Industry News

Soundcloud brings in ‘fan-powered royalties’

While it may look like that your favorite artist that you are playing on loop is getting paid for every stream that you do, it’s not true. The problem with today’s streaming revenue model which almost all the streaming apps follow is that the revenue is based more on market share of the total streams rather than each individual stream itself, unless you’re Drake or Taylor Swift of course. Well, let’s take a closer look.

Phalguni Gupta | BeatCurry Team


Now, what is being claimed as a ‘bold’ move, SoundCloud has announced to switch to the user-centric royalty method, the one being called as a ‘fan-powered’ royalty. The change has been implemented since April 2021, but only for artists who use SoundCloud Premier, Repost by SoundCloud, or Repost Select that includes 100,000 customers who upload their music directly via the streaming service.


All the major streaming services use the Pro-Rata model when it comes to distributing the share of the right holders. As the total money generated from users’ monthly fees is distributed in proportion to all listening times, the model, therefore, favours the right holders of the most popular tracks. Of course, this isn’t fair to the small artists who see their royalties lag behind the superstars based not so much on performance, but popularity.Whereas, in the alternative user-centric model, it all comes to the individual users and their subscription fees.  The compensation of the right holder’s is based on: how many different tracks the user is listening to and how many times. For example, in simple language, if the total number of streams of an artist is 100, and a user (say User 1) listening to his music, contributes 25% (25 streams) of the total streaming, then the percentage of that user’s premium (say Rs200) which goes straight to that artist would be 25% of his premium. (Rs 50)


Fan-powered royalties are a more equitable and transparent way for the artists to get paid wherein the revenues from each user goes to those artists that they actually listened to and not based on how popular they are. Basically, the more fans listen to your music on SoundCloud, the more you get paid. This model allows the artists to get paid based on their fans’ actual listening habits. That means that if a user listens to an artist for 80% of the time, then that artist gets 80% of the subscription charge for the month.


Founded in 2007, SoundCloud is a Germany-based online audio distribution platform with a global community of artists and listeners. The platform has over 250 million tracks from 30 million artists from 190 countries on SoundCloud. It has also come up with a website explaining how the new system will work. Commenting on if the system is fairer than the industry norm it says “this new model benefits independent artists and empowers fans to play a larger role in the success of their favorite artists. It also encourages the growth of local scenes and the rise of new genres.”


The site mentions some examples to show how the new system will work. Vincent, an independent artist with 124,000 followers on SoundCloud, earning $120 a month under the existing ‘pro-rata’ model of streaming royalties. His earnings will go upto $600 a month under the new system as cited by the site. Another artist, Chevy, with 12,700 followers, will earn 217% more per month according to SoundCloud, with no dollar amounts mentioned in this case.


Since no big streaming service has been able to bring itself to change its distribution model, for the first time now we’d get to see whether this system can actually benefit the independent musicians.


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