Warner Music Group adopts “fan-powered” royalty model on Soundcloud for artist payouts based on actual listening

Warner Music Group will be the first major label to support payouts through this model

SoundCloud App

Image: M4OS Photos / Alamy Stock Photo

Record label Warner Music Group has signed a deal with SoundCloud to support artist payouts based on a “fan-powered” model, meaning royalties are earned based on actual listens rather than a portion of streams.

WMG will be the first label to support the model, which delivers the monthly revenue of each subscriber or ad-supported user to the artist.

This system is similar to that of solutions that seek to offer fairer pay for musicians such as Bandcamp. Streaming platform giants such as Spotify contrast these methods by using a pro-rata model, which pools revenue together and then distributes royalties as a piece of overall streams.

Digital Music News reports that Warner Music Group’s chief digital officer and EVP of business development, Oana Ruxandra, said: “The evolution of the music industry brings new ways to create, consume and monetise. As the ecosystem expands, WMG is focused on advancing and experimenting with new economic models to ensure the opportunities for our artists and their communities are maximised. SoundCloud has been an amazing partner in connecting artists and fans, deepening our relationship will allow us both to proactively build for the future.”

SoundCloud previously released a report through Midia Research that analysed the earnings of 118,000 musicians taking part in the “fan-powered” system. It claimed that 64 per cent of artists with between 100 and 1,000 listeners earned more from FPR than they would have from pro-rata (the Spotify model).

Four Tet recently won £56,000 from a court case with Domino Records concerning the royalties split for artists. He said that the label recognised he should be “paid a 50 per cent royalty on streaming and downloads, and that they should be treated as a license rather than the same as a CD or vinyl sale.” However, the label made a statement reiterating that the case’s outcome did not set a precedent for change in “how streaming should be categorised or streaming income split”.

This deal between Soundcloud and WMG could see the beginning of a change in the music industry regarding how artists are paid as a means to adapt to how listeners are consuming music, which is predominantly through streaming platforms as opposed to outright buying of records.