SoundCloud Disrupts The Digital Music Industry

Cameron DeFaria

Many people aren’t aware that their monthly payments to music streaming platforms may not be going to the artist(s) that they’re listening to. Major DSPs (Digital Streaming Platforms) like Spotify and Apple Music are based on pro-rata business models. This means that all royalties are split at the end of each payment period based on artists’ market share of streams across the platform.  It doesn’t take a Harvard grad to put together that this model favors the Taylor Swifts and Ed Sheerans, but it leaves all of the Lil Simps in the dust.

SoundCloud has always been somewhat of a safe haven for indie artists. It’s a platform to instantly share sounds, ideas, productions and re-productions that may not need an all-DSP release. However, the Swedish audio-sharing platform has officially announced that it is moving toward a user-centric payout system that prioritizes creators with less traffic and challenges the current norms of the streaming industry. 

In a recent statement, SoundCloud introduced “fan-powered royalties” that will “benefit rising independent artists with loyal fans”. The disruptive DSP has published a microsite that explains the model’s logistics in fairly simple terms and conveys its widespread support. SoundCloud CEO Michael Weissman has high hopes for this transition, noting that its success will be because of “the powerful connection between artists and fans that takes place on [the] platform.”  The new royalty system will be implemented on April 1st.

While exciting, SoundCloud might have to overpay for some time upon the implementation of the new royalty calculator – ultimately because there will still be artists who are part of the pro-rata model on SoundCloud. With a quick raise in “fan-powered” artist royalties, the DSP will still have to pay in full its monies owed to pro-rata artists. However, Weissman is aware of the risk and is willing to take it on to promote direct business with independent artists. 

Regardless of whether or not this royalty experiment is successful, it is undoubtedly a necessary disruptor in a digital music age that begs for change.