Let’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.