Udio Strikes AI Licensing Deal With Merlin for Independent Labels

Generative AI start-up Udio has formed a licensing agreement with Merlin, a popular digital licensing provider for thousands of independent labels and distributors. The announcement — which arrives a few months after Udio signed similar licenses with Universal Music Group and Warner Music Group — will now allow independent labels, distributors and artists to earn money by allowing their recordings to be used in AI training.

A representative for Udio declined to provide further information about the remuneration structure of the deal, and whether any backpay would be provided to Merlin members for the use of their works in AI training up until this point, but the company did confirm that Merlin members will only participate in this licensing on an “opt-in” basis, meaning that Merlin members have the ability to choose whether or not they are part of Udio’s training data.

The deal comes after Udio, along with competitor Suno, was sued by the three major music companies in the summer of 2024 for using their copyrighted sound recordings without permission or compensation to train their AI music models — something that the labels argued constituted copyright infringement on a vast scale. Then, in November 2025, UMG and WMG made amends with Udio, forming licensing deals that allow their artists and songwriters to opt-in to Udio in exchange for a new income stream. The deals also effectively settled WMG and UMG’s part of the lawsuit against Udio (Sony Music’s part of the lawsuit is ongoing). WMG also struck a licensing deal with Suno, settling its part of the lawsuit with Suno.

As part of its agreement with UMG, which was its first music industry licensing partner, Udio agreed to make major amendments to its platform. Originally, Udio was known as a generative AI music service that could create an entirely new song from simple text prompts. Those songs could then be downloaded and used by Udio subscribers however they wished. Now, Udio is pivoting away from the creation of new songs and is focusing on remixing and customizing licensed, pre-existing songs from its music industry partners. Udio will retire its current model some time during 2026 and relaunch as this new service with only licensed songs from trusted partners like UMG, WMG and Merlin. Udio also agreed to become a “walled garden,” meaning users can no longer take their AI-generated tracks outside of the platform — all of the creation must be done within it.

In an interview with Billboard just hours after announcing its deal with UMG, Udio CEO Andrew Sanchez said: “We believe there’s an incredibly exciting market that combines creation and consumption, both of human-generated songs and of AI-generated songs. We are building a platform that is going to allow you to engage in both of those activities, because that’s where we think the market and users want to go. By the way, we also think that’s the way that artists are going to benefit from this enormously. Because if you can go and you can do stuff with your favorite artists, make a song in their style or remix [a] favorite song, you’re also going to listen to their own music. And we want to be able to meet the users and provide them one place to do that.”

This is the second major AI licensing deal for Merlin. In September, Merlin (along with large independent publisher Kobalt) struck an opt-in AI licensing deal with ElevenLabs for its new music model, Eleven Music. This was the first deal of its kind, and it set the tone for the smattering of AI licensing deals that arrived after it for the music industry.

The Udio deal also marks the first Merlin licensing agreement to be announced after the organization appointed a new CEO, Charlie Lexton. In a statement about the deal, Lexton said: “As AI develops, it is critical to Merlin that we work with partners who respect artists, their work, and the requirement to license music, For some time, Merlin and Udio have been engaged in conversations focused on a foundation of consent and fair remuneration. We are excited by Udio’s vision and how they clearly respect and value our members and their artists… Our partnership illustrates that Merlin is committed to not simply reacting to AI developments, but to being a participant in shaping the opportunities they promise.”

“Independent artists are the driving force of this partnership,” said Sanchez.“By teaming up with Merlin, we’re ensuring they maintain control over their work and are compensated for their creativity. Together, we’re building a platform that gives fans and creators unmatched tools, real power and a deeper connection to the music they love. We’re not just imagining the future of music creation — we’re making sure independent artists are helping us lead it.”