April 21, 2022
In March of 2021, SoundCloud introduced a fan-powered royalty model. Now, to celebrate the one-year anniversary of this model’s adoption, the music-sharing platform is set to double artists’ payments on Friday, April 29th.
Read more about the fan-powered royalty model:
SoundCloud today announced that it will double artists’ compensation (attributable to on-platform streams, of course) on Friday to commemorate one year of fan-powered royalties. The latter refer to payments based upon actual listener engagement as opposed to a portion of overall revenue.
Under the fan-powered model, each user’s monthly payment or advertising revenue is distributed to artists (less fees) as a portion of listenership. For instance, an individual who spends 75 percent of his or her listening time enjoying music from one act would see this same post-fee percentage of said monthly payment ($9.99 for SoundCloud Go+) make its way to the artist at hand.
The existing pro-rata model, however, centers on dividing total revenue by each artist’s share of overall streams. This system, which is utilized by Spotify and others, favors big-name creators who rack up billions of streams and shortchanges indie artists with dedicated fanbases, according to critics.
(Tidal adopted direct-to-artist payments in November of 2021, and Spotify one month ago claimed that “a shift to user-centric payments would not benefit artists as much as many may have originally hoped.”)
Early evidence suggested that SoundCloud’s embrace of fan-powered royalties was proving beneficial for members of the music community, though, and higher-ups provided an additional update on the model’s performance today.
Independent artists earn an average of 60 percent more under the fan-powered model than the pro-rata system, SoundCloud indicated, with entire genres such as tribal house and neo-soul pulling down roughly twice as much as they previously did.
Lastly, regarding the impact of direct-to-artist payments, SoundCloud said that there’s been a 97 percent hike in fans contributing over “$5 to a single artist” since the fairer system’s adoption, as 30 percent more artists began monetizing their work during the last year or so.
In terms of SoundCloud’s initially highlighted plans to boost royalties for a day, “Fan-Powered Friday” will see the Berlin-based service “double the artist’s payout – matching 100% of the revenue earned that day,” execs made clear.
Moving forward, it’ll be worth monitoring the prevalence of fan-powered payments. Upon downplaying the model’s potential benefits, Spotify also communicated that it is “willing to make the switch” provided that there’s “broad industry alignment” on the pivot. Needless to say, this broad industry alignment appears unlikely, for the major labels are earning larger sums than ever from streaming.