Warner Music Adopts SoundCloud Fan-Powered Royalty Model

Photo credit: SoundCloud

About three months after celebrating the anniversary of its fan-powered royalty model, SoundCloud has officially signed a global licensing agreement with Warner Music Group. As part of the pact, WMG will become the first major label to support payments based on actual viewing as opposed to a portion of total streams.

Several artists have offered positive reviews of fan-fed royalties, which provide monthly revenue (minus fees) from each ad-supported subscriber or user to creators whose work they have enjoyed. A band that gets 55% of the listening from a paid account in a given month would get 55% of their subscription payment after fees, for example.

This system contrasts with the pro-rata model of Spotify and others, which calculate artists’ compensation by aggregating revenue and then distributing it as aggregate streams. Of course, the arrangement favors big names with millions upon millions of monthly plays and a sizable promotional budget – at the particular expense of professionals with relatively small but staunchly dedicated followings.

Now Warner Music Group – which in 2014 announced it was the “first major music group to forge a partnership with ‘SoundCloud’ – will allow “every artist” on its roster to get paid for streams on the platform. form via the fan. model.

Addressing the deal in a statement, Warner Music Group Chief Digital Officer and Executive Vice President of Business Development Oana Ruxandra said: “The evolution of the music industry brings new ways to create, consume and monetize. As the ecosystem grows, WMG is focused on advancing and experimenting with new business models to ensure that opportunities for our artists and their communities are maximized. SoundCloud has been an incredible partner in connecting artists and fans, deepening our relationship will allow both of us to proactively build for the future.

And SoundCloud President Eliah Seton added in part: “Today’s agreement is a significant milestone because under Fan-Powered Royalties more artists are getting paid more money. But more importantly, Fan-Powered paves the way for artists to create even more opportunities to monetize their art beyond streaming and create more value, driven by engagement with their fans.

“Warner Music Group is known for developing some of today’s biggest superstars and helping them build long-term careers by investing in technologies and models that grow and support their fan communities. This makes them an ideal partner for SoundCloud and we are thrilled to bring our groundbreaking fan-focused product to their incredible roster of artists,” concluded Seton, a longtime executive at Warner Music, who signed with SoundCloud on last year.

Warner Music’s adoption of fan-powered royalties on SoundCloud is particularly interesting as Spotify has previously signaled an openness to transitioning to the model.

“The research we’ve seen to date suggests that a shift to user-centric payments would not benefit artists as much as many would have originally hoped,” Spotify said of the potential pivot fueled by the fans. “We’re ready to move to a user-centric model if that’s what artists, songwriters and rights holders want to do. However, Spotify cannot make this decision alone; this requires broad industry alignment to implement this change.

Warner Music Group’s pact with SoundCloud could mark a key step toward said “industry-wide alignment” on the fan-powered model, which Tidal has also embraced. But evidence suggests that Universal Music Group (which has long spearheaded promotional initiatives with Spotify) and Sony Music Entertainment may be less willing to embrace change.

To be sure, none of Spotify’s most-streamed UMG artists of 2021 — Bad Bunny, Taylor Swift, BTS, Drake, and Justin Bieber, respectively — are signed to Warner Music Group. A single act signed to Warner Music, Dua Lipa, managed to land on Spotify’s list of the most streamed songs (fifth place with “Levitating”) for 2021, despite being ranked second nostalgia for the future was joined by Ed Sheeran of Atlantic and =which ranked fourth on the list of most-streamed albums last year.

And for SoundCloud — which a number of artists used before achieving mainstream commercial success — fan-generated royalties represent one component of a larger effort to continue to attract and promote emerging talent.

At this point in 2022, the music-sharing platform released a feature film with tracks from SoFaygo and others, unveiled an artist discovery deal with Solid Foundation Management, and bought music metadata company AI Musiio. .

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