SoundCloud announces overhaul of royalties model to 'fan-powered' system
SoundCloud announced on Tuesday it would become the first streaming service to start directing subscribers’ fees only to the artists they listen to, a move welcomed by musicians campaigning for fairer pay.
Current practice for streaming services including Spotify, Deezer and Apple is to pool royalty payments and dish them out based on which artists have the most global plays.
Many artists and unions have criticised this system, saying it disproportionately favours megastars and leaves y little for musicians further down the pecking order.
They also argue it means that many fans of niche artists and genres fund music they never actually listen to.
SoundCloud says from 1 April it will start directing royalties due from each subscriber only to the artists they stream.
“Many in the industry have wanted this for years,” said Michael Weissman, SoundCloud’s chief executive officer. “We are excited to be the ones to bring this to market to better support independent artists.”
The company 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,” Weissman said. “Fans can directly influence how their favorite artists are paid.”
Major record labels are believed to have resisted such a move, 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 this year found that 10% of all revenues from Spotify and Deezer go to just 10 artists.
That has allowed the major labels to amass record revenues over the past year,while many musicians were thrown into crisis by the cancellation of live tours due to the pandemic.
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.
But SoundCloud said this was wrong – that its computing calculations took just 20 minutes under the new model, compared with 23 hours under the old one.
“The most important takeaway from SoundCloud’s data is that none of the previous modelling has been accurate, that when you actually run a user-centric system, the rewards to artists that have an audience are significantly improved,” said Crispin Hunt, chair of the British Ivors Academy, which has been running a campaign to “fix streaming”.
“It proves the distortion in value that the existing model delivers.”