Warner Music Adopts SoundCloud’s Fan-Powered Royalties

Warner Music Group has become the first major music label to adopt SoundCloud’s fan-powered royalties payout model. Launched last year, the model is designed around what the music streaming service calls “the fan economy,” enabling artists to engage directly with fans for more control and increased monetization opportunities. The audio distribution platform allows every artist to be paid “based on fan listening behavior on SoundCloud,” with subscription and advertising revenue “distributed among the artists [the fans] listen to, rather than being pooled under the traditional pro-rata model the music industry has been using for over a decade,” explains SoundCloud.

SoundCloud emphasized its role as a market leader in forging this new path. “From indie darlings to international superstars,” the fan-powered royalties model lets artists “earn money directly from their fans,” the company said in an announcement.

Initially, “only independent artists were eligible to earn FPR,” which required payment of “at least $30 a year.” However, “now that SoundCloud has signed a licensing deal with Warner Music Group (WMG), one of the largest global record companies, even more musicians will be eligible for these payouts,” writes TechCrunch, explaining that “buy-in from major labels is necessary for an FPR system to work,” given the economies of scale.

That’s why, TechCrunch says, “Deezer hasn’t been able to widely implement a similar model yet, despite vocally advocating for it since 2019. Meanwhile, Tidal introduced a fan-centric model in November that doesn’t require buy-in from labels. In addition to standard pro-rata payouts, fans on Tidal’s highest tier ($20 per month) will see 10 percent of their monthly payment sent straight to their most-listened-to artist.”

Major platforms like Spotify and Apple Music divvy up royalties from a centralized pot based on the number of streams, known as the pro-rata model. “The pro-rata method has contributed to an extremely top-heavy distribution system. Rolling Stone previously reported that the top one percent of artists end up getting 90 percent of streaming revenue,” The Verge writes. The user-centric FPR model aims to level the playing field among lesser-known artists.

The Verge observes that fan-powered royalties “has certainly been working for SoundCloud. Within a year of introducing it last spring, SoundCloud saw a 30 percent jump in subscribers to its premium creator services, which start at $30 a year and go as high as $144 per year.” While fan-centric models are “gaining traction,” they’re not even close to becoming the norm, with Warner — as one of the big three labels, along with Universal and Sony — potentially helping to “move the needle.”

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