Music Industry

Music Industry Turns to Patents As UMG and Liquidax Capital Launch New AI Strategy

Credit: Outlever

Key Points

  • The music industry is shifting its AI strategy from defensively protecting copyrights to offensively controlling the technology with patents.
  • Daniel Drolet, Founder of Liquidax Capital, details his firm's partnership with Universal Music Group to commercialize the patents that will shape music's future.
  • A new entity, Music IP Holdings, was created to license UMG's AI technology, turning a potential threat into a new revenue stream.
  • Drolet stresses that while the goal is to empower artists with AI tools, those who don't engage risk being "drowned out" by innovation.
●●●
Daniel Drolet - Founder, Managing Partner | Liquidax Capital
We're creating a mechanism that will allow the music industry to use AI in a more productive way. There's a huge opportunity here. Copyrights are great, but to protect your copyrights, you have to have patents.Daniel Drolet - Founder, Managing Partner | Liquidax Capital

After years of treating AI as a threat to be contained rather than an asset to be cultivated, the music industry is pivoting from defense to offense. A landmark partnership between Universal Music Group and IP investment and advisory firm Liquidax Capital is far from just another business deal. It's a signal that the industry is moving beyond protecting its content with copyrights to controlling the underlying technology with patents.

We spoke with Daniel Drolet, the Founder and Managing Partner of Liquidax Capital, to understand the strategy from the inside. A veteran IP asset manager and former tech startup mentor at Stanford University, Drolet has built a career commercializing the very technologies now reshaping the creative world. He provided a rare look into the strategic thinking that aims to turn AI from an existential threat into the music industry’s next major revenue stream.

"If you don't have a seat at the table, you're going to be on the menu." It's a stark warning and the central philosophy driving the new approach: simply fighting AI is a losing battle. The only way to survive—and thrive—is to help build the table itself. For UMG and Liquidax, that means owning the patents that will govern how AI creates, collaborates, and connects with music.

  • The patent shield: Copyright alone is no longer enough. While copyright protects the final song, patents protect the methods and systems that generate it. "We're creating a mechanism that will allow the music industry to use AI in a more productive way. There's a huge opportunity here," said Drolet. "Copyrights are great, but to protect your copyrights, you have to have patents." It’s a shift that reframes AI not as a legal risk, but as intellectual property to be owned and monetized.

    Daniel Drolet - Founder and Managing Partner | Daniel Drolet
    We created MIH as the entity that will be commercializing and licensing for UMG. We already have companies approaching us to partner early, knowing the advantages of getting in ahead of the curve. It’s about enabling the industry and collaborating across diverse AI applications.Daniel Drolet - Founder and Managing Partner | Daniel Drolet

    That led to the creation of a dedicated commercialization engine. The new entity, Music IP Holdings (MIH), was formed to license UMG’s growing portfolio of AI patents and technology, separating the complex work of invention from the fast-moving world of deal-making. The move is already creating momentum.

  • The commercial engine: "We created MIH as the entity that will be commercializing and licensing for UMG," Drolet noted. "We already have companies approaching us to partner early, knowing the advantages of getting in ahead of the curve. It’s about enabling the industry and collaborating across diverse AI applications."

The proactive strategy is wrapped in a simple yet strong philosophical mandate: the technology must serve the artist, not the other way around. The vision is to position AI as a tool for enablement and collaboration, giving artists new ways to create, experiment, and connect with fans.

  • The artist-first mandate: "The point is not to have AI create music from start to finish, but for artists to use AI as an enablement and a collaboration tool to create more, create better," Drolet said. In this vision, AI expands artistic possibility while keeping the human creator firmly at the center of the process.
  • New revenue channels: "It also allows artists to engage with their fans on a whole new level. AI not only will enable the industry and create opportunities, it's going to create more revenue channels for artists." This new layer pushes artist-fan connection beyond social media posts into personalized, patent-protected AI-driven experiences across merchandising, video, and even concerts. It turns connection into a direct economic strategy to offset streaming’s disruption.

While this new model reframes AI as a mechanism to restore value in an ecosystem where streaming devalued the price of a song, Drolet was realistic about the future for artists who choose not to engage. Although he believes there will always be a place for traditional creation, he acknowledged that the market’s gravitational pull toward AI will be immense. Those who don’t adapt risk being "drowned out" by the wave of innovation.

The UMG-Liquidax partnership is driven by a desire to steer the industry’s course, rather than being swept away by it. It’s a calculated, long-term play to ensure that as AI becomes embedded in the fabric of music, the artists and rights holders who power the industry are the ones holding the blueprints. "It's a mechanism to enable the music industry to use AI in a better way," Drolet concluded. "Not just to sit passively and let it happen."