Business News Digital Labels & Publishers

SoundCloud reportedly offering equity to major labels as it seeks licensing deals

By | Published on Friday 11 July 2014


SoundCloud is offering the three major labels equity in the company, in exchange for both licensing deals and guarantees not to sue over any past copyright violations when the service shifts to a monetised model. According to Bloomberg, Universal, Sony and Warner are being offered between 3% and 5% of SoundCloud, along with a cut of future revenues.

This report comes as SoundCloud tests new monetised-content functionality, which will bring it closer to being the “YouTube of audio”, in that it will enable content owners to opt for ads to be displayed next to (and possibly played within) their tracks on the service, earning a cut of any ad revenue in the process. It’s thought that the $60 million in funding raised by SoundClloud last year was in part destined to fund licensing deals too.

For many, this change to SoundCloud’s business model – ie offering content owners monetisation tools as well as a free/cheap streaming – has been a long time coming, which make the guarantees not to sue all the more important. Although labels all freely use SoundCloud as a promotional platform, there has been controversy over unlicensed tracks uploaded by other users. This has led to what some see as an overly harsh takedown system to placate the labels, with claims recently that Universal has been given direct access to SoundCloud’s database to remove infringing content directly.

Bloomberg notes that SoundCloud has been seeking a buyer for some time now, with Twitter last mooted as a possible new owner, but that fears over possible future legal action have been a sticking point to date. Which means that, while the original intention may have been to find a buyer and then move into monetised content, the digital company is now having to get the new ad-funded element off the ground first.

It’s probably also worth mentioning, because it will be mentioned, that these equity deals are only seemingly being discussed in terms of the major labels. Independent record companies, arguably the most active users of the platform in the label community, will not be best pleased if they are left out of such discussions. Accusations that they are being left with just the scraps that remain from deals dictated by the three largest record labels may well emerge in the coming days. Though, while that won’t be good for SoundCloud’s brand, it will certainly further strengthen that “YouTube of audio” claim.

In other SoundCloud news, it has been added to the list of services available to users of the Sonos wireless speaker system. Which means you now have no excuse to not have the CMU Podcast booming around your home this weekend.