SoundCloud gets ads and preps subscriptions as part of licensing deals


SoundcloudSoundCloud’s plans to a.) make money through advertising and b.) pay that money out to music rightsholders have been the subject of plentiful rumours in recent months.

Today, the company is revealing more on those plans, formally launching advertising on its platform today, with plans for paid subscriptions for listeners to remove those ads if they want to.

The New York Times, which got the scoop on the news, says it’s part of licensing talks with labels – major and “some independents” – that include royalty payments and potential equity stakes.

The article has more details on what’s being described as ‘On SoundCloud’, including Red Bull, Jaguar and Comedy Central’s role among its first advertisers, with ads that “will run only in conjunction with licensed content” from partners including two publishers – Sony/ATV and BMG – music distributors INgrooves and Seed, and various independent artists.

Most (an exact revenue share isn’t specified) of the ad revenues will go to those partners, but the piece stresses that as of today, the three major labels have NOT yet signed off on licensing deals.

This isn’t the full ‘SoundCloud has licensing deals for all the music it streams’ announcement that has been eagerly anticipated within the industry, then, and as the NYT points out, there isn’t yet a neat solution for the licensing headaches around DJ mixes and mash-ups that so enraged EDM star Kaskade earlier in the year – this, as we’ve noted before, is an issue that goes beyond SoundCloud.

Just this week, an online row has blown up about SoundCloud’s terms and conditions, with US indie body A2IM warning its members to “strongly consider turning API access off” when uploading tracks to SoundCloud, to avoid granting a royalty-free licence not only to the company, but to anyone – “internet radio stations, remix services or other music apps” – tapping its API.

But the introduction of monetisation beyond SoundCloud’s pro creator accounts, as well as payouts to licensing partners, is nevertheless a big step forward for a platform that now claims 175m monthly listeners out of 350m people who “encounter” its files on desktop and mobile devices – i.e. half of the latter don’t actually play them.

This has been coming for a while, with speculation about licensing deals ever since SoundCloud raised a $60m funding round in January. In July, reports claimed that the three major labels were in talks to take stakes of between 3% and 5% in the company, including a percentage of future revenues and a promise not to sue for copyright infringement.

On the advertising front, co-founder and CTO Eric Wahlforss clearly signposted the plans in a Music Ally interview in June. “Right now in the US we’re experimenting with different monetisation approaches. We’re testing out different things: throwing a couple of things out there and testing the waters a bit,” he said.

“We’re super-excited about where this stuff can go. When you have millions of followers and millions of listeners, you’ve got some point expecting there to be some sort of monetisation there. We hear that loud and clear.”

It appears SoundCloud is adopting a careful approach to ensuring its new revenue streams can keep pace with its royalty payments. Although let’s see how those major-label talks pan out before firmly predicting a profitable future for the company.

Written by: Stuart Dredge