I won’t waste time here explaining, once again, the dangerously deep hole that streaming service Soundcloud has dug itself into as of late. For a complete summary of prior events, click here before reading on.
Today, Digital Music News released a leaked contract written by Soundcloud for legal licensing with independent music publishers. Although this specific copy is unsigned, it reveals all too much about the desperate moves the service is executing in order to save their business and reputation. Last month, a deal was reached between Soundcloud and the National Music Publisher’s Association, the trade association that represents all American music publishers and their partners, that indicates the contract’s legitimacy in the negotiations currently taking place.
The contract stipulates that Soundcloud will be required to pay the NMPA either 10.5% of their overall revenue (including advertisements) or 22% of their revenue on sound recording rights. Whichever percentage stands higher is the one they’ll have to pay. The deal leaves room for similar ones to be made between Soundcloud and the three major publishing companies: Sony, Warner, and Universal. Through the use of a Favored Nation Clause, however, the NMPA will automatically receive equal compensation to the highest earning partner of Soundcloud, meaning: if Sony receives $1M from Soundcloud, and the NMPA only recevies $600k, Soundcloud will be contractually obligated to make up the difference and give the NMPA an extra $400k. Fucked up, right?
Finally, the contract proposes the addition of two new “paid” tiers within Soundcloud’s service. The Additional Services tier “would let users pay for an audio and visual ad-free experience and download a limited amount of music, presumably similar to syncing options from services like Spotify.” The deal states that labels will be entitled to 18 cents per premium user per month, but only if this revenue is higher than the other two forms mentioned above. Additional Services will also restrict the content able to be listened to, with only the final tier allowing for a full listening experience. The SoundCloud Full Catalog Subscription Service (catchy name) offers more listening content, but can grant labels 80 cents per user per month. Soundcloud will be required to pay a $350k advance to labels under this contract. The service will continue to offer a free yet ad-saturated tier.
Also included in the TechCrunch article was a video clip from a conference held last year. In it, Soundcloud CTO Eric Wahlforss is put on the chopping block during a 20-minute grilling of his business practices, prospective future, and relationship with both the big labels and smalltime contributors. During the conversation, Wahlforss manages to avoid nearly every hard hitting question thrown at him, while repeatedly describing his “excitement” for the company’s future and the “trickiness” that lies in finding the boundary where misused copyrighted content must be taken down. The interviewer does not sit idly by, however, as he repeats questions several times and points out Wahlforss’s blatant avoidance of certain topics.
For a truly frustrating and astonishing performance, watch below.