REPORT: SoundCloud is close to a deal with Universal Music Group that could see it give away a big chunk of equity

SoundCloud CEO Alexander LjungSoundCloudSoundCloud CEO Alexander Ljung.

In May, Sony Music pulled some of its biggest artists from SoundCloud, including Adele, Kelly Clarkson, Miguel and Hozier. That move could have weakened the streaming service’s bargaining position with other rights-holders.

According to a report from Music Business Worldwide, SoundCloud has almost confirmed a licensing agreement with Universal Music Group. The talks between the two parties have gone on for several months because UMG is asking for a significant chunk of equity in SoundCloud.

MBW sources are saying that SoundCloud investors were spooked by Sony’s decision to pull music from the streaming service. They are now pressuring SoundCloud to reach agreements with major rights holders before they will release more capital. SoundCloud told Business Insider that it doesn’t comment on rumour or speculation.

Warner Music made a deal with SoundCloud last November, taking a 5% stake in the business. SoundCloud had already launched its On SoundCloud programme at that point, meaning that partnered artists and labels could block a copyrighted track, mute its audio, or choose to monetise it with ads. In March, SoundCloud announced that On SoundCloud was paying out $US166,000 in monthly ad revenue to rights-holders.

Licensing group Merlin, which represents 20,000 independent record labels including Beggars Group and Domino, signed a similar deal with SoundCloud in June. American publishing collective the NMPA has come to an agreement with the streaming service a month before.

Now it looks as though SoundCloud is in the process of reaching an agreement with Universal too.

Here’s what one of MBW’s sources told the publication:

“Universal had a couple of aggressive choices: they could either sue SoundCloud, which wasn’t off the table, or refuse to play ball with them and watch them slide out of existence as the money ran low. But Universal knows that a world with a SoundCloud that it can control is better than a world without SoundCloud full stop — especially if that leads to a hundred clones popping up online.”

“Initially, UMG’s demands were completely unacceptable to SoundCloud, but the balance of power — of who needs who to prosper — appears to have shifted since those days.”

All of SoundCloud’s licensing agreements were signed on the basis that SoundCloud will eventually launch a paid tier, MBW reports.

According to another MBW report, which quotes an in-depth review of music streaming services by Next Big Sound, SoundCloud’s popularity has doubled in the last year. The number of plays on the streaming platform hit 4.9 billion in May this year, up from 2.5 billion in June 2014.

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