A contract that Soundcloud is reportedly about to sign with major music publishers has just been leaked. Digital Music News got their hands on the contract, which outlined splits and advances between the Berlin-based streaming and discovery service, as well as paid tiers for customers that would increase royalty payouts and create an ad-free experience.
The contract between the National Music Publishers' Association and Soundcloud is still unsigned, however last month the two sides announced they had come to terms on a deal. It is unclear whether or not this leak might put the deal currently on the table and in front of you in jeopardy.
The contract is full of interesting notes about how Soundcloud would pay royalties and attempt to become a legal music service. It would pay 10.5 percent of its revenue, including ads or about 22 percent of what it earns on sound recording rights — whichever is higher. Soundcloud will also pay a $350,000 advance to the publishers, based on money generated on paid tiers.
The document implies deals could be reached for independent and major labels, but the publishers finagled a Most Favored Nation clause to keep their compensation equal to any majors once market share is accounted for.
One of the most radical changes would be from the new proposed paid tier system that would offer a differing range of services that expand as you pay more — surprise, surprise. The "Additional Services" tier would let users pay for an ad-free experience and download a limited number of songs. Labels would take $0.18 per Additional Services member per month if it is higher than the revenue or sound recording rights income for the tier. The second tier "Soundcloud Full Catalog Subscription Service" would be offer access to much more music and labels would earn $0.80 per user per month.
A free ad-supported tier will still be allowed, but there will be pressure to sign up new members to its reported subscription possibilities.
Soundcloud is at a crossroads. It has been laboring through attempted negotiations with the major labels who are tired of seeing hundreds of hours of unlicensed material get uploaded onto the service every day without getting a penny for the plays on those streams. It has already signed a deal with Warner Music Group, which has enabled more ads on their content and started to generate some revenue from the plays on WMG artist pages. Negotiations have broken down with Universal and Sony, who has started taking their music down from the service, sometimes against their artist's wishes.
We will see what happens next, as Soundcloud continues to try and keep their customers while also creating a sustainable business model that can get artists (but mostly the labels) paid.
