SoundCloud will pay indie artists based on their actual listeners

SoundCloud’s trying something new for a major music streaming service: paying indie artists a share of their actual listeners’ subscription fees. The company calls this “fan-powered royalties,” and it means a SoundCloud subscriber’s subscription fee or advertising revenue will be divvied up among the artists they actually listen to, rather than going to a big pot and being split up among the platform’s most popular artists.

This is a major change for the industry and one indie artists have pushed for. Currently, most music streaming platforms reward the world’s biggest stars with the most royalties. At Spotify, for example, the company figures out how many streams happened on its platform in a given country and then calculates what portion of those streams went to a specific artist. The result is that smaller artists, who might not have massive reach but also have a dedicated, loyal audience, end up not making much money because they represent a smaller portion of the overall streams.

SoundCloud says today that its new system will change that. It specifically cites one musician who has 124,000 followers. With the old model, this artist made $120 a month, but with fan-powered royalties, he makes $600.

For now, SoundCloud hasn’t worked out a deal with the three major record labels — Warner, Sony, or Universal — but it’s able to implement this model with the indie artists it directly monetizes through its SoundCloud Premier, Repost by SoundCloud, and Repost Select tiers. (These services make SoundCloud the distributor of the music, either only on SoundCloud or on other music streaming services, too.) The nearly 100,000 artists who participate in these programs will be the first to experience fan-based royalties. They’ll receive their first payouts after April 30th this year.

It’s unclear how SoundCloud will balance the royalties with its payouts of the major music labels or how it’ll divvy up a listener’s revenue. But for now, this feels experimental. If it’s successful, artists could advocate for more platforms to take this model on, and if it’s not, then the streaming platforms can continue with the status quo, possibly to the detriment of smaller artists.

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