Warner Music Group Partners with SoundCloud for Digital Edge

With about 175 million current users, SoundCloud far exceeds Spotify and Pandora, which combine for a total of about 116 million users. And while SoundCloud has yet to build any sort of real business with these numbers, it recently agreed to partner with a major record label. Rather than taking a traditional licensing route with its new Warner Music Group deal, the music-streaming site will offer WMG the option to advertise on some of its songs and share revenue with SoundCloud.

WMG joins independent artist and smaller labels that are already participating in a program that currently features advertising from companies such as Sonos, Jaguar, and Red Bull.

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According to Businessweek, Warner may not look to make a buck of every single song it owns on SoundCloud. In fact, most other major and independent labels do not.

“Digital music is valuable for the music industry even if it doesn’t directly lead to revenue,” notes Businessweek. Because SoundCloud has become a destination for new and unique tracks, as opposed to complete albums, music executives have accepted compensation in the form of exposure and ongoing conversations for a particular artist.

Moving forward, SoundCloud aims to maintain a balance between songs that have ads and songs that do not. SoundCloud CEO Alex Ljung does not plan to convert the service into everyone’s complete music library. SoundCloud is a destination for those looking for those individual tracks that the others such as Spotify and Pandora do not have.

Following the deal with WMG, SoundCloud will most likely release a paid subscription service sometime in the near future, one that it committed to doing before the deal with WMG was closed. Like other paid music services, SoundCloud is expected to include ad-free listening, access to exclusive content and mobile storage capabilities for offline listeners.