Universal Music Group and AI song generator Udio have reached a settlement in a copyright infringement lawsuit and announced a partnership to launch a new AI-powered music creation and streaming platform.

In a joint statement issued Wednesday, the companies said they finalized a “compensatory legal settlement” and new licensing agreements for recorded music and publishing that will create additional revenue opportunities for Universal’s artists and songwriters.

The deal marks the first resolution since Universal, along with Sony Music Entertainment and Warner Records, sued Udio and another AI platform, Suno, last year for alleged misuse of copyrighted works.

“These new agreements with Udio demonstrate our commitment to do what’s right by our artists and songwriters — whether that means embracing new technologies or developing new business models,” said Universal CEO Lucian Grainge.

Financial details of the settlement were not disclosed.

AI song generation tools such as Udio have shaken the $20 billion global music streaming market by allowing users to instantly create songs in various genres using text prompts — from classic rock and 1980s synth-pop to West Coast rap — without needing musical skills.

The technology has sparked debates over copyright and artistic integrity, with critics warning about a flood of low-quality, automatically generated content and the rise of fictitious “AI artists.”

Under the new agreement, Universal and Udio will launch an AI subscription service next year that will allow users to “customize, stream and share music responsibly” using authorized and licensed content.

Udio CEO Andrew Sanchez said the partnership “empowers artists and fans alike” and represents “a collaboration that unites AI and the music industry in a way that truly champions creativity.”

Universal’s roster includes global stars such as Taylor Swift, Olivia Rodrigo, Drake and Kendrick Lamar.