SoundCloud’s lack of music licensing deals has been a source of growing unrest among some rightsholders over the last couple of years, even if the artists using the platform have seemingly been comfortable with its mixture of promotion and analytics in lieu of royalties.
The latest details on SoundCloud’s sensitive negotiations with major labels came via Bloomberg late last week, with a report suggesting that Universal, Sony and Warner are in talks to take stakes of between 3% and 5% each in SoundCloud, as well as a percentage of future revenue.
What is SoundCloud getting in return? A promise not to sue for copyright infringement, according to Bloomberg, which suggests that the negotiations are valuing the company at between $500m and $600m.
What’s not mentioned in the report is the status of negotiations between SoundCloud and collecting societies – we reported on these last year – as well as publishers.
Oh, and don’t forget independent labels too: if SoundCloud is dishing out up to 15% of its equity to major labels, indie licensing agency Merlin will be keen to secure a fair share for its members, who are just as important – if not more so – to SoundCloud as a business.
Mention of future revenues is a reminder that SoundCloud is still working out where that income will come from. Co-founder Eric Wahlforss told Music Ally recently that SoundCloud’s New York office is experimenting with native advertising, while the company is trying to work with brands in other ways too.
But the biggest implication of deals with music rightsholders is the removal of the legal threat that’s been dangling over SoundCloud for some time, and a big barrier to a big-bucks acquisition by a larger technology company.
Talks with Twitter earlier this year reportedly foundered partly on its lack of licensing deals. Bringing clarity to that area of SoundCloud’s business may bring Twitter – and other suitors – back to the negotiating table.