SoundCloud to launch ‘fan-powered royalties’ user-centric model

The move makes SoundCloud the first music streaming platform to launch a user-centric payment model. In February, it was widely reported that the company was working on a new payment system, which would let fans pay musicians directly.

The model will only apply to the tracks uploaded by independent artists directly to the platform, which includes almost 100 000 members who use SoundCloud Premier, Repost by SoundCloud or Repost Select features.

The payment system will be driven by the musician’s fanbase, with each listener’s subscription or advertising revenue being spread among the artists that they listen to, instead of their streams being pooled.

“Many in the industry have wanted this for years. We are excited to be the ones to bring this to market to better support independent artists,” SoundCloud CEO Michael Weissman said. “SoundCloud is uniquely positioned to offer this transformative new model due to the powerful connection between artists and fans that takes place on our platform.

“As the only direct-to-consumer music streaming platform and next-generation artist services company, the launch of fan-powered royalties represents a significant move in SoundCloud’s strategic direction to elevate, grow and create new opportunities directly with independent artists.”

Deezer has been trying to implement the user-centric system with no success, partly because the three major music rightsholders have not reached a consensus on using the model. SoundCloud was able to implement the model because it has a direct monetised relationship with independent artists via its services as a distributor.

The majority of artists on SoundCloud will remain paid via ‘pro rata’. However, the new system will offer the first practical experience of user-centric licensing, while demonstrating its potential gains to artists.

The platform also explains that the royalties will depend on how much a fan listens to an artist “relative to all of their listening time in a given month, how many advertisements the fan has consumed and the subscription tier the listener is paying for".

It also offers examples of two independent artists using SoundCloud, including Chevy who has 12 700 followers and Vincent who has 124 000 fans.

By switching the two musicians to a 'fan-powered' model, based on their recent play counts on SoundCloud, the service estimates that Chevy’s monthly royalties would rise by 217%, while Vincent’s would increase fivefold from $120 to $600.

Additionally, the music streaming platform says the launch of the system will be supported by “extensive artist education campaign and direct, ongoing outreach” with independent artists and industry partners.

SoundCloud's most recent financials show that the company generated €99m (about $120m) from its ‘listener business’. That includes ads shown to and subscriptions paid for by consumers, whereas its ‘creator business’ entails selling subscriptions to musicians and other audio creators. SoundCloud currently hosts more than 250 million songs from 30 million creators in 190 countries.

Meanwhile, a recent report suggests that the user-centric model would not make a material difference to some artists, which the model seeks to assist, including those who do not have a big fanbase, but draw a significantly-sized loyal audience that streams their music regularly.