Soundcloud Forcing ‘Extremely Crappy’ Deal Terms Upon Indies…

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You saw what happened to YouTube when they tried this, right?  Well, get ready for another round of fireworks.

According to a pair of sources close to Soundcloud’s ongoing label and publishing negotiations, Soundcloud is now attempting to force ‘extremely crappy’ deal terms upon indie labels.  Under the current Soundcloud licensing plan, major labels will not only receive priority negotiation status and terms, but substantially better access to a range of Soundcloud perks.

That includes priority placements, equity percentages, early participation in alpa and beta launches, and most importantly, ‘most favored nations’ privileges.  Most favored nations, or ‘MFN,’ effectively ensures that the ‘big three’ majors – Warner Music Group, Sony Music Entertainment, and Universal Music Group – automatically the benefits of any licensing negotiation that is better than theirs.  Effectively, MFN allows a contract to adjust to reflect the added benefits negotiated by someone else, ensuring the best deal among all rights owners.

It’s unclear how resolute Soundcloud is at this stage in the negotiation process.  A Soundcloud representative refused to comment,  and sources to Digital Music News have not offered concrete terms or contracts.  If Soundcloud is indeed marching forward with sub-standard offers, however, the company could face a massive indie backlash, similar to what YouTube experienced before relenting on terms.  That could include a massive press blow-up, negative spillover into the artist community, and possible review by EU competition authorities.


More as this develops.

Image by Terry Alexander, licensed under Creative Commons Attribution 2.0 Generic (CC BY 2.0).  Written while listening to Roxy Music.


12 Responses

  1. Irving Mindreader

    Granting the majors MFN is totally fine.

    But SoundCloud *should* have turned around and offered MFN to indies as a next step, insuring equal footing for all content partners.

    Missed leadership opportunity by SoundCloud.

    • Versus

      Wouldn’t “most favored” status be meaningless if everyone has it?
      Then again, I’m all for that.

      • GGG

        No, it would just be bad from Soundcloud’s perspective because they’d just be ponying up more and more money for everyone. But for some small indie, it’d be great, and stop them from getting potentially fucked over.

  2. Anonymous

    indies got no muscle and little leverage, just the way it is.

  3. Anonymous

    We enjoy Soundcloud but keep on making ‘extremely crappy’ deal terms, and we will take you down.

  4. Deep Throat

    Indies – and artists – have as much leverage as their ability to organize and stand together. There are indies – and artists – who DO have clout and when those indies lend their clout to a community of indies it’s up to the rest to take advantage of it. See A2IM. See Merlin. See AIM, Impala, International Music Managers Forum, etc. It works (as this article references).

    If you aren’t covered by these groups but are unhappy with the compensation you’re receiving for your music on licensed digital services you are AT LEAST obligated to ask the person or company signing these lousy licenses on your behalf what they’re thinking, why they’re signing and what payoffs they’re getting in exchange for signing such crappy deals. Every indie label and artist should be working hard to see the ACTUAL license that their label or distributor is signing on their behalf. If you’re wondering what I’m talking about, search Fair Digital Deals Declaration. It’s fine to complain about crappy deal terms but if you want to change it you need to do more than complain. Get active. Get organized. Not everyone is getting crappy deals but if your representative (or you) are willing to sign any old deal offered, well then, what do you expect?

  5. Remi Swierczek

    Souncloud, VEVO, YouTube, Shazam even Pandora in current business mode are obstractions and preventers of normal monetization of music!

    We can slightly adjust their activities and all will blossom and participate in new $100B music industry!

    VEVO is the only one that has to GO!

  6. Willis

    Nobody is “forcing” anything upon anyone. A deal is offered and it doesn’t have to be taken.


      Exactly right!
      …and just like any subscription…if you aren’t happy with the service or provider anymore, CANCEL!
      Majors are nothing without indie artists. It is the artists that hold the power in the end. It may take time, but eventually the major labels will require more than back catalogues to survive. They will need fresh NEW music/talent…and this is where the artist should think before signing up.

      This goes for PRO’s and Publishers also. Less red tape and restrictions will allow artists to more freely choose which platforms they wish to use in promoting and selling their music.

  7. Hessel van Oorschot

    Dear Paul,

    I do not work at SoundCloud but for a longtime work with their API’s as part of our own music industry services. The idea that Warner, Sony and Universal will benefit from SoundCloud is of course not far fetched. We all remember the bold statement half a year ago: “The labels agree not to sue SoundCloud for copyright violation in exchange for a xx percent stake in the company each. SoundCloud would also give the labels a percentage of future revenue.” Some called it a business case others blackmail.

    Will independent artists move on? Probably. SoundCloud was already shifting from “music files” to “any audio file on the planet” so it’s no longer a dedicated online community for musicians. Some of them moved on to MixCloud years ago.

    Since SoundCloud is still a powerful distribution platform with some artist-friendly API’s I think the “more tech savvy” artists can still use SoundCloud as part of their toolbox without too much hassle of changing terms.

    But as you state so adequately: More as this develops.

  8. Brett

    Hard-hitting reporting here!
    –“”It’s unclear how resolute Soundcloud is at this stage in the negotiation process.””
    Great to know!

    –“”and sources to Digital Music News have not offered concrete terms or contracts. If Soundcloud is indeed marching forward with sub-standard offers..””

    Again, thanks! What a dream!

  9. Jeff Robinson

    My guess is that this has much to do with the majors and not much to do with the indies. The majors likely leverage ‘burying’ indie content in the process to ensure a higher royalty rate at their end. It could be worse- it could Beats which promised to pay everyone across the board the exact same rate- and our label has seen a solid 1.5 cents a stream from the sale side, but the problem is that Beats doesn’t pay. On-demand streaming has been solid since August and we’ve received 91 cents to date. Be careful what you wish for. Most of these services are not even close to profitable and being propped up by Wall Street Venture Capital Money. We can exclude Beats from that because this is just more of Apple skimming from the music industry. Which verifies they most certainly were under-reporting digital sales for financial gain.