content, the status of fully AI-generated outputs remains nebulous under most copyright regimes throughout the world, which only protect human authorship.

Under this deal, the question of intellectual property ‘ownership’ of fully AI-generated tracks would be governed by its contractual terms, not by statute. The creative industries are waiting to see how various jurisdictions will consider questions of authorship and ownership of intellectual property which has combined human/AI inputs or authorship, or are fully machine-generated. That will play out in the coming years as the AI arms race continues.

Potentially, this deal could set a precedent far wider than the music industry when it comes to opt-in licensing regimes. For the music industry specifically, it remains to be seen whether these approval rights will be offered to UMG’s artists and songwriters on a blanket basis, or whether the terms of individual record and songwriting deals will govern musicians' abilities to control not just how and where their music is used, but what is created from it, and how they are paid.

These implications will be significant worldwide. In Europe, the European Union Artificial Intelligence Act (AI Act) could treat narrowly defined creative AI tools differently from general-purpose models. If platforms like Udio or Stability AI classify their AI as “music creation specific” rather than “general purpose,” they may avoid some of the Act’s stricter transparency or copyright-related obligations. This regulatory distinction will likely influence how AI companies design their systems and datasets within Europe.

Other key jurisdictions will also be watching these developments closely. It is by no means a given that countries which have historically led the way in intellectual property, technology and trade regulation and reform will all take a unified approach to licensing the use of content for AI platforms. Just four days ago, the Australian government announced that, contrary to the approach taken in the US, Europe, UK and Japan, it would not be enacting a text and data mining exception for training AI models. In a radio interview, Australian Attorney General Michelle Rowland explained that this position “gives certainty to the environment, but it also enables the creatives of Australia to have that certainty going forward. This is fundamental to their right as people who are generating works to ensure that fairly remunerated for that and that there are fair terms of use.”

The creative industries will be watching closely as the dance between protection for creators' rights and technological innovation continues at an accelerated pace in the age of AI.

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