It's been a strange time for Soundcloud recently. After posting a loss of $29 million on revenues of $14 million in 2014, the company has been doing whatever they can to turns things around with little success. They've introduced advertisements, sponsored posts, and songs presented by major companies. As you can imagine, people haven't responded too well.
Beyond that though, the major issue lies between Soundcloud and the record labels. Sony has been snatching up music left and right now, and now the online streaming service is desperately trying to strike up a deal to go legal and pay royalties before more and more music gets pulled. This is causing a rift between labels and Soundcloud, and in turn Soundcloud and the users.
At this point they aren't winning on any fronts, and now leaked contracts spelling out Soundcloud's plan for Ad-Free Subscription plans would ask users to pay to avoid advertisements. This is similar to services like Spotify, but introducing this after years of free service is a tough sell. Most artists and labels on Soundcloud already pay since there is a free 2 hour limit, but there are countless users who just see Soundcloud as a free place to stream music.
According to the leaked contract that first appeared on Digital Music News, Soundcloud would pay 10.5 percent of its revenue including ads or about 22 percent of what it makes on sound recording rights, just depending on which is higher. The contract then proposes a deal with independent labels, and implies that similar deals could be reached with the big 3 of the music industry: Sony, Warner, and Universal.
Soundcloud is then releasing two new tiers for users, the first being "Additional Services." This would ask users pay for an audio and visual experience free of advertisements, along with a limited amount of downloads. Labels will also get a cut of users who purchase this service. The second option is a "Soundcloud Full Catalog Subscription Service."
This would offer users access to an even larger range of music on Soundcloud, with labels getting a bigger cut. Again, this will be a tough sell when users have gotten used to unlimited access to all music on Soundcloud, unlimited free downloads for artists that offer, and until recently no ads. This is the basis Soundcloud was built on, but unfortunately it's legally a grey area of music to the big labels.
We've already seen artists like Madeon venting about getting his music pulled, and every week we have more and more artists getting pulled from the site. This plan might help them make more money, but it seems like it will damage the relationship between Soundcloud and the artists, users, and blogs that have given the website a cult like following within music and specifically electronic music these past few years.
It's going to be an interesting year for Soundcloud vs. The World, and we have a feeling this could drastically change the role of the website. Even if this all gets worked out, it seems that in the next few years Soundcloud won't be the primary place for artists in the electronic realm to host their music. It's a changing field, and Soundcloud needs to make this work fast before everyone turns even more against them.