SoundCloud or PoundCloud? New developments as SoundCloud choose cash over artists

In Latest News by pg-admin

The past week has seen a media frenzy over SoundCloud’s introduction of advertising on the streaming site. For the moment, adverts are only appearing on the US version of the site and only on the accounts of certain artists and content creators invited by SoundCloud to take part in the new ‘Premier’ tier of the platform. Adverts are set to appear on international versions of the site in the near future whilst SoundCloud have stated their eventual aim is for all artists to be given the option to join Premier and allow advertising on their accounts.

So is this a good thing for SoundCloud’s artist base? At first glance, the answer appears to be yes. Whilst the actual percentage creators get for hosting adverts on their accounts is as yet undisclosed, a SoundCloud spokesperson has stated that artists will get the “majority” share of ad revenues. Given the problems musicians are having monetising themselves, this seems like a positive step in the right direction.

However, it is all too easy to hear the words ‘artists’ and ‘paid’ and get carried away with the idea at the expense of the bigger picture, and this seems to have been the reaction of most of the press to the news. Taking a closer look at the details of SoundCloud Premier leads to a different conclusion.

The first thing to note is that access to SoundCloud Premier and sharing in the advertising revenue is, at the moment, by invitation only. Invitations to join Premier have so far been accepted by the major music publishers Sony/ATV and BMJ; the distributors INgrooves and Seed; and a few independent artists including rappers GoldLink and Little Simz, indie band Jakubi, acoustic singer Cyra Morgan and film composer Oliver Sadie.

Commenting on the Premier partnerships, SoundCloud spokesman Luke Geoghegan stated, “We believe the range of different partners is indicative of the fact that SoundCloud is for everyone, not just major labels”, but it is hard not to take his words with a pinch of salt. If SoundCloud is for “everyone”, why are only the major institutional players and a token handful of independent labels and artists being invited to benefit from Premier?

The answer is simple: big-ticket names attract advertisers and advertisers bring dollars.

SoundCloud has a cash flow problem. In 2012, the most recent year for which accounts are available, the company made a loss of £12.4m as it failed to monetise its user base. Given that the company has raised around £65m in financing, it needs to start finding ways of turning a profit to please its investors. SoundCloud’s current business model is not making any money, so it is on the hunt for one that does.

Working with advertisers is an easy solution to SoundCloud’s problem, with proven successes in the music field; think YouTube and Spotify. However, for advertisers to be attracted to SoundCloud as an ad platform it needs to make itself more consumer-friendly. Which means cultivating music listeners at the expense of music creators.

For those paying attention, this isn’t news. Over the past few years, SoundCloud has taken increasing steps to alienate itself from its initial core user base of creators, whilst simultaneously making the platform more appealing to listeners. Although SoundCloud was founded as a community for music creators to showcase their work and connect and collaborate with other artists, recent changes have seen a definitive shift in emphasis towards listeners.

The most obvious of these changes was the shiny redesign of the website at the start of 2013. Whilst the new design did give the site an appealing professional polish, the modifications were more than just skin-deep. Features useful to creators, such as the commenting function, were made less prominent (and thus less useful as a feedback tool for artists) under the new design, whilst those aimed at listeners were improved and made more usable. Whilst making the site more accessible to listeners cannot be said to be a bad thing, the disregard which SoundCloud showed for the effect this would have on the site’s functionality for creators clearly indicates where their priorities lie.

The other major sign of SoundCloud’s shifting allegiance away from creators is the increasingly hard-line attitude the site is taking towards policing copyright infringement. To appreciate the significance of this, it is helpful to understand the context around SoundCloud’s formation and the way the site was originally used.

SoundCloud was originally built and marketed in 2007 as a vehicle for DJs and producers to exhibit their work as well as share it for use by other like-minded musicians. From a copyright perspective, problems of infringement arose not only from mash-ups of other artists’ original material for which the creator did not legally have permission to use, but more importantly, from the practice of creators making their tracks available to download freely for use, distribution and performance by other artists. Whilst this sharing and collaborative ethos was one of the main purposes of early SoundCloud, and the decisive reason for its growth and popularity amongst music creators, legally it was a minefield.

SoundCloud’s Terms of Use, which all users agree to when starting an account, clearly state that SoundCloud does not endorse copyright infringement by its users. The Terms of Use also state that, if notified by a third-party rights holder that their copyrighted work is being uploaded by a SoundCloud user without the rights holder’s permission, that SoundCloud has the right to close that user’s account.

This is all the standard legal backdrop required in any Terms of Use for a user-generated-content platform like SoundCloud, but for most of its existence SoundCloud did little, if anything, to enforce it. It tacitly ignored the pervasive instances of copyright infringement which occurred as these were fundamental to the use creators were making of the site – to promote their work and creativity through sharing tracks.

Around the start of 2011 this changed, as SoundCloud took a more militant approach to copyright infringement. It implemented content identification technology which automatically scanned uploaded tracks for copyrighted material, gave Universal Music ‘trusted sender’ status which allowed the label to directly remove tracks to which it owned the rights, and closed the accounts of large numbers of creators who SoundCloud deemed to have consistently flouted copyright regulations, even those who had paid a subscription to be ‘Pro’ members. This latter applied to unknown artists but also to big name users such as house DJ Kaskade, who protested the actions of the site via his Twitter and blog earlier this year.

Whilst these more stringent copyright enforcement tactics were at times in error and consistently lacked transparency, in many cases, legally, SoundCloud was in the right – but this is not the issue here. What is significant is the complete U-turn the company took from its previously laissez faire approach to infringement. It is this total change in attitude which is the most telling indicator that SoundCloud was moving away from its previous approach of centring the platform around creators and distancing itself from their needs.

SoundCloud today is a very different entity from when it was founded in 2007. It is no longer a platform whose primary emphasis is on artists and forming a creative, collaborative community. Instead, it is now a corporate creature subject to the needs of investors – generating revenue and functioning within the confines of the law.

And this is the filter through which SoundCloud’s new Premier program should be viewed. Striking a deal with advertisers is not for the benefit of artists, it is for SoundCloud as a business. Yes, selected creators get a “majority” share of ad revenue for hosting brands on their account page, but all of those minority shares that go to SoundCloud add up and give the company a nice fat revenue stream.

Presenting SoundCloud Premier as motivated by the benefit it gives to artists is just marketing hype. If remunerating artists was the main aim there are more effective ways SoundCloud could go about it, streaming royalties for instance, which would go to all creators on the site not just those invited onto Premier. More fundamentally, SoundCloud’s actions over the past few years clearly show that the welfare of its artist community is no longer the company’s primary consideration – promoting SoundCloud as a business venture is.

In this way, SoundCloud is a victim of its own success and follows the familiar pattern of a well-meaning start-up losing its original purpose and alienating its early user base on the route to profitability and growth. This is unfortunate but is not what is being debated here. What is an issue is the hypocrisy of SoundCloud’s PR spin, selling itself as artist-driven when it clearly stopped thinking of them a while ago. SoundCloud has changed and that’s a shame, but what is more regrettable is how it lost its integrity on the way.

Written by Zaz Ali