Why is SoundCloud’s new ‘fan-powered’ payout model so revolutionary?

SoundCloud launches user-centric-payouts

SoundCloud has announced the launch of a more ‘user-centric’ streaming payout model: fan-powered royalties.

Why is SoundCloud music the perfect platform for that and what will that mean for the music industry? Find it out in this blog post.

What is the idea behind SoundCloud’s ‘fan-powered royalties’?

At the beginning of March 2021, SoundCloud music announced the so-called ‘fan-powered royalties’, a system where independent artists can get paid more because they have dedicated fans streaming their music.

Music owners get paid based on individual subscriber’s behavior. The more fans listen to them on SoundCloud music, the more they get paid.

It works by using a percentage of each subscriber’s fee being distributed only to the artists/labels they have individually listened to that month. SoundCloud music is the first major DSP to implement this streaming payout model.

Initially, it was believed that SoundCloud would keep a 45% from the fan-powered royalties, according to information published by Vice a few weeks ago, but in a recent statement by a spokesperson from SoundCloud in Music Ally, it was revealed that the number is lower as they will be also paying mechanical royalties and performance publishing royalties out of that share, as well as other costs.

It won’t matter if a listener is a paying subscriber or a free user. The fan-powered royalties will also be determined by a calculation of “how much someone listens to an artist relative to all of their listening time in a month.”

How SoundCloud's fan-powered royalties work

Photo via SoundCloud

Why is SoundCloud’s user-centric payout model for streaming royalties so revolutionary?

This new user-centric streaming payout model by SoundCloud (channel integrated with SonoSuite) is in contrast to the current ‘pro rata’ royalty payment model, where music rights-owners get paid from a giant pool according to their market share of total plays across the platform. This is mostly beneficial for big (mainstream) artists.

SoundClouds’s new user-centered model seeks to add a balance and bring more benefit to independent music owners as they get paid more considering fans’ overall listening times.

Why SoundCloud music is perfect for this kind of streaming royalties payment

A streaming payout model like this that seeks to balance the game between mainstream and independent music owners may be a good fit for a DSP like SoundCloud, which has built a big community of independent music creators (around 100,000).

With this new addition, SoundCloud music gives the opportunity to pay the royalties using the two models at the same time – the pro rata and the fan-powered royalties.

When will SoundCloud music officially launch the new fan-powered royalty payment model?

From April 1st, independent music owners are being paid according to the new fan-powered royalty payout model.

SoundCloud has launched a dedicated website about it, where you can discover how it works and find examples of the increasing calculation of royalty ppayments.