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SoundCloud introduces fan-powered royalties

SoundCloud has announced that it will become the first streaming service to direct the fees of paying subscribers to the artists they actually listen to. The move was backed by many musicians who have criticised the economics of streaming in the past. From April 1, SoundCloud will start directing royalties due from each subscriber only to the artists they are currently streaming.

The new model, known as fan-powered royalties, has faced fierce resistance from major record label bosses, as AFP reports. Soundcloud moved into the new model after a series of UK parliamentary select committee hearings that investigated the financial impact of streaming.

During the hearing, MPs were warned that the unfair streaming payments were “threatening the future of music”, by the likes of Radiohead’s Ed O’Brien, Elbow’s Guy Garvey and Nadine Shah. Claiming that emerging artists are facing “massive competition” from classic acts. At hearing SoundCloud also crushed claims that fan-based royalty payments could prove too complicated - claiming that its royalties calculations took just 20 minutes under the new model, instead of the 23 hours under the old model. Leading Soundcloud to now adapt the new model after much speculation.

Major streaming services such as Spotify and Apple Music currently operate on a system where royalty payments are dished out in accordance with which artists have the most plays. But the system has been criticised by artists further down the ladder, who say that the system allows huge stars to generate vast amounts of money, while leaving little for smaller artist.

“The most important takeaway from SoundCloud’s data is that none of the previous modelling has been accurate, that when you actually run a user-centric system, the rewards to artists that have an audience are significantly improved.”

said Crispin Hunt, chair of the British Ivors Academy. He continued telling that;

“It proves the distortion in value that the existing model delivers,”

Spotify has rebuked suggestions that raising its subscription price could result in a fairer model, instead claiming that any price rise could push users to online piracy.


Sources: NME