AI and the Entertainment Industry | Kaufman & Canoles

The AI Music Revolution: Major Labels Pivot from Litigation to Licensing

Warner Music’s Landmark Settlement with Suno Signals Industry Shift

In a dramatic reversal that signals a fundamental shift in how the music industry approaches artificial intelligence (AI), Warner Music Group (WMG) announced on Tuesday, December 2, 2025, that it has reached a deal with Suno, settling its copyright lawsuit against the AI music startup. The settlement makes Warner the first of the three major labels to officially partner with an AI music generation platform—and it came remarkably fast.

Just over a year ago, in June 2024, the landscape looked very different. Warner Music Group joined Universal Music Group and Sony Music Entertainment in filing lawsuits against both Suno and its much smaller rival Udio, accusing the AI companies of mass copyright infringement. The labels alleged that both platforms had trained their models on vast troves of copyrighted recordings without permission — a practice the AI companies defended as fair use.

Today, that legal battle is over—at least for Warner and Udio. Universal Music Group settled with Udio in late October, followed by Warner’s own settlement with Udio last week. WMG is the first of the major music companies to settle with Suno, announcing the deal just over a week after settling with rival AI music platform Udio.

The Terms: Opt-In Models and Download Restrictions

While neither company disclosed financial details, the settlement’s structural terms reveal the new framework for AI music generation. Most significantly, by officially dropping its “fair use” defense, Suno has effectively ended the legal standoff with one of its most aggressive adversaries.

Under the new framework, the startup will implement a strict “opt-in” mechanism for WMG artists and songwriters. Reversing Suno’s previous “scrape everything” approach, the move ensures that only authorized works are used to train future models. WMG and Suno said that with the partnership, Suno will be launching “new, more advanced and licensed models” for music generation, adding that Suno’s current models will be phased out.

The Suno-WMG deal will also introduce what Suno describes as “new experiences for fan engagement,” allowing users to create content featuring participating Warner artists’ voices, compositions, and likenesses. Artists and songwriters will be able to decide whether to opt in, according to both companies.

The settlement also imposes significant new restrictions on users. As was the case with the Udio settlement, WMG’s Suno deal is putting new limitations on downloads for users. Suno said that moving forward, only Suno’s paid tier subscribers will be able to download their creations off-platform, and paid users will also have download caps, having to pay more for more downloads. Such a move seems to be WMG seeking to address the thousands of AI tracks made on Suno that subsequently flood streaming services with content.

A Strategic Sweetener: The Songkick Acquisition

As part of the deal, Suno acquired the concert-discovery platform Songkick from WMG — the idea, the company’s press release says, is to bring “together the power of interactive music with live performance.” Through this integration, Suno aims to connect AI music creation with live performance discovery, potentially funneling AI users toward human concerts.

What Does This Mean for the AI Bubble?

The speed of this reversal is remarkable. In AI, everything moves faster. And so, just one year after Warner sued Suno, the music label is now ready to embrace the startup and AI.

As one commentator noted, these record labels are in the intellectual property business. IP is their most important asset, and they instinctively fight tooth and nail to stop others from getting anywhere close to it. The fact that they’re folding so soon, instead of digging in for a long fight, suggests they don’t expect the AI bubble to burst anytime soon.

The settlement also comes on the heels of major investor confidence in AI music. Suno announced last week that it raised a $250 million Series C round at a $2.45 billion post-money valuation. The round was led by Menlo Ventures with participation from Nvidia’s venture arm NVentures, as well as Hallwood Media, Lightspeed, and Matrix.

Still, both UMG and Sony are still in litigation with Suno as of this story’s publication, and Sony is still suing both companies. How those remaining cases resolve will help determine whether Warner’s approach becomes the industry standard or represents a more isolated strategic choice.

California Tightens Protections Against AI “Digital Replicas”

While the music industry negotiates licensing deals for AI-generated content, California has taken a legislative approach to protecting artists’ rights in the age of artificial intelligence. Two significant changes to California law took effect on January 1, 2025, dramatically expanding protections against unauthorized AI replicas.

Restricting Digital Replica Contracts

Effective as of January 1, 2025, California prohibits contracts that purport to permit the creation of digital replicas of a person unless a number of easy-to-meet exceptions apply, such as if the person is represented by a lawyer or use of the digital replica does not replace work that the person would otherwise do. Another exception is if the person is a member of SAG-AFTRA, because the SAG-AFTRA Basic Agreement provides much better protection.

This legislation addresses a critical concern in the entertainment industry: preventing studios and producers from sneaking digital replica provisions into boilerplate contracts that performers might sign without full understanding of the implications.

Closing the “Deceased Personality” Loophole

Perhaps more significantly, California closed a long-standing loophole in its right of publicity law for deceased individuals. California law provides the heirs of “deceased personalities” (persons who are widely known at the time of, or because of, their death) with right of publicity protection for 70 years after their death. However, there was a large statutory loophole that permitted use of the deceased personality’s voice or likeness in connection with “entertainment, or a dramatic, literary, or musical work,” and this exception was repealed as of January 1, 2025 with respect to digital replicas.

This change means that creating an AI-generated performance by a deceased celebrity for use in a film, television show, or music recording now requires permission from the celebrity’s heirs, even if the use is artistic rather than purely commercial.

New York Joins the Fight

California isn’t alone in addressing AI-generated synthetic performers. In June, New York passed legislation requiring any advertisement that includes an image of a human created by AI (“synthetic performer”) to conspicuously disclose that fact unless (a) the image “is recognizable as any identifiable natural performer” (in which case that person presumably gave consent or has a right of publicity claim) or (b) the advertisement is for an expressive work (like a film) in which the synthetic performer appears.

The Need for Federal Legislation

These state-by-state approaches, while important, create a patchwork of inconsistent rules. Given the wildly inconsistent rulings on the right of publicity at the state level, there is a desperate need for uniform federal legislation on this issue, as there is for copyright and trademark.

The challenge is that AI doesn’t respect state borders. Content created in compliance with one state’s laws may violate another’s. Platforms operating nationally must navigate a maze of different requirements, and rights holders must pursue enforcement jurisdiction by jurisdiction.

Looking Ahead: The Convergence of Technology and Rights

The Warner-Suno settlement and California’s new digital replica laws represent two different approaches to the same fundamental challenge: how do we protect creators’ rights while allowing beneficial innovation in AI technology?

The music industry appears to be betting that licensing and partnership—with strong opt-in protections and artist compensation—offers a sustainable path forward. California’s approach emphasizes mandatory disclosure and consent requirements, with statutory penalties for violations.

Both approaches recognize that AI-generated content is here to stay. The question is no longer whether AI will be used to create entertainment content, but rather on what terms and with what protections for the human artists whose voices, likenesses, and creative works make that AI generation possible.

For entertainment lawyers, these developments create both new opportunities and new challenges. Contracts must now address digital replica rights explicitly. Licensing deals must contemplate AI training data. Right of publicity claims must account for synthetic performances. And all of this is happening in real-time, with the law struggling to keep pace with the technology.

The next few years will be critical in determining whether we can build a framework that protects artists while fostering innovation—or whether the two goals prove fundamentally incompatible. Based on Warner Music’s rapid pivot from litigation to licensing, at least some industry players believe a middle path is possible. Time will tell whether that optimism is justified.