Since streaming became the dominant form of accessing digital music, there’s been mainly one business model—streamers collect money from ads and subscriptions, and then artists are paid proportionally from that big pool of cash based on how many times their songs are played.
While some companies have begun to recalibrate who gets the lion’s share of that money, only SoundCloud has eschewed that model entirely for some of its artists.
With Fan-Powered Royalties, the ad or subscription revenue generated from each user is allocated to the specific artists that the user listens to.
SoundCloud first introduced this audacious compensation approach in 2021 for SoundCloud Direct creators and expanded it to Warner Music Group in 2022. But in May 2023, Fan-Powered Royalties made a big expansion to indie artists who were signed to labels and distributors using licensing company Merlin (the third-largest digital rights manager for music streaming services, behind UMG and WMG). Over the course of the year, the number of artists benefiting from Fan-Powered Royalties more than tripled.
Beyond being a monetary boon for artists, Fan-Powered Royalties offers insights that can help artists better connect with fans. And even for the share of SoundCloud’s 40 million artists who haven’t opted in to Fan-Powered Royalties, SoundCloud is boosting its music-discovery capabilities. In July, the platform rolled out First Fans, which uses AI powered by subsidiary Musiio to process new songs uploaded by artists and funnel them instantaneously toward users who listen to similar artists.
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