SoundCloud becomes first streaming service to introduce fan-powered royalties

Streaming payments will be directed to the artists that users are listening to

SoundCloud has announced that it will become the first streaming service to direct the fees of paying subscribers to the artists they listen to, a move previously backed by musicians who have criticised the economics of streaming.

Leading streaming services such as Spotify and Apple Music currently operate on a system where royalty payments are dished out in accordance with which artists have the most plays.

But it has been criticised by artists further down the ladder, who say that the system allows huge stars to generate vast amounts of money, while leaving little for musicians who have not achieved similar success.

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From April 1, SoundCloud will start directing royalties due from each subscriber only to the artists they are currently streaming.

“Many in the industry have wanted this for years. We are excited to be the ones to bring this to market to better support independent artists,” said Michael Weissman, SoundCloud’s chief executive officer, in a statement.

Weissman added: “Artists are now better equipped to grow their careers by forging deeper connections with their most dedicated fan. Fans can directly influence how their favorite artists are paid.”

The new model, known as fan-powered royalties, has faced fierce resistance from major record label bosses, as AFP reports.

The move comes after a series of UK parliamentary select committee hearings investigated the financial impact of streaming.

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The likes of Radiohead’s Ed O’BrienElbow’s Guy Garvey and Nadine Shah warned MPs that unfair streaming payments were “threatening the future of music”, before it was claimed that emerging artists are facing “massive competition” from classic acts.

During the hearing, SoundCloud also rubbished claims that fan-based royalty payments could prove too complicated – claiming that its royalties calculations took just 20 minutes under the new model, compared with 23 hours under the old one.

“The most important takeaway from SoundCloud’s data is that none of the previous modelling has been accurate, that when you actually run a user-centric system, the rewards to artists that have an audience are significantly improved,” said Crispin Hunt, chair of the British Ivors Academy.

“It proves the distortion in value that the existing model delivers,” he said.

Spotify has rubbished suggestions that raising its subscription price could result in a fairer model, instead claiming that any price rise could push users to online piracy.

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