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article imageSoundcloud announces $100 million in funding, plans to monetize

By Lidya Patal     Aug 28, 2014 in Music
Once a haven for independent artists, SoundCloud has recently gone slightly corporate. With the $100 million in funding raised since 2007, the platform will now monetize using advertising, a premier tier and a subscription service.
Described by The New York Times as the "ubiquitous wild child of the digital music world", SoundCloud has long served as a haven for unsigned artists, unofficial remix masters and bedroom DJs since its inception, an extraordinarily popular (and free) service curated by its audience for its audience. SoundCloud has no licensing agreements with major labels, nor has it prohibited uploads from its user base. The Wild West of the streaming music world may have been a better nickname for the service through its successful seven-year lifespan.
Not anymore.
On August 21, it was reported SoundCloud has raised more than $100 million in funding since its launch in 2007. SoundCloud will trade its pared down, spartan aesthetic for an advertising-based look and, in another new development, pay its more popular artists royalties. It will unveil a platform called On SoundCloud, that will include a premier, invite-only tier to allow creatives to monetize their content with selective advertising. Eventually, SoundCloud also plans to roll out a subscription tier by which customers can bypass advertising and be privy to everything that comes along with a premier tier.
SoundCloud's chief business officer, Jeff Toig, said the monetization effort is the logical third phase of the company's growth model. First, SoundCloud developed the tools to allow users to upload and track content, then the company attracted the audience to make them a go-to digital music platform. With easy-to-use tools and 175 monthly visitors, SoundCloud has accomplished those goals. Now they're hoping advertising and a subscription model will solve the revenue issue.
Up until the announcement, SoundCloud had rejected advertising and earned most of their revenue from charging artists to host their music files. The introduction of a premier tier means partnerships will everyone from Red Bull to Comedy Central, with ads preceding tracks and mixtapes similar to those pre-rolls on YouTube videos.
SoundCloud will diverge from the typical music start-up in one key way: The company will launch their monetization scheme without making deals with the three major record labels, Universal Music Group, Sony Music Entertainment and Warner Music Group. Since so much of Soundcloud's content (80%) is user-generated, the website doesn't think it needs licensing deals with the dominant mainstream labels. However, if a paid subscription service is implemented soon (as plans indicate) SoundCloud expects to cut deals with the majors as well as the larger indie labels.
As SoundCloud continues to offer a legitimate alternative to the YouTubes and Spotifys of the world, many in the industry warn the company needs to make nice with the license-holders if they hope to turn a profit.
“SoundCloud have to be good actors with the rights owners because no one will invest one more dollar in the business if they are at war with the content owners,” one major label executive told Billboard. “If they don’t figure out how to monetize, or if they make enemies of the content companies, they will not be long for this world.”
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