6.12.2015

Online Music Stream Service SoundCloud Reaches Deal With 20,000 Record Labels

The online music streaming service SoundCloud announced this week that it has struck a deal with 20,000 independent record labels through Merlin, an organization that represents small companies in large scale digital negotiations.
The Berlin-based company, which boasts 175 million monthly users, has also recently inked deals with Warner Music and the National Music Publishers' Association, although negotiations with Sony have reportedly reached an impasse. As a result, some mainstream Sony acts have been pulled from the service, including Kelly Clarkson and Adele. Negotiations with the Universal have also reportedly slowed.
Unlike fully licensed operators Pandora and Spotify, until recently SoundCloud lacked formal licensing agreements, and therefore paid no royalties. Predictably, this led to a tense relationship with the music industry, although many artists love the service for its wide reach and easy accessibility. Many, like then-17-year-old surprise 2014 Song of the Year Grammy-winner Lorde, choose to debut new songs on SoundCloud long before selling them through their labels.
Despite its enormous popularity, SoundCloud has struggled up to this point to generate significant revenue through its service. It did not establish an advertising platform until late last year, after which time it has only paid out $2 million in royalties.
This new agreement is seen as a major step towards convincing the industry - Sony and Universal specifically - that SoundCloud can in fact generate revenue for artists and labels alike. According to Charles Caldas, Merlin's chief executive, "For SoundCloud as a business, their relationship with the music industry long term without having some form of monetization would make their future incredibly difficult." Fans of the free streaming music service sure hope it can find a way to do just that.

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