MBW Reacts is a series of analytical commentaries from Music Business Worldwide written in response to major recent entertainment events or news stories. Only MBW+ subscribers have unlimited access to these articles. The below article originally appeared in Tim Ingham’s latest ‘Tim’s Take’ email, issued exclusively to MBW+ subscribers.
In my last MBW+ column, I suggested that the major music companies were closer to inking a licensing agreement with Udio than they were Suno. And that, if it wasn’t careful, Suno might soon find itself isolated and license-less, with legal bills ticking up.
Well.
Universal Music Group just settled with Udio. And Suno’s isolation has begun in earnest.
To understand why this matters, you need to grasp what just happened.
This time last week, Udio and Suno were each defendants in legal fights with Universal et al, with both AI startups making near-identical arguments: that training their models on copyrighted music constituted “fair use” under US law.
They were brothers-in-arms against the major labels. Now one of them has switched sides.
Suddenly, Udio is pivoting to become a “responsibly trained AI music platform” with Universal’s, ahem, gentle encouragement.
The UMG/Udio settlement terms are wrapped in NDAs, but the key takeaway seems obvious: you don’t restructure your entire platform around (costly) “responsible” licensing if you genuinely believe your original practices were unproblematic.
As a result, Suno finds itself clinging to a “fair use” defense that its biggest AI-music rival just publicly abandoned.
In future courtrooms, Universal’s lawyers can now point to Udio’s transformation into a licensed platform as market validation that AI companies need permission.
Some observers predict that, in the wake of UMG/Udio, Suno will quickly settle too – a natural domino effect. Maybe. But I’m not so sure.
Why would Universal want another licensed gen-AI partner right now?
UMG has Udio playing by the rules. It’s established a precedent.
Suno may end up being worth more to Universal as a deterrent example – a head on a spike, warning future AI copyright cowboys not to try their luck.
Think about Sir Lucian Grainge’s options today. Sure, he can license Suno using the Udio playbook. Or? He could watch Suno bleed legal fees while Udio establishes itself as the “responsible” AI music platform.
And he could then push for an equity position… turning Suno from antagonist into controlled pet.
The timing is precarious for Mikey Shulman’s company. Suno is reportedly generating over $100 million in annual revenue – while attempting to raise funds at a $2 billion valuation.
Yes: according to Bloomberg, Suno is out there right now, with a pretty pitch deck, wooing investors to quadruple their valuation vs. the firm’s last $500 million-valued round.
Imagine being the private equity associate who has to explain this one to your partners: “The good news is Suno is generating solid revenue. The less good news? Erm, their direct competitor just did a screeching U-turn on the same legal arguments Suno is still betting on. As such, the major music companies might now be holding the cards. Still interested?”
Suno’s pitch deck must have looked gorgeous last week. Clean hockey-stick growth charts. TAM slides about the $120 billion future of AI music. Maybe some quotes about “democratizing creativity”.
Today? There’s a Udio-shaped shadow over every page.
(Smart money will have already noticed that Udio’s lead investor is Andreessen Horowitz. When a16z backs away from a “fair use” fight, expect Wall Street to take note.)
Meanwhile, there remains a good chance that Amazon-backed AI giant Anthropic will settle with Universal soon enough – this time in a huge legal fight over the copyright of lyrics.
If this all plays out, UMG will have executed nicely on the AI battlefield: One compliant partner. One pending settlement. And one foreboding example of what happens when you try to “democratize” your way past copyright law.
On Thursday (October 31), Irving Azoff raised important questions about UMG/Udio and how, exactly, artists will benefit from these new licensing frameworks: “Artists must have creative control, fair compensation and clarity,” he said, while querying how individual artist consent will work in UMG’s dealings with its new AI best bud.
All valid concerns that need addressing. But at least with licensed platforms, there’s a framework for that conversation.
With proponents of “fair use” absolutism, artists get nothing. Except maybe the sound of their music being fed into machines – with zero permission, for zero royalties.
Music Business Worldwide
