SoundCloud subscription service coming this year

SoundCloud’s recent agreement with Sony Music Entertainment now paves the way for SoundCloud to introduce its long talked about subscription service.

The German-based SoundCloud current database of 110 million tracks will now swell by further millions, as the deal includes not just Sony Music Entertainment’s direct signing artists but also those on subsidiaries The Orchard and Sony Red Distribution, worldwide.

As part of the deal, Sony Music Entertainment takes a stake in SoundCloud, and might even part fund its subscription service to launch “later this year”.

Details on what model the SoundCloud subscription service will take are thin on the ground. It was first slated to launch in 2015, however it remains to be seen what its remix and mash followers will do once SoundCloud puts them behind a firewall, and particularly with the likes of Apple Music and MixCloud offering a home for these.

“This agreement creates a business framework for the use of Sony Music songs on the SoundCloud platform that meets the needs of our artists and labels, and supports the growth of SoundCloud through its new premium on-demand music tier,” commented Dennis Kooker, President, Global Digital Business & US Sales, Sony Music Entertainment in a release announcing the partnership.

SoundCloud founder/CEO Alexander Ljung, looking to the future, added, “With SME now on board, we continue on our journey building a unique platform, empowering our community of more than 18 million artists at every stage of their careers to share their work and connect with their fans, and enabling listeners to discover and be inspired by new music and audio. We are very excited to be working with SME and cannot wait to see what we can achieve together as we continue to transform the future of music online.”

SoundCloud launched in 2008 as a “YouTube for music”. It allows artists, musicians, DJs and podcast creators to post their content and share it on blogs and social media. Many acts started out sharing their compositions to get their names noticed. The site also drew the large EDM music community for its huge array of DJ sets and exclusive mixes. It has 175 million monthly users around the world, making it the second most popular streaming option after YouTube. It also claims 18 million creators post their content on the site.

But it aroused the ire of the music industry. A lot of its uploaded tracks were infringing copyright, and labels were getting no, or very little, royalties from the tracks they themselves posted.

That changed in 2014 when SoundCloud developed tools to detect and remove unlicensed content. It also began running ads, which slightly increased its royalties.

Warner Music was the first to come on board, in late 2014, with Universal Music signing on in January 2016, for a reported equity stake.

SoundCloud needs to come up with strategies to sustain itself and its subscription service is crucial if it wants to become profitable. Its losses are massive. In its last financial report, for 2014, it had revenues of €15.37 million (A$22.73 million) but a yearly loss of €39.14 million ($57.9 million). That year, employee wages jumped up by 42.5% to €17.9 million ($26.4 million) which meant that the average wage for each employee was €79,980 ($118,300). Last year it raised US$77 million in investment and a further $35 million in January.