SoundCloud Switches to Fan-Powered Royalties

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By Caroline Morris

SoundCloud rappers are about to make bank. Hopefully.

Music streaming has been around for over two decades, beginning back in 1999 with the music sharing website, Napster. These streaming services have continued to grow through platforms such as Spotify, Apple Music, and SoundCloud, especially in the last five or so years.

But streaming often falls short when it comes to royalties distribution.

Most streaming services, like Spotify or Apple Music, pay their artists using a “pro rata” model. This means that all the revenue from every stream is pooled into one pot and then gets divided and distributed by total percentages of streams on the platform.

This system allows megastars to disproportionately profit from streaming services while smaller, independent artists are undercut. Such disproportionate payment occurs because all listeners are essentially funding the top 10% of artists even if they only stream niche, independent artists.

SoundCloud, however, has decided to break the mold and switch to fan-powered royalties.

The streaming service announced this change on Tuesday, March 2 in a press release on their website.

“With this move, each listener’s subscription or advertising revenue is distributed among the artists that they listen to, rather than their plays being pooled – benefiting rising independent artists with loyal fans,” the statement said.

The switch to fan-powered royalties will go into effect starting April 1, 2021.

SoundCloud’s decision is revolutionary yet, to a certain extent, unsurprising. Smaller artists have been long suffering from the current payment model and have voiced their displeasure.

This indignation came to a head in 2020 when a union of musicians launched a campaign entitled “Justice at Spotify.” The organization’s website provides some powerful statistics that show how unprofitable the current payment model is for smaller artists.

“To pay the median American monthly rent ($1,078) an artist needs to generate 283,684 recurring streams monthly. And to earn $15/hr each month working full time, it would take 657,895 streams per band member,” the website reads.

SoundCloud has clearly heard the calls for change and acted in kind.

“Many in the industry have wanted this for years. We are excited to be the ones to bring this to market to better support independent artists,” said Michael Weissman, Chief Executive Officer of SoundCloud.

It seems logical that SoundCloud would be the first streaming service to take this step. It is often the service that leads to real results and fame for small artists, examples including Billie Eilish, Lil Yatchy, and Doja Cat. By changing its payment model, it solidifies its brand as a hub of opportunity for independent musicians.

This new system relies strongly on fan loyalty. Because artists get paid directly from those who are listening to their music, rather than receiving a percentage from the total revenue of all streams, they can potentially make more money.

“Artists are now better equipped to grow their careers by forging deeper connections with their most dedicated fans; and, in turn, fans can directly influence how their favorite artists are paid,” the SoundCloud statement said.

SoundCloud has taken a bold step towards transparency and opportunity with this change to fan-powered royalties. The hope is that independent artists will have greater opportunity to make a living wage off of music and build their careers.

So for all the hopeful 13-year-old SoundCloud rappers out there, get to work!

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