SoundCloud to Run Ads, Share the Loot

Many SoundCloud users are dismayed by the thought of ads littering the site, but others are more willing to embrace the business reality of providing a free Web service. There's also the prospect of opening a channel of revenue for indie artists through the program, although it appears that at least initially, the ads will run mainly with licensed content from the likes of Sony and BMG.

SoundCloud on Thursday launched On SoundCloud, a program that will facilitate advertising on the site.

Membership initially is by invitation only; SoundCloud will roll it out to a select number of artists.

It later plans to bring on more advertisers and make the program available to the general membership.

The announcement sparked a mixed response from members.

Torn Between Love and Hate

“Really dude?” wrote “creator 1,000,001. “Ads? Come the hell on, it gets worse every update.”

Creator 1,000,001 suggested SoundCloud follow the band camp model of buying tracks and splitting profits instead, adding that “I’m a huge supporter of [SoundCloud] and I gotta be honest here, yall are gonna lose a lot of ‘creators’ over this.”

Other members voiced concerns ranging from fear that the move would benefit large corporations to concerns that mixes, which often include unlicensed content, would be impacted over copyright issues.

Others, however, like “Praverb,” argued that taking ads ultimately would benefit the membership.

“I personally think more creators will embrace [SoundCloud] given the potential to monetize,” Praverb contended. “The increase of ads did not stop YouTube from growing, did it?”

SoundCloud “needs this to compete with YouTube/Spotify/etc,” said “jamesfixt,” general manager and cofounder of FiXT. “If SoundCloud gets this right, it could become more than just a promo platform, which is all it’s been so far …, and could take a much bigger step into the world of seriously supporting artists/labels with a revenue model.”

Member “pmmm” issued a caution, saying SoundCloud “didn’t have much of a choice [because] they have lost so many Pro account members recently because of their below average service [and] had to find a new income stream ASAP,” but suggested improvements should come first.

Candace Locklear, of SoundCloud’s PR agency MightyPR, declined comment because “we are all jammed up over here.”

What On SoundCloud Offers Musicians

With the new program, SoundCloud has restructured its offerings.

It used to have Free, Pro and Pro Unlimited tiers. These have been consolidated and changed: Free tier users are now called “Partners,” and have more upload time; Pro and Pro Unlimited users are now called “Pro” partners; the third tier is labeled “Premier.”

However, the Pro and Pro Unlimited plans still differ; the Pro plan provides six hours of upload time, while Pro Unlimited has no limit.

Advertisers for the Premier program reportedly include Red Bull, Jaguar and Comedy Central. Their ads will run only with licensed content, provided by music publishers Sony/ATV and BMG, distributors INgrooves and Seed, the comedy site Funny or Die, and a few independent artists.

SoundCloud reportedly has been holding talks for months with the three major record companies — Universal, Sony and Warner.

It’s not clear how the royalties will be split, but members who make their output available to Getty Images, which teamed up with SoundCloud in 2012, apparently get 75 percent of the total incoming royalties.

A Win All Around

SoundCloud claimed 250 million listeners as of last fall.

However, “in terms of awareness and audience, SoundCloud is nowhere near the stature of Pandora, Spotify, Heart, iTunes Radio or the market leaders,” Ross Crupnick, founder and managing partner of Musicwatch, told the E-Commerce Times. “We estimate it’s used by about 5 percent of the Internet population.”

Its indie music content makes it difficult to compare to other players, which carry mainstream music, Crupnick said, but “it does fulfill a unique niche for music discovery and promotion that is different than some of the more well-known services [as well as for] niche music fans.”

If SoundCloud can obtain needed funding, artists can share in the revenue, and marketers [can] reach a prime audience, Crupnick suggested, the move to advertising will be “a win all around.”

Richard Adhikari

Richard Adhikari has written about high-tech for leading industry publications since the 1990s and wonders where it's all leading to. Will implanted RFID chips in humans be the Mark of the Beast? Will nanotech solve our coming food crisis? Does Sturgeon's Law still hold true? You can connect with Richard on Google+.

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