SoundCloud becomes first music app to launch ‘fan-powered’ royalties

LOS ANGELES: SoundCloud has become the first streaming service to start directing subscribers’ fees to independent artists they support, a move welcomed by musicians campaigning for fairer pay.

At the moment, streaming services like Spotify, Deezer and Apple give royalty payments based on which artists have the most global plays. Many artists and unions argue this system is unfair, giving a huge slice to mega-stars like Drake and Ariana Grande while leaving almost nothing for lesser-known musicians.

From April 1, SoundCloud will start directing royalties due from each subscriber only to the artists they stream. However, this will only apply for the roughly 100,000 independent artists who monetise directly through the site and artists licenced from major labels will continue to be paid via the traditional method.

SoundCloud said the new payment system – known as “fan-powered royalties” or a “user-centric model” – would empower listeners and encourage greater diversity in musical styles. “Artists are now better equipped to grow their careers by forging deeper connections with their most dedicated fans,” the statement said. “Fans can directly influence how their favorite artists are paid.”

Major record labels are considered resistant to “user-centric” payments, in part because the current system allows them to generate massive profits through a relatively small number of huge stars.

A study by France’s Centre National de la Musique (CNM) earlier this year found that 10 percent of all revenues from Spotify and Deezer go to just 10 artists at the very top. This has allowed the major labels to amass record revenues over the past year as most musicians were thrown into crisis by the cancellation of live tours due to the pandemic.

Earlier this year, label bosses told a British parliamentary commission investigating the streaming economy that it may be too complicated for platforms to shift to fan-based royalty payments.

SoundCloud, which has been trialing the new model for months, said this was exactly wrong and its computing calculations took just 20 minutes for user-centric, compared with 23 hours for the pooled model.

SoundCloud found it made a significant difference. Using the example of an artist with 124,000 followers, it said they would see an increase in royalties from $120 to $600 per month. It said the overall effect was that 90 percent of royalty pay-outs would now be driven by 90 percent of listeners, rather than just 40 percent of listeners under the existing model.

SoundCloud said its positive data may be linked to the particular nature of its users, who tend to be “younger and much more active”. It was launched in Berlin in 2007 as a sort of YouTube for music allowing anyone to upload their music. This made it hugely popular, with some 175 million users by 2019. It struggled to generate revenues and landed in legal trouble over the number of unauthorised remixes and covers on the site.

In 2016, it shifted strategy, signing deals with the major labels to provide a premium service with a catalogue similar to those of its rivals but has remained a long way off the customer numbers of Spotify, Amazon and Deezer.