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SoundCloud is Letting Fans Pay Creators Directly

SoundCloud will soon announce a new alternative streaming payout plan.

The music streaming platform SoundCloud is close to announcing a new payment system. Once launched, it would allow fans to pay creators directly. According to multiple sources, the open audio platform is now setting what possibly will become a gem-changing precedent for the music streaming industry.

SoundCloud is Letting Fans Pay Creators Directly

Moreover, this move will make SoundCloud the very first major music streaming platform to adopt a direct payment model. Such a strategy is popular among Chinese streaming services, such as the QQ Music by Tencent Music. It is also the same tactic that subscription services like OnlyFans and Patreon have built their businesses around. Furthermore, fans want bigger digital music distributors to do the same. 

According to an anonymous reliable source, the music streaming platform is still exploring a number of alternative streaming payout models. It will announce its plans before the first quarter of 2021 ends.

A Major Shift for Purchasing Real SoundCloud Plays

The aforementioned new model is a big shift for purchasing real SoundCloud plays, which, as of now is utilizing a pro-rata model. Such is the same method used by every major streaming service. It works by pulling subscriber revenue and allocating earnings to artists or creators who brought the most streams in. Needless to say, the pro-rata model directs the biggest percentage of the revenue to the platform’s biggest acts. 

But now, the 175 million active monthly users of SoundCloud have the choice to pay up to $10 per month for the platform’s on-demand streaming service, such as SoundCloud Go+. However, their payments are not distributed to artists based on who they are personally listening to. They also cannot tip or seer their subscription fees toward their favorite artists.

Moreover, this development came after British lawmakers put music executives on fire over the fairness of streaming economics. They also explored the possible benefits of what is known as the user-centric payment models, like what SoundCloud is working to implement now.

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The heads of Warner Music, Sony Music, as well as Universal Music’s UK divisions testified on January 19 in front of the Parliament. They insisted that the current pro-rata model is not measured in favor of the labels. But the MP from the Scottish National Party John Nicolson remarked, “I think you’re living in the cloud cuckoo land,” as a response.

Spotify, Apple, and other bigger music streaming services currently divide subscription fees to record labels partly based on the label’s market share. Then, labels pay their artists a share of the revenue. The amount that these artists will receive will be based on their individual agreements. 

However, critics have demanded for a system that would better support artists beyond the major-label superstars who drive the majority of the world streams. They also want to allow fans to funnel their subscription money to the artists who they actually listen to.

SoundCloud is Letting Fans Pay Creators Directly

The Ups and Downs of SoundCloud

SoundCloud has the right to experiment with new payment strategies without asking for approval from major record companies. Lately, this music streaming platform has been focused on artist services. It acquired Repost Network, a rights management and distribution company in 2019. And in April 2020, it launched Repost — its very own marketing and distribution platform for independent artists. 

Repost lets SoundCloud artists monetize their music within the platform. It also allows them to distribute music and collect revenue from major music streaming platforms like Apple Music, Spotify, and Tiktok. Apart from that, Repost also offers promotional tools for $30 a year. This plan allows artists to keep 100 percent of their revenue on SoundCloud. On the other hand, they can keep 80 percent of their revenue from other music streaming platforms. 

SoundCloud is moving to dig into alternative payment models months after Kerry Trainor turned over his position as the SoundCloud CEO to Michael Weismann. Trainor, who is also the former CEO of video service Vimeo, stepped down after he spent three years turning around SoundCloud, which was struggling during that time. 

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Trainor took over his position in 2017 as part of the $170 million deal from Singapore-based Temasek Holdings and global merchant bank The Raine Group. The deal aimed to rescue the music streaming platform from bankruptcy. Weissman, who was then the chief operating officer at Vimeo, came with this rescue package. He joined SoundCloud in the same role before he was promoted as the president in 2019. 

Moreover, Trainor has led SoundCloud to major increases in revenue. This was made possible through its creator-first products and its subscription offerings. 

In 2018, the music streaming platform’s revenue grew by 19 percent and 37 percent in 2019. This allowed the company to have its first profitable quarter in 2020. This success has given SoundCloud a $75 million investment from SiriusXM in February 2020. This gave the company an opportunity to expand its ad sales agreement with Pandora. 

Conclusion

Furthermore, SoundCloud’s upcoming changes to its streaming payout model are an indication of Weissman’s first major move as the company’s CEO. But even before this major move, the music streaming platform has already expanded its focus outside music, which gave birth to SoundCloud Player One. Such is a live-streamed gaming tournament inside Fortnite. It features eight SoundCloud artists who turned into online gamers. Moreover, these eight artists will face each other in a Fortnite battle. 

SoundCloud is Letting Fans Pay Creators Directly

The said tournament took place on February 18. It was viewed as the first in a series of SoundCloud gaming events. Notably, half of the users of SoundCloud identify themselves as gamers. 

It is interesting to see how SoundCloud will grow further after this new payment method for artists is implemented. Once this plan is already launched, there is a huge chance that artists will turn to SoundCloud for more revenue.

Date: June 29, 2021 / Categories: SoundCloud Plays, / Author: Joy P

June
29
2021

Joy P

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