Warner Music Group Officially Adopts ‘Fan-Powered’ Royalty Model On SoundCloud: ‘Today’s Deal Is a Major Milestone’

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Photo Credit: SoundCloud

About three months after celebrating the anniversary of its fan-powered royalty model, SoundCloud has officially inked a global licensing deal with Warner Music Group. Under the pact, WMG will become the first major label to support payouts based upon actual listening as opposed to a portion of total streams.

Multiple artists have offered positive assessments of fan-powered royalties, which deliver the monthly revenue (less fees) of each subscriber or ad-supported user to the creators whose work they enjoyed. A band that secured 55 percent of a paid account’s listening during a given month would receive 55 percent of its post-fee subscription payment, for instance.

This system contrasts the pro-rata model of Spotify and others, which calculate artist compensation by pooling revenue and then distributing it as a piece of overall streams. Of course, the arrangement favors big-name acts with millions upon millions of monthly plays and a correspondingly massive promotional budget – to the particular detriment of professionals with comparatively modest but decidedly dedicated followings.

Now, Warner Music Group – which back in 2014 announced that it was the “first major music group to forge a partnership with” SoundCloud – will allow “every artist across” its roster to be paid for on-platform streams through the fan-powered model.

Addressing the deal in a statement, Warner Music Group chief digital officer and EVP of business development Oana Ruxandra said: “The evolution of the music industry brings new ways to create, consume and monetize. As the ecosystem expands, WMG is focused on advancing and experimenting with new economic models to ensure the opportunities for our artists and their communities are maximized. SoundCloud has been an amazing partner in connecting artists and fans, deepening our relationship will allow us both to proactively build for the future.”

And SoundCloud president Eliah Seton added in part: “Today’s deal is a major milestone because, under Fan-Powered Royalties, more artists get paid more money. But even more importantly, Fan-Powered paves the way for artists to create even more opportunities to monetize their art beyond streaming and create more value, driven by engagement with their fans.

“Warner Music Group is known for developing some of today’s biggest superstars and helping them build long-term careers by investing in technologies and models which grow and support their fan communities. This makes them an ideal partner for SoundCloud and we’re excited to bring our game-changing fan-driven product to their incredible roster of artists,” finished the longtime Warner Music exec Seton, who signed on with SoundCloud last year.

Warner Music’s embrace of fan-powered royalties on SoundCloud is especially interesting because Spotify previously signaled an openness to transitioning to the model.

“The research we’ve seen to date suggests that a shift to user-centric payments would not benefit artists as much as many may have originally hoped,” Spotify communicated of the potential fan-powered pivot. “We are willing to make the switch to a user-centric model if that’s what artists, songwriters, and rights holders want to do. However, Spotify cannot make this decision on its own; it requires broad industry alignment to implement this change.”

Warner Music Group’s pact with SoundCloud could mark a key step towards said “broad industry alignment” on the fan-powered model, which Tidal has also adopted. But evidence suggests that Universal Music Group (which has long spearheaded promotional initiatives with Spotify) and Sony Music Entertainment might be less willing to rally behind the switch.

To be sure, none of Spotify’s UMG-heavy most-streamed artists of 2021 – Bad Bunny, Taylor Swift, BTS, Drake, and Justin Bieber, respectively – is signed to Warner Music Group. Only one Warner Music-signed act, Dua Lipa, managed to rank on Spotify’s list of most-streamed songs (fifth place with “Levitating”) for 2021, though her second-ranked Future Nostalgia was joined on the list of most-streamed albums by Atlantic’s Ed Sheeran and =, which placed fourth.

And for SoundCloud – which a number of artists have used before achieving mainstream commercial success – fan-powered royalties represent one component of a wider effort to continue attracting and promoting emerging talent.

To this point in 2022, the music-sharing platform has released a feature film with tracks from SoFaygo and others, unveiled an artist-discovery deal with Solid Foundation Management, and purchased AI music metadata company Musiio.