SoundCloud contract with indie publishers leaks
An unsigned contract between audio streaming platform SoundCloud and independent music publishers has leaked.
According to the 19-page licensing contract, obtained and analysed by TechCrunch, SoundCloud would pay 10.5% of its revenue including from ads or approximately 22% of its sound recording rights revenue, whichever is greater, to the publishers.
In March SoundCloud announced that its initiative to run advertisements in between audio in the US, ‘On SoundCloud’, had paid overUS$1 millionin advertising revenue to partners including labels, audio partners and emerging artists.
SoundCloud’s current struggle to ink deals with the majors and indies is clear in the contract; the document outlines a deal for the independents and hints that a similar deal could be struck with the majors following its recent agreement with US trade association for the publishing industry,the National Music Publishers’ Association (NMPA).
The leaked contract isn’t signed and its 2015 date isn’t included, however it does include a Most Favored Nation clause which could keep compensation to NMPA publishers equal to any deals with major labels, once market share is taken into account.
SoundCloud’s licensing deal with NMPA, inked in early May, enables “independent publishers and songwriters to receive royalties through the monetisation of content that contains their compositions on SoundCloud.”
The German-born site’s deal with NMPA was announced at the same time Sony Music pulled many of its major artists’ catalogues. The move in the US only, followed unfavourable licensing negotiations, with many reports suggesting Sony wanted an equity stake in the company. Warner Music has reportedly taken up to 5% equity in SoundCloud.
Any deal SoundCloud strikes with labels needs to monetise content to assure labels won’t pull their artists’ catalogues. The deal outlined in the leaked contract introduces two paid subscription tiers. One tier gives users ad-free access to audio and visual content with offline listening capabilities similar to that featured on Rdio. The contract offers labels $0.18 per subscription, per user per month –if it’s more than the sound recording rights revenue. The other tier, “SoundCloud Full Catalog Subscription Service” would initially offer “(i) the ability for subscribers to listen to content as Limited Downloads, and (ii)the removal of audio anddisplay advertising.”
SoundCloud is also offering independent publishers $350,000 or as it calls it, the ‘NMPA Advance Pool’ to split between them. The advance is based on market share of the independent music listened to on SoundCloud.
Since its inception in 2008, SoundCloud has become the second largest music streaming service globally with 175m listeners per month, behind YouTube of course. SoundCloud has raised $123.3m since it was founded and its net worth has now surpassed $120 million.