Berlin-based music streaming site SoundCloud — perhaps better known as the company Twitter considered buying earlier this year — has finally worked out licensing deals with U.S. music labels. As part of the agreement, ads will be introduced to the service for the first time and artists will now be able to collect royalties from plays of their tracks on the service.
SoundCloud’s CEO Alex Ljung hailed the introduction of ads as a move in the right direction. The new revenue model is an “important step” for artists who use the platform, Ljung said in a statement on the company’s blog.
The program for artists to make money from their own work is currently only available to a small group of “premier” members. “Over time we will roll this out across the creator community,” Ljung said.
The announcement is a good indication that SoundCloud may be moving forward with talks reportedly held last month with major music labels about receiving equity in exchange for agreeing not to sue SoundCloud over copyright infractions.
Sources familiar with the negotiations claim that Universal Music Group, Sony Music Entertainment, and Warner Music Group are are seeking up to 5% of the German company.
A new licensing scheme with music labels could mean that more big-name American musicians will begin using the service. While SoundCloud already counts Skrillex, Snoop Dogg, and Madonna among its users, many U.S. music labels have criticised the service over its policy that allows SoundCould users to upload tracks to the without asking for the owners’ permission — unlike European rival Spotify.
SoundCloud has been keen to distance itself from Spotify, the other big European music streaming platform. The company revealed last year that users listen to 90% of tracks uploaded to the site, with the majority played within an hour after they are posted online. In contrast, users only listen to 80% of tracks uploaded on Spotify.
Unlike Spotify, many musicians are uploading their music direct to their personal SoundCloud profile, often bypassing their music label in the process. SoundCloud has also built a reputation for playing host to a large amount of remixes, with popular musicians often reposting and sharing remixes and cover versions found through the site. Many musicians and fans find SoundCloud’s following system to be more like a traditional social network rather than a streaming site.
In May of this year, it emerged that Twitter had been in talks to acquire SoundCloud, although it later backed out of the deal after the “numbers didn’t add up.”
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