Signing deals with Warner, UMG and Sony – amongst other things – might not only put Soundcloud on its way towards a healthier business plan. It also means we might see unofficial remixes holding up on the platform without the infamous take down notifications.
According to Billboard a new Soundcloud music-streaming subscription service might be coming sooner than expected, perhaps even in the following weeks. It should include both free and paid tiers and make Soundcloud a healthy competitor for services such as Spotify, Tidal and Apple Music.
It gets more interesting here: following the announced Apple Music and Dubset Media Holdings deal, Soundcloud seems to have their own plans for monetization from uploaded remixes and dj mixes. Both Apple and Soundcloud’s ideas look similar: an uploaded mix set or remix will be screened much in the same way as Youtube and Soundcloud have been recognizing audio files for years now. Yet instead of taking a remix down, original copyright holders will receive compensation that will be equally split amongst all copyright holders involved in that remix.
Doubts about Soundcloud
While waiting for an official statement by Soundcloud on how this process will work, it definitely does seem to fit its founders original ‘vision of enabling people to create and share sound more easily and collaboratively’.
Founded in 2007 by Swedish entrepreneurs Alexander Ljung and Eric Wahlforss, Soundcloud started out as a free and social music sharing service – at the time without major label deals. It’s revenue would come from premium memberships, going for €108 (around $120, Pro Light) €348 (around $390, Pro Standard) and €708 (around $790, Pro Max) per year. Illegally uploaded content would be removed after reports of copyright infringement were posted by it’s original rights holders. In 2011 the Berlin startup signed a deal with Audible Magic in order to automatically recognize and remove illicit content from the site.
My @SoundCloud is back, after pulling major favors from major labels..
— Morgan Page (@morganpage) 23 maart 2016
But not always proving as effective – and also frustrating users, Morgan Page being only a recent example – the detection system does not fully ward off potential and expensive copyright lawsuits. Meanwhile costs have been rising, as the Soundcloud user base has grown from 10 million registered users in 2011 to a reported 150 million in 2015.
Operating costs, legal costs and an apparent need of an efficient business model have left Soundcloud with overheads growing faster than its revenue in recent years. While Soundcloud brought in €15.37m ($17.35m) in 2014, it lost a total of €39.14m ($44.19m), leaving Soundcloud’s auditor KPMG voicing ‘a material uncertainty which may cast significant doubt on the company’s ability to continue as a going concern‘.
This year, the deals with major labels such as Warner, UMG and most recently Sony have been reported by Soundcloud. The company got a new Chief Revenue, secured $35m debt funding and announced to be aiming for the paid subscription model coming this summer (though yeah, something might already happen in the coming weeks).
According to Billboard, the major labels will have their own say about which song stays up for free on Soundcloud. Or as UMG’s Lucian Grainge told Billboard in January: “The Soundcloud agreement gives us the opportunity, with our artists, to have flexibility with respect to how we make music available to fans.”
Whether those unofficial remixes hold up on Soundcloud or not is going to be up to it’s rights holders such as UMG, Warner and Sony. Filtering out all these remixes might turn out to be an expensive process. So it might be fair to wonder: how much revenue will these remixes generate in Soundcloud’s new subscription model? The outcome of that question might decide the fate of quite a few upcoming remixes.