Signs have been pointing to SoundCloud eventually becoming a pay service for a while now. Major labels and copyright owners have been pulling down music left and right from the site. Without a reliable flow of audio, there’s nothing to keep users clicking. To keep that flow going, SoundCloud would have to secure labels’ interest, and that means monetizing their service. Ads are already part of the music-hosting company’s model, and now a leaked contract between SoundCloud and the National Music Publishers’ Association has revealed more details about the inevitable subscription packages.
The 19-page contract can be seen in its entirety below, but the immediate takeaway is that SoundCloud is planning a three-tier system. At the base would be a free, ad-based service that would allow users a limited access to the site’s catalog. Next up would be an “Additional Services” level, something that would remove the ads and add more catalog, but not everything. To get full access to all of SoundCloud’s music, you’d need to opt for the “Full Catalog Subscription Service”.
As for how this all translates to pennies in the labels’ pockets, TechCrunch reports that the companies would be owed 10.5% of all revenue from subscriptions and ads, or nearly 22% of what is earned through any recording rights owned by SoundCloud, whichever is higher. There’s a clause that says the labels could take $0.18 from each Additional Services subscriber and/or $0.80 from each Full Catalog Subscription Service subscriber if that would net the labels more than the 10.5% or 22% payouts at each level.
What’s more, there’s a “Most Favored Nation” clause that would ensure independent labels compensation equal to deals cut with major labels after market share is accounted for. SoundCloud also offered an advance of $350,000 to each independent label and publisher.
The contract is unsigned, so it’s not known if this is the actual deal the NMPA agreed to last month. However, it’s become pretty obvious that if listeners want to continue to use SoundCloud to its fullest potential, they’re going to have to start ponying up some dough.