Soundcloud will introduce a fan-powered royalty model for independent artists

By Emmanuel Legrand

SoundCloud plans to introduce a fan-powered royalty system that will provide "a more equitable and transparent way for emerging and independent artists to earn money on SoundCloud," according to the Berlin-based music streaming platform.

  Soundcloud described the system as "a new model of payouts that is driven directly by an artist’s fan base. With this move, each listener’s subscription or advertising revenue is distributed among the artists that they listen to, rather than their plays being pooled - benefiting rising independent artists with loyal fans."

  From April 1, 2021, the nearly 100,000 independent artists monetising directly on SoundCloud through SoundCloud Premier, Repost by SoundCloud or Repost Select will benefit from fan-powered royalties. In addition, the roll-out of the new system will be backed by an extensive artist education campaign and direct, ongoing outreach with the independent artist community and industry partners.

A transformative model

  The model will not apply initially to artists signed to major companies or to other entities that have licenses in place based on a pro-rata model. For Soundcloud to be able to remunerate all music on the platform via a user-centric model would require a renegotiation with all its licensors.

  SoundCloud Chief Executive Officer Michael Weissman claimed that "many in the industry have wanted this for years" but SoundCloud "is uniquely positioned to offer this transformative new model due to the powerful connection between artists and fans that takes place on our platform.” He said the move is designed "to better support independent artists."

  He added: “As the only direct-to-consumer music streaming platform and next generation artist services company, the launch of fan-powered royalties represents a significant move in SoundCloud’s strategic direction to elevate, grow and create new opportunities directly with independent artists.”

A significant innovation

  Soundcloud's move was most particularly welcomed in the UK, where the #FixStreaming campaign has focused on fair remuneration for creators. Crispin Hunt, Chair of the Ivors Academy, which is backing the campaign, told Creative Industries Newsletter that Soundcloud's decision was a "significant innovation."

  He elaborated: "A driving principle in any market remains: if you grow your customer base, you grow your profit. This principle looks undermined by streaming’s market-share remuneration model. Soundcloud’s user-centric results contradict so much of the modelling. In practice, user-centric distributions appear technically straightforward and deliver meaningful improvements for artists with an audience. I look forward to other trials of user-centric across other platforms.”

  When implemented, Soundcloud will become the first platform to to switch to a User-Centric Payment System (UCPS) to remunerate rights holders. The scheme differs from the current pro rata model, or Market Centric Payment System (MCPS), used by most platforms, including Spotify, Apple Music, Amazon Music and Deezer, which remunerates rights holders based on the amount of streams generated for each title on a streaming service out of an overall pot of money. Deezer is also considering the option to switch to a UCPS model.

Equitable paybacks and transparency

  A recent study by France's Centre National de la Musique concluded that the UCPS system would not fundamentally result in massive shifts in revenues but could have some benefits for under-represented music genres in the current system. The system would mostly benefit artists ranked between the 101 and 10,001 most played artists. Below that level, the changes would be limited.

  For Soundcloud, fan-powered royalties can help forge forge deeper connections with their most dedicated fans who can directly influence how their favourite artists are paid. "Fan-powered royalties reflect feedback from the independent artist community on SoundCloud who want equitable payouts, transparency, and control over their own careers," said the service.

   Soundcloud offers access to over 250 million tracks from 30 million creators located in 190 countries. It is understood to have 175 monthly users worldwide.