AI music gets hot as Warner Music settles with Udio, Suno hits $2.45B valuation

Warner Music Group has settled a copyright lawsuit with AI firm Udio, while rival company Suno announced a $250 million funding round, which brought its valuation to $2.45 billion.

The announcements, which came on the same day, show that major record labels and VCs are racing to capitalize on AI music technology after months of litigation, even as fundamental questions about copyright and fair use remain unresolved in the courts.

Warner Music and Udio to launch a song creation platform 

Warner Music’s settlement with Udio makes it the second major label to resolve its dispute with the Massachusetts-based company in less than a month, following Universal Music Group’s October agreement. The companies plan to jointly launch a subscription service in 2026 that will use licensed music from Warner’s catalog to power AI-generated remixes, covers, and new songs featuring participating artists’ voices.

“We’re unwaveringly committed to the protection of the rights of our artists and songwriters, and Udio has taken meaningful steps to ensure that the music on its service will be authorized and licensed,” said Robert Kyncl, Warner Music Group’s chief executive officer.

The settlement also includes provisions for artist protection, as they can choose to opt in to participate and will receive credit and compensation. Sony Music Group remains the last major label still litigating against Udio.

Suno’s valuation rises

Suno’s latest funding round was led by Menlo Ventures and also saw participation from other investors, including Nvidia’s NVentures, Lightspeed, Hallwood Media, and Matrix. 

The raise values the company at $2.45 billion. The platform, which allows users to create full songs using text prompts and has become widely popular among first-time creators and professional producers alike, is also facing copyright litigation with Warner, Universal, and Sony Music. 

Suno’s co-founder and chief executive officer, Mikey Shulman, said the latest capital will be used to build more sophisticated tools and expand its platform as demand for generative audio continues to accelerate. He added that millions of users have produced music through Suno over the past two years.

However, unlike Udio, Suno hasn’t settled or resolved the copyright battles it has with the world’s largest record labels, which allege that the company used protected recordings to train its model and risks flooding music platforms with AI-generated tracks that could “drown out” professional artists.

From courtrooms to collaboration

In 2024, when the major record labels first took Udio and Suno to court, they alleged that they used protected recordings to train their AI models without permission. The labels accused the companies of copying hundreds of songs from popular musicians to create systems that would “directly compete with, cheapen, and ultimately drown out” human artists. 

However, both AI startups claimed that they didn’t violate any US copyright law and characterized the lawsuits as attempts to stifle competition. 

Industry observers had predicted that major labels would seek equity stakes and licensing arrangements rather than pursue lengthy court battles, and that forecast seems to have largely materialized.

Part of Universal Music’s settlement with Udio also involves them collaborating to launch a platform for generative AI music trained on authorized and licensed music.

Warner Music also announced a separate partnership with Stability AI on Wednesday, November 19, to develop professional-grade AI tools for artists and producers using ethically trained models. Universal Music also struck a similar deal with Stability AI in October.

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