Soundcloud officially has all three major record labels on board as of this Tuesday. Their next step is to launch an all-out subscription service that will include a paid tier (most likely premium-based) coexisting with its free streaming model. Signing deals with Universal, Warner, and most recently, Sony, grants the major labels control over the degree of their catalogue’s availability. In other words, they will be the ultimate deciders on which songs are free and which will be paid to stream, a feat that has proven difficult with streaming counterpart Spotify.
Furthermore, with the new deals signed, Soundcloud is now offering authorized user-generated remixes and DJ sets on both paid and free tiers. The streaming service will use a new method of monetizing all samples and sounds through a sophisticated analyzation process that will divide all revenue correctly to the multiple rights holders. Before the licensing deals were signed, the volume of unlicensed mixes and remixes made Soundcloud a huge target for the three major record labels. The majority of its community consists primarily of EDM fans, festival-goers, and DJs. Hopefully this next step will bridge the gap between record labels and Soundcloud’s massive following of users and offer a middle ground.
But even with this major pivot in the Berlin-based streaming service’ business model, one question remains to be asked: Does the world need another streaming service? Despite Soundcloud’s concentrated and immense user-community, it’s still in competition with streaming services Youtube, Spotify, Apple Music, and Tidal, all of which provide a free tier of streaming services.
And while offering authorized remixes and DJ sets may seem innovative, recently Apple Music made the same announcement, partnering with Dubset Media Holdings which uses the innovative MixBank and MixScan technologies in dividing royalties.
Others, however are more optimistic. “Looking at conversion rates, it’s likely they’ll end up with low single digits,” says Mark Mulligan, an analyst at Midia Research, based on comparisons with other free services. But even a 5 percent conversion rate from SoundCloud’s 175 million users — 8.7 million — would make it a serious player.