Warner Music to adopt SoundCloud's Fan-Powered Royalties payout model

SoundCloud has struck a global licensing deal with Warner Music Group that will see WMG become the first label to adopt SoundCloud's Fan-Powered Royalties payout model.

Why it matters: Given WMG's status as one of the "Big 3" recording companies, SoundCloud certainly hopes this deal will pave the way for similar agreements from others.

• Warner Music is the third-biggest recording company, behind Universal Music Group and Sony Music Entertainment.

How it works: WMG's artists will now be able to be paid more directly based on fan listening behavior.

• Royalties are paid based on how much a user listens to a certain artist compared to others and how many advertisements they hear while doing so.
• This model is designed to ensure that artists get more directly compensated for their fans' listening behavior and replaces the traditional pro-rata model where money is pooled together.
• SoundCloud launched its FPR model last year.

The big picture: Even as sales for physical media like vinyl records and cassette tapes have made a comeback of sorts, the heavy majority of music listening happens on streaming platforms like Spotify, Amazon and Apple Music.

• At the same time, many artists have voiced concern over the amount they are compensated for their music on streaming.
• There's been a growing number of web3 and blockchain-based platforms from the crypto world that have launched their own platforms designed to better compensate artists.
• "Today's deal is a major milestone because, under Fan-Powered Royalties, more artists get paid more money. But even more importantly, Fan-Powered paves the way for artists to create even more opportunities to monetize their art beyond streaming and create more value, driven by engagement with their fans," SoundCloud president Eliah Seton said in a statement.