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

Jul 21, 2022

Illustration: Brendan Lynch/Axios

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.
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