SoundCloud goes user-centric with its ‘fan-powered royalties’ – Music Ally

Rumours that SoundCloud would become the first big music streaming service to adopt user-centric payouts were correct. The company has just announced plans for what its calling fan-powered royalties.

The system wont apply to the entire catalogue of music that is available on SoundCloud, but just to the tracks uploaded by independent artists directly to the platform: specifically the nearly 100,000 who use the companys SoundCloud Premier, Repost by SoundCloud or Repost Select features.

The switch will happen on 1 April 2021, and SoundCloud has launched a website explaining how the new system will work, and encouraging artists to tell your fans about it to drive listening (and thus royalties) once its up and running.

The site includes some examples modelling out how the new system will work. One independent artist called Vincent, with 124,000 followers on SoundCloud, is cited as earning $120 a month under the existing pro-rata model of streaming royalties, but the company says this could increase to $600 a month under the new system.

Another artist, Chevy, with 12,700 followers, stands to earn 217% more per month according to SoundCloud, although dollar amounts are not provided in this case.

The site also explains some of the all-important details of how fan-powered royalties will be calculated. The royalties will depend on how much a fan listens to an artist relative to all of their listening time in a given month, but also how many advertisements the fan has consumed and whether they are paying for a SoundCloud Go+ subscription the services premium tier.

There are some interesting unanswered (for now) questions about the new model: for example, whether its being used for recordings only, or both recordings and publishing royalties. Also about how it intersects with SoundClouds licensing deals with labels, since a SoundCloud Go+ subscriber may be listening to a mixture of independent and label-signed artists.

The significance of todays news should not be overhyped. In 2019, the most recent year for which it has published financial results, SoundCloud generated 99.5m from its listener business ads shown to and subscriptions paid for by consumers, as opposed to its creator business selling subscriptions to musicians and other audio creators. The service has grown since then, but its important to keep the size of its royalties pool in mind before getting overexcited about that pool being divided in a new way.

Still, its a very interesting move from SoundCloud, which can unilaterally launch a user-centric system in a way that Deezer, Spotify and other major streaming services cannot, because it has that community of artists uploading and making money directly from its service.

If you want to dive deeper into the user-centric topic, weve got plenty to read in our archives. Heres our primer on what the model is and how it works, for example, and heres our report on the latest study of user-centrics potential impact, which was conducted in France.

User-centric payouts have also been a key topic in the UK parliamentary inquiry into the economics of music streaming. SoundClouds Raoul Chatterjee offered a cautious curiously so, given that it was only a couple of weeks before the launch of fan-powered royalties assessment of the model.

Its definitely an interesting area, and as an artist-first platform were always looking for ways to make payouts to artists fairer, he said. But the whole investigation into user-centric is a very detailed and complex investigation that needs to be taken. Its one potential path were exploring and it would require industry-wide conversations and support to be impactful.

The three major labels offered mixed views on user-centrics potential in their most recent submissions to the inquiry, but in a session featuring representatives from Spotify, Apple Music and Amazon Music, all three DSPs indicated a willingness to explore the model but also stressed the need for wider industry backing.

Meanwhile, a recent episode of our Music Ally TV Show asked Deezer why it has struggled to get a user-centric pilot off the ground in France, and heard from the company about why it still thinks the model could be beneficial.

Stuart Dredge

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SoundCloud goes user-centric with its 'fan-powered royalties' - Music Ally