SoundCloud needs to make its move – and soon

800x500_white-on-orangeLet’s set out a few facts here. First: SoundCloud is experiencing massive growth, particularly since its “Next” iteration went live for all late last year. Second: with that growth and switch to a Twitter-like “follow” mechanism, artists are seeing huge growth in fan numbers on the platform – in some cases rivalling or exceeding Facebook. Third: SoundCloud pay nothing to rightsholders.

Among my peers, the same question keeps getting asked: “When are SoundCloud going to start paying?”. Make no mistake: people are starting to resent the fact that they’re seeing all these plays and getting no payment per-stream. There’s a Catch-22 here: as the platform grows and delivers more plays for artists, so will the annoyance among rightsholders who are seeing those big numbers with zero payouts.

Here’s some observations as I see it:

1. SoundCloud needs to introduce ads
Right now, SoundCloud is in the same place as the pre-monetisation YouTube. They’re growing rapidly, and need to satisfy rightsholders who at some point will make a put-up-or-shut-up demand on them. Additionally though, their costs must be spiralling on an epic level. An audio platform is not a cheap one to run, being fairly bandwidth-heavy, so logic would dictate that at some point Soundcloud’s investors are going to demand a stronger push to monetise and offset costs. Advertising is inevitable: its the only way the requisite revenues can be generated. Look to YouTube for the precedents on this one.

2. SoundCloud is running a risk of being blindsided by Google, Spotify, Daisy etc etc.
In the last few weeks. the streaming music market has suddenly become a very crowded place, with Google rumoured to be stepping into the fray with potentially not one but two offerings, Access Industries investing in Daisy… even Tesco launching their own service. Among these newer players particularly, there’s some very deep pockets with other business interests that allow them to make highly competitive moves. With that massive hike in competition, it is now a label’s market again as each service strives to get the exclusives and premium content that will draw in new users. What the labels could also do though is use these services to seriously put the squeeze on SoundCloud’s payments (or lack thereof).

That said, these audio services currently all have one common difference from SoundCloud: you have to have an account to play music. That means that right now, their services are not 100% portable. A huge factor in SoundCloud’s adoption among labels was because we can post a player and have it travel all over the web to music websites, blogs, people’s social feeds etc, and people can listen immediately, no login required, from anywhere in the world. Its why so many people use SoundCloud. But what if Spotify, Google or another service were to offer an open platform for labels to undertake promotion with? Imagine an ad-supported player that could play anywhere AND monetise for the rightsholder. Would labels flock to that? You bet. Just as with YouTube, “premium” music (ie mid- to large-level artists) make up a huge proportion of plays. If that content were to vanish overnight, SoundCloud would have a big problem. Additionally of course it also reflects well on them; having premium artists on your service is an endorsement.

3. SoundCloud needs to demonstrate what the value of a fan on their platform actually is
Right now, I am seeing huge growth in fan numbers on SoundCloud for the artists I work with. On the face of it, that seems like a great development, especially when those numbers are in places starting to rival Facebook. But how can I then capitalise on this? Can I push a direct message to them? Not unless its attached to a new player. Can I advertise to them? No. Literally the only thing I can do is post more music to them – music which right now, pays zero per stream. So are those fans as valuable as Facebook fans or Twitter followers? No. Not even close. People could argue this is a slightly myopic view and to some extent they’d be right: on some campaigns I’ve seen around 1% clickthrough on the Buy button on my SoundCloud players. So, SoundCloud does drive awareness and sales… but the fact remains that YouTube does that too – but it also monetises directly. Furthermore, on YouTube I can run remarketing – an incredibly handy means to then target fans with your messages (eg. album out now, tickets now on sale etc).

4. SoundCloud needs to understand what kind of service it is
In some respects, I think SoundCloud has an identity crisis of sorts. They’re a music service, but not a dedicated one (evidenced by a very noticeable shift in terminology from “music” to “sound” and an emphasis on found sounds, SoundCloud Voices etc). They’re also a marketing platform, but not a closed, dedicated one in the manner of something like Topspin or Cash Music. SoundCloud always presented itself as a social network, but I think the reality is that the social element only really kicked in with the recent relaunch. So exactly what space do they occupy? Right now it feels vague, as if they’re a bit of this and a bit of that. Presenting yourself as the main repository for all audio on the web is admirable – but it does not excuse you from joining all other music audio services in paying rightsholders.

Let me put this another way: if a really well-evolved marketing platform were to launch, allowing globally embeddable players and a stronger featureset for connecting with fans, I would be advocating the use of that to my artists and labels – even more so if it was monetisable too. So then if I was not using SoundCloud for marketing to fans, what would I be using it for? Not as a streaming music service: there’s now a plethora of those, all of which pay rightsholders. What’s left then? An established audience, potentially… but not much else.

That, really, is the nub of it. Something needs to change.

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16 thoughts on “SoundCloud needs to make its move – and soon

  1. […] wirklicher Entschluss, kein Ratschlag, bloß ein paar Gedanken die mir kamen, als ich den Artikel von Hemmings las, den ich hiermit noch einmal […]

  2. Craig says:

    Great article Darren.
    Have been asking labels /acts to think a bit more about what they post up on Soundcloud – usually with limited response!
    Whole spate of album previews in The Guardian of late that have been powered by Soundcloud.

  3. GZA says:

    Finally a voice of reason on the topic.

    SoundCloud ignoring basic copyright issues and making it extremely hard for people to enforce takedowns has been a bugbear for a few years now. This article reflects what a lot of people have been trying to ignore for too long. It can’t continue as is.

    It’s a great service but this needed to be said. Well done.

  4. bengomori says:

    So basically what you’re trying to say is we should destroy everything SoundCloud has built up and made it so desirable in the first place. People like that SoundCloud doesn’t have ads. People like that they don’t generally get spammed on SoundCloud. Both terrible ideas.

    Where SoundCloud has missed a trick and could keep both rightsholders and users happy is by introducing a payment system like Bandcamp have done so very well. I can’t believe they haven’t already – their distribution and social discovery is amazing for any user, but people are driving traffic from their pages/players off site to 3rd party merchants! Why? SoundCloud and its artists could make tons of money from this and preserve everything that’s good about the platform.

    At time of writing:

    To date, artists have made $33,605,304 using Bandcamp, and $2,025,426 in the past 30 days alone.

    We’ve driven 4,966,613 paid transactions and served 50,154,457 downloads to happy fans.

    Your suggestions make me shudder.

  5. Darren says:

    There’s little doubt that no one, ever, has said “you know what would improve my experience? Ads!”. Nobody wants ads, nobody likes ads – and yet we all put up with ads all over the place, and even click on them now and again. This is not a case of “ads are the answer”, but more “ads are the only answer I can think of if SoundCloud is to remain an openly-accessible platform containing large amounts of label content”.

    Regarding your comments on a payment system, I’d argue that they highlight precisely my point about what SoundCloud is there for. Personally (as a guy marketing bands) I’d LOVE to see SoundCloud get more empowered around driving sales and how it could be improved as a marketing platform in that regard – so much so that I have a “part two” post coming soon outlining just that, along with a means to tackle the “labels must be paid” element without pissing off the many users they have who are either unsigned or not music-related in any way.

    It raises a good question though, namely: “if SoundCloud generated more revenue by being much more of a marketing platform than it is at present (in the same manner as Bandcamp or Topspin for example), would labels leave them alone relative to per-stream payments?”

  6. Digimox says:

    Good article. I think Soundcloud’s identity is it’s “a tool for artists” which it always has been and does a pretty sweet job of. They generate revenue from Premium subscriptions to premium “tools for artists”.

    What would make Soundcloud an even better “tool for artists” is if they drove more revenue to the artists. Agreed. Yes Buy buttons do that, but not very well, and as ownership of music falls away as a prevailing model of consumption buy buttons are going to become even less valuable.

    Rather than trying to compete with streaming services by charging or serving ads, what if Soundcloud were to work with streaming services – and their increasingly accessible APIs – to access the content on those services and drive plays (=revenue for the artist) back to those services? Like Tomahawk on steroids. Tomahawk with established audiences and amazing social features. That way artists (and labels) could provide their fans on Soundcloud with access to their music via whichever streaming service the fan has a premium subscription with, and if the fan doesn’t have a premium streaming subscription, the artist could choose to block access or see it as “promotional” access like it is currently. Soundcloud doesn’t need to deviate from it’s original mission, streaming services get extra value for their content and artists (and labels) get paid. Everyone’s a winner.

  7. […] this blog post (via Music Ally) outlines, Soundcloud doesn’t appear to have thought about revenues – there […]

  8. […] this blog post (via Music Ally) outlines, Soundcloud doesn’t appear to have thought about revenues – there […]

  9. kwadrant says:

    This is ridiculous! Calling for Soundcloud to pay royalties to record labels completely misses the point of Soundcloud. I’m pretty sure that Soundcloud was not designed as a marketing or money-making tool for major label artists. Neither is it a music streaming service like Spotify or Deezer that licences officially released tracks from labels. It was designed for small independent artists and producers to UPLOAD and share their work in progress, demos and ideas to get feedback from a like-minded community, and perhaps to drive sales on other sites. This is the reason people join and a big part of its success.

    The fact that some big name producers and artists joined (a lot of them as PAYING customers to use the service) and decided to release some of their demos, mixes or unreleased tracks is their choice (and a good thing, in my opinion – a great way to connect with their fans). If artists and labels are now adding new releases to Soundcloud they are doing so to maximise exposure (again, a good thing). If you then start introducing pre-roll ads and forcing the site to pay royalties for tracks that artists themselves have uploaded then it is not sustainable, will kill the site and the community will move on elsewhere. It will drive all the underground producers elsewhere and it will just become youtube without pictures, or another myspace with no longevity. I’m not convinced that this is what Soundcloud envisaged and I really hope they have the bollocks to stand up to the major labels and not kill the site with ads. However, I agree with bengomori that sales is an area they could exploit more and i’m also surprised they have not done so.

    It shouldn’t all be about money and marketing. I think Soundcloud is aiming to be more like a Twitter for musicians, producers and music fans. It’s about building a useful platform, getting sounds heard and creating a community. People use Twitter everyday because they aren’t bombarded with adverts and obvious marketing schemes (if they are, they can unfollow). It’s available freely to the public (no signup required to consume content) and it’s viewed more as a useful tool or platform. This is why Twitter will be around a lot longer than most music streaming services.

  10. THETENSHEILDS says:

    ” I’m pretty sure that Soundcloud was not designed as a marketing or money-making tool for major label artists ”
    No but it’s become a posturing platform for hype and a massage for the ego’s of thousands of bedroom producers and musicians.
    I used it for a few years when it started out and it was a good tool. Sadly what happened was that a kind of ingrained snobbery developed whereby the more followers you had meant that ego’s were running rampant and comments appeared that suggested that competing producers were jealous of the number of followers they would have, like a game of ‘one upmanship’ I could see this happening a mile off.
    They also changed the layout for the worse which didn’t help and it became a bit user unfriendly.

    I quit while the going was good. Soundcloud did help me get quite a few vinyl releases and i am gratefull for it. But….
    I don’t use it anymore and I am pressing my own LTD vinyl releases on seven inch which have gone down well so far.
    I find this much more rewarding and can do it when funds allow.
    It’s called getting off your arse, doing something and selling your product….
    People should try it sometime. Oh and before anyone snipes that it’s expensive to press records, right now it’s at the cheapest it’s been for years. roughly £500.00 will get you 500 seven inches with a white paper label and white sleeve.
    Go figure.

  11. Emil Siravo says:

    Stop trying to turn Soundcloud into just another pay music site. They are unique, and artists love that. If they drop what makes them stand apart in the first place, they will loose their appeal and many of their subscribers. They are not trying to be just another youtube or facebook music promotion machine. I love the fact that I can share my music to fellow artists and listeners quickly and easily, and I can embed the player all over the internet. Record Companies are a thing of the past. Today’s musician needs no middle man, we directly market our sounds to the consumer. Trying to set up Soundcloud to pay royalties to record companies is like taking a step back into the middle ages. This is the digital age and FINALLY we dont need to cater to some record company middle man. Sites like Soundcloud let us enjoy this newly found freedom. You want us to throw that away? No Way! And bringing ads to soundcloud? Another terrible idea! I would cancel my premium subscription if that happened.

  12. Darren says:

    I think what you’re missing Emil is that SoundCloud carries numerous types of media on it: signed music, unsigned music, speech content, podcasts etc. In order for it to exist in the manner you describe, it cannot carry music signed to labels because for the most part those labels will eventually want to see some kind of recompense for all the plays on that platform. That’s why I feel it is inevitable that SoundCloud is going to wind up like YouTube. After all, on there if you (as an artist owning the music, without a label etc) upload your music, it doesn’t have to have ads running on it; people can enjoy it without that interruption. However for music belonging to labels, some (though not all) opt to run adverts in order to monetise those plays. So, it then boils down to this: if you want to listen to music from artists signed to labels who wish to monetise that content, you have to put up with the ads…

  13. Pliski says:

    Great article. But let’s face it. Music on the net is free. Anything you put on the internet is free. There’s no way to stop it. Forget about royalties. Spotify payed couple cents a month, Soundcloud doesn’t pay at all. Welcome to the XXI century. Soundcloud is the Music Industry killer, and the music liberator

  14. I think part of the problem is that those of us that joined and bought plans a few years ago with SoundCloud Classic found the community to be so supportive. We were spoiled. Most of that “community” was on the comment bar. Collaborations were far easier with the old track bar and sometimes there would be impromptu lyric writing going on in the nested comments tied to the track.

    Now the comments are barely legible. Your replies are separated from the track most times on another page. Most of the premium members I know won’t be renewing their memberships and seem to be going to other sites like Emeraz and Hearthis.at (which looks an awful lot like SC but doesn’t have good commenting either). I think musicians need to have a few different sites to do specific jobs and while it would be nice to be able to sell downloads from SC or be paid for plays there are other better sites for that.

  15. Chris says:

    I agree with Peter, but go further to say: SCRAP NEW SOUNDCLOUD. ….KEEP SOUNDCLOUD CLASSIC>>>> That is the format everyone knows and loves.
    New SC is a mess.

  16. Nick Cicero says:

    Reblogged this on Modern-Day Cicero and commented:
    This is still super relevant.

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