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SoundCloud is bringing music creators even closer to their biggest fans with a new product that gives artists access to granular user data and facilitates direct, one-on-one interaction with their most loyal listeners.
Dubbed simply “Fans” and now available on SoundCloud for Artists, the tool allows artists to tap into the platform’s proprietary data and sort their most engaged listeners based on factors like comments, listening behavior, sharing habits and location — and even identify who among their listeners are fellow artists. Using SoundCloud’s pre-existing messaging feature, they can also directly message individual fans to share previews of upcoming releases via private links; sell tickets and merch; and/or just say thanks. (SoundCloud notes there’s an opt-out option for users who don’t wish to be contacted by artists.)
Tracy Chan, svp of creator at SoundCloud, says there’s a special power in fans receiving direct acknowledgment from their favorite artists that can unlock “real revenue opportunities” for creators.
“[It’s] one thing to blast out, ‘Hey, come attend my concert or my show,’ but actually asking specific people, like, ‘Hey, I know you’re a super fan, will you come to my show?’ is a very kind of different way to ask,” Chan says. “You can imagine the possibilities of commerce that open up between artists and fans once the communication lines are open.”
Prior to Monday’s announcement, SoundCloud had been running a six-week test of the tool, which is currently in beta, with roughly 10,000 artists. Starting now, the platform is opening up the product to an additional 50,000 artists who are part of its premium Next Pro tier.
Chan describes the tool as “the next step” in SoundCloud’s fan-powered royalties payment system first unveiled in March 2021, which has since been opted into by both Warner Music Group and Merlin. Unlike the traditional pro-rata model, under which streaming services collect all subscriber revenue and then pay out earnings based on each rightsholder’s share of total streams, fan-powered royalties direct a portion of every listener’s subscription or advertising revenue to the rightsholders for the specific tracks they listen to. Some of the user data SoundCloud artists now have access to under the new tool derives from that fan-powered royalties system.
As part of the unveiling, SoundCloud noted several successful individual use cases among the 10,000 artists included in the previous phase of the tool’s beta period. These include Lil West, a hip-hop artist from Delaware who used the artist filtering tool on Fans to connect with fellow artists 100 gecs and nothing,nowhere., leading to collaborative track releases. After gaining access to the tool, Def Jam artist Armani White worked with SoundCloud and his label to set up a listening party/meet-and-greet with his top fans at SoundCloud’s Los Angeles office on Thursday.
Fans is the latest effort by SoundCloud to differentiate itself as a more artist-friendly alternative to rival streaming services. Chan frames the tool in opposition to the limited functionality offered by other major streamers along with ticketing and merch platforms, which don’t allow artists to identify their individual fans or connect with them one-on-one.
“When artists are like, ‘Cool, I want to go connect with my fans’ [on other streaming services] … they see lots of charts and graphs describing their audiences, but the platforms will not tell artists who their fans are…so that means you can’t market to them,” he says.
According to data provided by SoundCloud, the platform currently boasts more than 320 million tracks from over 40 million creators and operates in 193 countries.
SoundCloud named Eliah Seton as its new CEO, the company announced today (March 9). Seton, who has served as president of the company since 2021, replaces Michael Weissman, who is leaving the company “for a new opportunity,” according to a press release.
Simultaneously, the company announced that Union Square Ventures founder Fred Wilson has been named chairman of the board. Wilson, who has been on the board at SoundCloud since 2011, replaces company founder and former CEO Alexander Ljung, who will be taking a new role as chairman emeritus and remain a member of the board.
“As the only platform with direct relationships with artists and fans at scale, SoundCloud has a singular opportunity to forge the future of the music industry by unlocking the full power of fandom,” Seton said in a statement. “I am grateful to Mike for our partnership, to Fred and the board for their confidence and thrilled to work alongside our incredible leadership team to realize that vision.”
Seton joined SoundCloud from the Warner Music Group, where he spent a number of years first working for former WMG CEO Stephen Cooper, then as senior vp of strategy and operations for Warner International, before moving to ADA, eventually being named president of independent music and creator services for the major label. He moved to SoundCloud in 2021 during a shakeup of the company, during which Weissman moved into the CEO role and SoundCloud began an evolution from an indie-focused streaming service towards a hybrid organization that now offers label and artist services, as well as distribution, audience insights and a growing roster of artists and partnerships.
During that period, SoundCloud also rolled out a fan-powered royalties initiative, which switched up how independent creators got paid on the platform, and Seton led the deal that brought Warner Music artists into the fan-powered royalties fold. In August, the company laid off 20% of its global staff while it pursued a different strategy amid the advertising-affected market, though in December it announced its revenue grew 19% in 2021, according to financial statements published in Germany. In the past year, SoundCloud has inked joint ventures with Quality Control’s management wing Solid Foundation and Atlanta-based management and services company Third & Hayden, and partnered with artists such as Lil Pump, Tekno and Aly & AJ, among others.
Wilson replaces Ljung as chairman, who originally founded the company and was its CEO from 2007 to 2017, at which time Kerry Trainor took over as CEO and Weissman as COO. According to a press release, Ljung will “remain closely engaged and available to the company’s management team and employees going forward.”
“I have served on SoundCloud’s board for more than a decade and can honestly say that I have never been more excited about the direction and leadership of the company,” Wilson said in a statement. “Eliah’s passion for the business of music, relationships and vision are exactly what is needed for the next phase of SoundCloud’s growth. On behalf of the board, I want to thank Mike for his leadership, dedication and partnership over the past several years and welcome Eliah to this new role.”
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Spotify finished 2022 with more than 100 million tracks in its catalog, according to the company’s annual report filed Thursday (Feb. 2). That’s 18 million more than the 82 million tracks streaming service had the year prior — which averages to about 49,000 new songs per day.
By most measures, 49,000 tracks a day is a huge amount of music. At three minutes per track, it would take about three and a half months to listen to a single day’s worth of new music from start to finish.
But 49,000 is only half the number that’s been cited in recent months. Universal Music Group chairman and CEO Lucian Grainge said in September 2022 that 100,000 tracks were being “added to music platforms every day.” Earlier that month, former Warner Music Group CEO Stephen Cooper said “roughly 100,000” tracks were uploaded “to SoundCloud, Spotify, Apple” and other platforms “on any given day of the week.”
Not that self-reported numbers have always been in sync with executives’ statements. In April 2019, Spotify CEO Daniel Ek said “nearly 40,000” new tracks were being uploaded daily. Based on Spotify’s own disclosures, however, the daily average that year was 27,000. In Feb. 2021, Ek said the number of daily tracks added to its catalog had surpassed 60,000. Spotify’s disclosures showed the daily average was 55,000 in 2020 — perhaps a function of artists staying home during the early days of the pandemic — but fell to 33,000 in 2021.
But there certainly could be 100,000 new tracks uploaded daily in aggregate. There’s more music on the internet than Spotify adds to its catalog. SoundCloud, for example, adds tracks at a faster rate than other platforms because it licenses music from record labels and distributors while also accepting direct uploads from independent musicians. The service currently boasts 40 million artists on the platform who are unlikely to be found elsewhere. When I wrote about the size of music catalogs in April 2022, SoundCloud had added 50 million tracks in about 12 months, or about 137,000 per day. It appears to have largely maintained that growth rate. From Feb. 2022 through Jan. 2023, SoundCloud added 45 million tracks — an average of 123,000 per day — according to numbers found in the company’s press releases.
Whether the number of new tracks being uploaded daily is 49,000 (17.9 million annually) or 100,000 (36.5 million annually) matters. Anybody following trends, making forecasts or deciding on M&A strategies should understand the size of the market and where the opportunities lay. The lower number is the amount of music landing on the world’s most popular audio streaming platform. The higher number better represents the size of what’s called “the creator economy,” or the universe of music being produced by novices, professionals and everybody in between.
The future of music is more music. People will still flock to chart-topping artists and congregate around a small number of superstars. But the barriers to entry are now so low that virtually anybody can commercially release music, and music streaming services increasingly serve every music niche in existence. The music creator tools market was worth $4.1 billion in 2022, according to MIDiA Research, and MIDiA forecast that the number of people paying for music software, skills sharing and learning will grow from 30 million in 2021 to nearly 100 million by 2030.
The technology to get that music online is well-established. Decades ago, Apple’s GarageBand opened the doors to self-produced music. Today, making music is far easier. BandLab, an online music creation platform, has 60 million users. Spotify-owned Soundtrap is another online music creation and collaboration tool. Any number of low-cost distributors, such as DistroKid and TuneCore, will get creators’ music to download and streaming sites around the world. LANDR cuts out the middleman and acts as both digital audio workstation and distributor.
That glut of music is good for some, bad for others. It’s great for distributors and developers of music creation tools. It’s bad for record labels that must fight harder to get their tracks heard and risk ceding market share. It’s a mixed bag for consumers who have unlimited access yet face a paradox of choice. How the industry will deal with all this music is unclear. What’s certain is there’s a lot of music out there — and the pace of new releases is only going to accelerate.
Emmy Lovell was named global head of music at SoundCloud, the company announced Thursday (Jan. 19).
In the role, Lovell will lead SoundCloud’s global music strategy and oversee its artist and label relations as well as its commercial label partnerships teams. She joins SoundCloud from Napster, where she most recently led the Napster app relaunch as interim CEO; prior to that, she was the company’s chief strategy officer. Based in London, she’ll report to SoundCloud chief content and marketing officer Lauren Wirtzer-Seawood.
“Emmy is the consummate music executive,” said Wirtzer-Seawood in a statement. “Her passion for the business and deep expertise in partnering with artists at all stages of their careers is critical as we continue to pioneer the future of fandom and unlock the full potential of the artist and fan relationship on SoundCloud.”
Lovell’s hire comes amid a company revamp that has seen SoundCloud working to reinvent itself as a distribution and artist and label services operation. Last year, the company struck a joint venture with Quality Control’s Solid Foundation, launched SoundCloud for Artists and signed direct partnerships with artists including Lil Pump, Tekno and Kelow LaTesha while also beefing up its artist partnerships team with the hires of Jessica Rivera and Maurice Slade. But it also experienced setbacks; in August, the company announced it would be cutting 20% of its workforce, with a rep stating the layoffs were “due to a significant company transformation and the challenging economic and financial environment.”
Elsewhere, SoundCloud partnered with the music collaboration and data management tool Session, acquired music AI company Musiio and signed a global licensing deal with Warner Music Group that adopted the user-centric “fan powered royalties” model — a switch from the pro-rata model traditionally utilized by streamers.
In addition to Napster, Lovell previously served as executive vp of WEA, part of Warner Music Group’s artist and label services arm, and also had stints at EMI Music, Bauer Media and the BBC.
“SoundCloud’s influence in pop culture is felt globally and their fast-paced and progressive approach to challenging the status quo in the music industry is refreshing,” said Lovell. “I look forward to working with Lauren and the team to continue the brilliant and innovative work SoundCloud has already done to create connection between their vibrant artist and fan communities.”
SoundCloud Holdings GmbH and its subsidiaries reported revenue in 2021 of 230.7 million euros ($273 million at the average exchange rate in 2021 of 1.18308), up 19% from the prior year, according to audited financial statements published by the privately held company in Germany on Tuesday (Dec. 13).
SoundCloud, which originally gained popularity for its embeddable streaming widget, has a unique business model that mixes tools for music creators and listening for fans. Fan revenue — from advertising and subscriptions — improved 16.6% to 143.3 million euros ($170 million), or 62.2% of total revenue, down from 63.5% in 2020. Revenue from subscribers grew 20% year over year and exceeded internal expectations, according to the financial statements. Advertising revenue was in line with expectations, with 12% year-over-year growth.
Revenues from creator tools grew 23.7% to 87.3 million euros ($103 million) and increased to 37.8% of total revenue, up from 36.5% in 2020. The company attributed the improvement to the number of artists that chose to self-release music through the platform to take advantage of organic growth at major DSPs such as Spotify, as well as improving monetization of platforms such as Meta, TikTok and Twitch.
Founded in 2007, SoundCloud originally gained popularity through its ubiquitous, embeddable music player. It eventually launched a subscription streaming service, SoundCloud Go, in 2016, but did not rank in the top eight music subscriptions in the second quarter of 2022, according to figures released on Dec. 7 by MIDiA Research. Deezer was the eighth-largest subscription service with 9.5 million subscribers and a 1.5% global share. Spotify had the largest share with 30.5%, equal to 187.8 million subscribers. SoundCloud’s financial statements did not reveal the number of subscribers to its streaming service.
Unlike its peers, though, SoundCloud has always been a unique destination for artists to connect with listeners. The platform offers SoundCloud Next Pro, a service that allows artists to upload tracks to the platform and distribute them to other streaming services as well as pitch music to SiriusXM, which owns a minority stake in SoundCloud following a $75 million investment in 2020. A 2019 acquisition of Repost Network, an artist rights management and distribution platform, provides SoundCloud with a subscription product that offers creative services such as promotion and marketing.
In January 2022, SoundCloud added a third business segment, called roster, to connect fans and artists. Roster provides support services for emerging and developing artists. Its launch coincided with the announcement of a joint venture with artist management firm Solid Foundation Management to “identify, invest in, and foster the careers of artists featured.”
Gross profit margin — defined as gross profit as a percent of revenue — improved 12% to 35.4% on the strength of growth in subscriptions. Content costs — mainly royalties paid to record labels, publishers and independent artists — totaled 120.8 million euros ($143 million), up 14.1% from 105.9 million euros ($125 million) in 2020. As a percent of fan revenue, content costs declined to 84.2% from 86.1% in the prior year.
Despite the improved gross margin, operating loss deepened to 21.1 million euros (-$25 million) from 15.4 million euros (-$18 million) in 2020. SoundCloud increased its marketing spending 69.7% and made “significant investments” in headcount to help “propel the company into its next phase of growth.” Although Russia’s invasion of Ukraine has created uncertainties and disrupted supply chains, it has had a limited impact on SoundCloud’s financials, as direct business with partners in Russia accounted for only 0.5% of its annual revenues.
Since the end of the period covered by these financial statements, SoundCloud announced in August its plans to lay off 20% of its workforce due to “a significant company transformation and the challenging and economic and financial environment,” a spokesperson told Billboard at the time. The company had an average of 451 employees in 2021, up from 392 in 2020, with growth spread across its technology, business and operations segments.
SoundCloud expects slower growth in 2022 due to inflation and other macroeconomic trends that could stifle consumer spending levels. It expects gross profit “to grow slightly” with a similar or higher gross margin as in 2021. Free cash flow from operations is expected to be “slightly negative” in 2022.
It also believes it has opportunities to find acquisition targets. In April, it acquired Musiio, an artificial intelligence and machine learning company, for approximately $7 million cash and an undisclosed amount of equity, according to the financial release. SoundCloud believes Musiio allows it to “further leverage its vast data to identify what’s next in music trends and talent” and create playlisting tools for the music industry.
SoundCloud has linked up with Third & Hayden, the Atlanta management and services company founded by music exec Kei Henderson, for a joint venture, the companies announced today (Dec. 5). The new venture will see Third & Hayden signing new acts to its label and developing them with the help of SoundCloud’s services division, which will provide marketing, A&R, distribution and promotion support, as well as financial backing.
The first two acts to sign to the new venture are Los Angeles singer/songwriter Jordan Hawkins and Atlanta-based rapper Key!.
The deal is the latest for SoundCloud’s new roster initiative, which has previously inked a joint venture with Quality Control’s Solid Foundation Management to work on new acts and signed distribution deals with Lil Pump, Tekno and Aly & AJ to release forthcoming projects. Henderson, meanwhile, has an extensive background as a manager over the past decade, beginning with Key! 10 years ago, who then introduced her to 21 Savage in the mid-2010s; Henderson would go on to co-manage Savage for several years as he rose from the mixtape circuit into one of the most influential rappers of the past half-decade. Henderson then co-founded SinceThe80s, a joint venture with Motown/Capitol Music Group, where she first worked with Hawkins, and founded Third & Hayden, which also manages artists like Asiahn, Ben Reilly and Kenneth Whalun, among others.
“We want artists to find success as independents to set the foundation for long-term careers and move through their careers with leverage, and creative control. What we were able to build with 21 Savage early and again with SinceThe80s is the blueprint for the way we’re working with our artists and I’m so thankful to have been a part of both of these brands from the start,” Henderson said in a statement announcing the deal. “SoundCloud is typically one of the first touch points for indie artists and I feel a great part of my career has been brand building with artists from day zero — for this reason they’re the best partner for what we’re building. We’re being intentional on ground up development.”
In an interview with Billboard, Henderson further broke down the reasoning for going with SoundCloud, after previously working through Distrokid and then Epic Records for 21 Savage and with Motown/Capitol with SinceThe80s.
Kei Henderson
Courtesy Photo
“I think it was the understanding that building isn’t an overnight thing,” she said. “It will allow me to fund their careers from a startup level in a way that includes advances, recording budgets and marketing budgets. We’re always gonna be scrappy and resourceful, but it’s always nice to have a little bit of money to be able to do certain things with. So we’ll be able to activate digitally a little more than we would be able to as a completely unfunded independent, and I like that, and it also allows me to have access to a full team. Because the team they’re hiring at SoundCloud looks like a label, but not everybody is from a label background, so the thinking is a little bit different and the approach to how we market an artist is a little bit different.”
In the past few years, SoundCloud has pivoted its business model away from being solely a streaming platform and more towards becoming first a distributor, then towards full-service artist and label support, a shift that is concurrent with similar moves across the industry. The company has also introduced user-centric royalties, what it calls Fan-Powered Royalties, that pay artists based on the number of streams that they accrue rather than through market share of total streams; in July, SoundCloud struck a deal with the Warner Music Group to allow the major’s artists to get paid in that way on its platform, in addition to indie artists.
“Kei has a proven track record of finding and fostering the next generation of talent, so partnering with Third & Hayden was simply the right fit,” SoundCloud’s global senior vp/general manager Jessica Rivera said in a statement. “We’re excited about developing this joint venture with such a respected industry leader and creative who shares SoundCloud’s dedication to providing solutions and empowering artists as they take their careers to the next level on their own terms.”
In addition to the joint venture, Henderson recently opened console by 2NDBDRM in Atlanta, a record shop, listening room and retail space in the city’s Ponce City Market for artists and music fans in the city to have a community space to come together, which will feature some small-scale performances and in-store appearances, consistentl with her idea of wanting to grow artists’ careers not just digitally, but through live events and in-person experiences.
“I don’t think what works for one artist works for every single artist, so we do take into consideration how the artist wants to build their career over a long period of time,” Henderson says about the approach the label will take. “Some artists may feel like, after three projects, I want to go to a major, and that’s perfectly fine. So I want to leave it open-ended: whatever you want to do, let’s put a team around the artist that gets us to that long-term goal.”
Overall, Henderson says, the goal is to build an actual audience for artists, a prospect increasingly difficult in a TikTok world where virality can mean a record deal, but not necessarily a dedicated fan base. “I think what we’re missing in the industry as a whole is, everyone’s in such a hurry to get their money back, and I get that from a business perspective,” she says. “But from a manager perspective, it’s like, some of you want to get your money back but you’re not actually building a fan base or building a connection between the fan and the artist. And sometimes that takes a little bit longer to get it done properly.”
As streaming became the dominant mode of music consumption, fraud and “fake streams” have been regarded as a minor nuisance — generally acknowledged but seldom worried about. Most industry executives tend to see this activity as a way for aspiring acts to inflate their numbers, and thus their commercial potential, or as an avenue for grifters to steer money into their pockets by running up plays of white noise or rain sounds.
At least since this summer, however, SoundCloud has detected evidence of fraudulent streams or manipulation on multiple releases from both notable independent acts and major-label artists, including hitmakers with track records of successful singles, according to two sources familiar with the company’s operations who spoke on the condition of anonymity. And this is not unique to SoundCloud. This summer, Deezer executive Ludovic Pouilly told the French investigative publication Les Jours that it has become more common to see “artists in the top 200 who have millions of real streams” have fake streams as well.
Streaming services are increasing their effort to fight the fakes. In a statement, a spokesperson for SoundCloud said, “We take the issue of stream manipulation extremely seriously and make every effort towards identifying and mitigating inauthentic plays.” It’s not alone: Earlier this year, a Spotify spokesperson told Billboard, “Stream manipulation is an industry-wide issue that Spotify takes very seriously.” SoundCloud also works with a third-party company that “specialize[s] in bot detection” to fight stream manipulation, an executive said at a Music Biz panel in May. (The panel had a pointed title, “They’re Coming For Us: Fraudsters & How We Stop Them.”)
Streaming executives say there are a handful of ways to fraudulently boost an artist’s numbers, including harnessing bot networks or fake or stolen user accounts, and that this activity is becoming “more intense,” as Pouilly put it. At Music Biz, Napster senior vp and general counsel Matthew Eccles noted that fraud on the platform “increased over COVID.”
In fact, the current streaming business is rife with “very prevalent fraud and abuse,” according to SoundCloud vp of strategy Michael Pelczynski, who spoke at the same panel. This abuse has “cultural ramifications,” Pelczynski added: If fraudulent streams go “undetected and not policed, and [they] start influencing the way we measure the success of music, we are literally supporting inauthenticity.”
The level of fake streams detected varies by service and region. At one point, bots on Pandora were generating “a large, large fraction of spins,” according to George White, senior vp of music licensing at SiriusXM, “nearly equaling” the amount coming from human accounts. Pouilly told Les Jours that “7% of the volume of daily streams [on Deezer] is now detected as fraudulent.”
The Merlin Network, which handles digital licensing for many independent labels and distributors, used to send members a monthly report detailing the percentage of fraudulent streams from their releases on Spotify; this February, 2.5% of ad-supported streams and 1.2% of the plays from premium Spotify accounts were identified as fraudulent. (Asked about the issue, a spokesperson for the platform said that stream manipulation was “an industry-wide issue.”) The ad-supported number was nearly 10% at one point in 2020, according to one executive who received the report.
As evidence of what Pelczynski dubbed “prevalent fraud” grows, music executives worry that artists who are playing by the rules will start to feel pressure to pad their numbers in order to keep up with rivals — especially in an increasingly crowded landscape where it feels harder than ever to stand out. Paying for fraudulent streams “will become a marketing expense that everyone needs to employ if it’s left unchecked,” White warned at Music Biz.
Eccles from Napster worried that the music industry could enter a phase like professional cycling decades ago, when cyclists felt compelled “to dope” just to compete at a high level. It is “key,” Eccles stressed, “to avoid a situation where that happens in music.”
Over one year ago, alt-pop sister duo Aly & AJ released their first album in 14 years — and the pair has been on a steady release streak ever since.
Now, Billboard can announce that the act’s upcoming single, “With Love From,” will arrive Nov. 2, ushering in a new deal for the duo. The single doubles as the title of a new album, coming in the spring, which will be the first through a new distribution deal with SoundCloud that will also see the company provide Aly & AJ with marketing support.
“We couldn’t be more thrilled to have the support of SoundCloud entering this new album cycle,” Aly & AJ said in a joint statement. “They’ve allowed us to have the creative freedom we need to make our best possible music to date.”
The signing comes at a crucial time for SoundCloud, which cut 20% of its workforce in September. Not long before that, the company had added new features such as “the roster” — which signs artists to more traditional record deals (initial members included Lil Pump and Tekno) — and Repost, a distribution service offered at $30 annually that allows artists to keep up to 80% of the royalties they make from other streaming services. Aly & AJ’s deal fits into neither category, proving artists can still choose their own path when partnering with SoundCloud.
With Love From follows Aly & AJ’s independently-released 2021 album A Touch of the Beat Gets You Up on Your Feet Gets You Out and Then Into the Sun. Also last year, Aly & AJ scored a top 10 hit on Billboard’s Digital Song Sales chart with the re-released hit “Potential Breakup Song (2020),” which went viral on TikTok years after its initial release.
Following the arrival of A Touch of the Beat, Aly & AJ hit the road performing at festivals including Lollapalooza, Governors Ball and Austin City Limits. They just wrapped an opening gig on Ben Platt’s national tour, including stops at New York’s Madison Square Garden and Los Angeles’ Hollywood Bowl. Next up, a performance at Corona Capital in Mexico City followed by a string of overseas dates in Europe and the U.K.
For now, as fans patiently wait for Nov. 2 to arrive, a snippet of Aly & AJ’s new single can be heard in the teaser for an upcoming collaboration between Rowing Blazers and Seiko watches, with the collection set to drop Friday (Oct. 28) at 11 a.m. ET.