Will SoundCloud Dance to its Own Tune or Will it Pay the Piper?
SoundCloud has been likened to the YouTube of audio. SoundCloud
If you listen closely to the music, you might hear a subtle shift in the balance of power in the music industry.
Record labels are trying to reassert their power over artists and—more recently, music sharing platforms—while the latter toy with the idea of teaming up to engage audiences and advertisers without the labels.
It seems that SoundCloud, the Berlin-based music discovery and sharing platform sometimes dubbed “the YouTube of music,” is dancing to a fast beat.
While reports swirl about a nearing agreement with major record labels for a licensing deal, SoundCloud, with 175 million monthly listeners, says it is launching a new partner program for music creators who will able to collect a share of revenues–effectively a shot across the bow of the record labels.
Additionally, t announced that it would be offering advertisements for the first time in its history.
Another shot across the bow.
The company said its On SoundCloud partnership would “enable creators to make money on the platform.” Various musicians and independent labels use the service today to promote their music, but the new Premier tier allows for advertisement revenue share with the artist.
As of now, the invitation-only Premier tier is available only to artists in the US, SoundCloud’s largest market. “The deals with rights holders will mean they’ll make the majority of the revenue that we generate,” Geoghegan said, addressing a long-standing gripe by artists who complain that the lion’s share of their revenue goes to the labels.
So far, On SoundCloud seems to have made a good start. Among the initial content partners for the new service are two major music publishers Sony/ATV and BMG, SoundCloud spokesman Luke Geoghegan said.
Other content partners include the Comedy Network’s Funny Or Die, Jash and AST Records, as well as independent artists Little Simz, Big Gigantic, GoldLink, Blackbear, Romiti, Jakubi, Cyra Morgan and Oliver Sadie, according to SoundCloud.
“We believe the range of different partners is indicative of the fact that SoundCloud is for everyone, not just major labels,” said Mr. Geoghegan. Sony/ATV and BMG weren’t immediately available for comment.
The first advertisers to bite include Red Bull, Jaguar and Comedy Central, the New York Times NYT +0.24% reported.
But as bold as its latest move is, SoundCloud needs to be careful to not to antagonize the big labels, who still hold the rights to much of the content on its platform. For instance, SoundCloud is especially popular with disk jockeys who share their remixes—reinterpretations of licensed music into new forms. The pieces of content on which the remixes are based are copyrighted. DJs have already been complaining that they’ve received removal notices – and this could increase should SoundCloud and the labels fail to reach an agreement. On the other hand, should SoundCloud strike a deal with the labels that keeps royalty money away from artists, the start-up will alienate its core users. Labels that aren’t present on platforms with millions of listeners could lose visibility to consumers.
It’s a tricky balance.
The real winners in this tug of war could be the artists, who may increasingly bypass the big labels and publish music directly on their own on popular platforms, and even work with advertisers. But the truth is that most budding artists still dream of being discovered by the big labels.
This coming licensing deal— if one happens—could set the tone for others in the space, including popular services Spotify, Rhapsody unRadio, Pandora Internet Radio and many others.
With its new offering, SoundCloud might be trying to outmaneuver the labels, staking out new ground for itself in the age of on-demand content. But record labels have their share of leverage, too. When Twitter Inc.TWTR +0.09% was reportedly interested in acquiring SoundCloud this May, the San Francisco-based company changed its mind after learning that the music platform had no licensing agreements with record labels back then, according to a person familiar with the matter.
SoundCloud wouldn’t comment on its ongoing business dealings. “Creators on SoundCloud are only able to upload sounds to which they own all rights, or for which they hold all necessary permissions and licenses,” Mr. Geohegan said. “This is made explicitly clear in our Terms of Use, our Community Guidelines and our Copyright Information pages.”