After posting a $29 million loss in 2013, there was a real sense of urgency that something had to give at Swedish music streaming service SoundCloud to create a sustainable revenue stream that would not only pay artists and labels, but also get them out of the red. It appears it is on the road to do that after the announcement that it finally penned the back-and-forth deal with Warner Music Group.
The deal marks the first of the three majors to sign with a licensing deal with SoundCloud, which has reportedly been close to signing with the three majors in the past. But after those deals fell through and the recent posting of its 2013 losses, things started to look grim for SoundCloud and its ability to monetize its massive user base.
Recent developments indicate it is developing a model for sustainability that includes a subscription service that will be launching in the first of 2015. It will be included as part of the recent "On Soundcloud" program that partnered with a select few artists to help it monetize its content with a special premium subscription by generating ad revenue.
According to The Next Web, "As part of the deal with WMG, artists are given control over the availability of their content and can make money from remixes and mash-ups of their music made by the site's users. This, of course, in addition to additional revenue every time a song is played."
Though exact details are not confirmed, according to The Wall Street Journal Warner would take an approximate 3 percent to 5 percent equity stake in SoundCloud.
In a statement via The New York Times, SoundCloud's founder and CEO said, "We're thrilled that Warner Music Group will be the first major label to join our new creator partner program. We expect to generate significant revenue for Warner and its artists in the months and years ahead as we roll out an ad-supported offering and subscription service that delivers real value to the industry."
The world's largest music discovery platform, SoundCloud has become a product that is integral to the music industry. With its 175 million users each month, it has become one of the giants of the new Internet-driven music industry. This is a big step as it moves forward beyond a trendy startup to a major player, trying to balance the interests of its users, investors and music titans.
Listen to "Sober Thoughts" from Washington, D.C., rapper Goldlink, one of the artists using the "On Soundcloud" program: