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What was that about major labels being reluctant to back ‘user-centric’ models of streaming payouts? Warner Music Group has become the first major to sign up for SoundCloud’s ‘fan-powered royalties’ system, which will be available to artists across its roster.

(The announcement had been embargoed to 9am EST today, but US outlets Billboard and Digital Music News ran the story overnight, which is why Music Ally is covering it this morning.)

It’s a big moment for SoundCloud, since when it launched fan-powered royalties [FPR] last year, the system only applied to DIY artists who were uploading directly to its platform. That enabled SoundCloud to launch without requiring the buy-in of rightsholders, and then to hopefully generate data that could be used to persuade them to join later.

Now WMG has done exactly that. “As the ecosystem expands, WMG is focused on advancing and experimenting with new economic models to ensure the opportunities for our artists and their communities are maximised,” said WMG’s chief digital officer and EVP, business development Oana Ruxandra in a statement.

The news comes a week after SoundCloud published a report with Midia Research setting out some of the early findings from its system. The report claimed that 56% of artists taking part were “better off under FPR than pro-rata” – the latter being the traditional system of dividing streaming payouts by overall share of streams.

It’s not a surprise that WMG is the first major to sign on for SoundCloud’s user-centric system. Back in 2014 it was also the first major to sign a licensing deal with SoundCloud. More recently, Ruxandra discussed fan-powered royalties on a Midem panel with SoundCloud execs Eliah Seton and Lauren Wirtzer-Seawood moderated by Music Ally.

“I think that it’s really important, as we’re talking about different ways in which people consume… to put different models of doing business, economic models, on top of that,” she said then, addressing her remarks to Seton and Wirtzer-Seawood. “We’ve definitely been living in one world for the last decade, and being able to experiment – the work that you guys are doing to experiment, and think of other models – is really interesting.”

[WMG has been on a journey, as have we all, for user-centric. In November 2019 its chief innovation officer for recorded music, Scott Cohen said that the company had “looked at the data but user-centric payouts don’t make an enormous change. That mythical person who repeatedly streams only one artist a month [and thus should give all of one month’s subscription money to that one artist] doesn’t really exist”. However, he added that “we’re not against it – if people want it”.)

So interesting, that WMG has now signed on to take part. A move that will give it real-time data on how this user-centric model impacts its artists and labels. And that, in turn, will influence any decisions WMG makes about user-centric models from other streaming services in the future. It could even embolden some of those other DSPs in their own plans to test or roll out user-centric payouts.

However, when the biggest streaming services have spoken publicly about user-centric, they have tended to claim that they are waiting for all rightsholders to back the model.

“Every licence agreement that we sign with every rightsholder all over the world would have to be transitioned into that model,” said Spotify’s Horacio Gutierrez during a hearing at the UK’s streaming economics inquiry last year. “The key thing for us is there needs to be consensus among all licensors,” added Apple’s Elena Segal in the same session.

Spotify’s Loud & Clear website sets out the company’s official position: “We are willing to make the switch to a user-centric model if that’s what artists, songwriters, and rights holders want to do. However, Spotify cannot make this decision on its own; it requires broad industry alignment to implement this change.”

One major signing up for user-centric payouts on one streaming service clearly isn’t “broad industry alignment”. But WMG and SoundCloud’s partnership will certainly encourage the advocates of user-centric payouts: a positive step forward that could lead to bigger leaps in the future.

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