Hudson was born in Windsor, Ontario, Canada. His parents, Fred James Hudson and Olive Louella Pentland, were musicians. His mother played piano and accordion and sang. His father, a farm inspector who had fought as a fighter pilot in World War I, played drums, C melody saxophone, clarinet, flute and piano. Hudson moved with his family to London, Ontario, around 1940. Classically trained in piano, music theory, harmony and counterpoint, Hudson wrote his first song at the age of eleven and first played professionally with dance bands in 1949 at the age of twelve. He attended Broughdale Public School and Medway High School before studying music (primarily Bach's chorales and The Well-Tempered Clavier) at the University of Western Ontario for one year; nevertheless, he grew increasingly frustrated with the rigidity of the classical repertoire.  In 1958, he joined a rock and roll band called "the Capers". He was reported to have said that he also gained some performance experience from playing at his uncle's funeral parlor. In December 1961, the 24-year-old Hudson joined the Hawks, the backing band for Ronnie Hawkins, which already consisted of 21-year-old Levon Helm on drums, 18-year-old Robbie Robertson on guitar, 18-year-old Rick Danko on bass and 18-year-old Richard Manuel on piano.  Fearing that his parents would think he was squandering his years of music education by playing in a rock and roll band, Hudson joined the band on the condition he be given the title "music consultant" and that his bandmates each pay him $10 a week for music lessons. Revealing a bit of the thinking behind his early fears, in The Last Waltz Hudson told interviewer-director Martin Scorsese: "There is a view that jazz is 'evil' because it comes from evil people, but actually the greatest priests on 52nd Street and on the streets of New York City were the musicians. They were doing the greatest healing work. They knew how to punch through music that would cure and make people feel good."

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