Thoughts on SoundCloud and its Licensing Deal with Universal Music Group / by Alex Young

For those in the market for a streaming service, paid subscription platforms like Spotify, Tidal, Pandora, and Apple Music are most attractive due to their massive 20 to 30 million song libraries, Tidal's High Fidelity sound quality, or other perks like Beats 1 Radio on Apple Music.

However, the streaming market may begin to shift after yesterday The New York Times reported that streaming site SoundCloud inked a deal with Universal Music Group. The agreement is a licensing deal that gives SoundCloud access to Universal's musical catalog and songwriting rights that the record label controls through publishing.

Currently, SoundCloud has reached licensing agreements with two of the three major record labels: Universal and Warner Music Group, which occurred in November of 2014. According to The Nielsen Company and Billboard, the big three labels, adding Sony Music Entertainment and Sony/ATV Music Publishing to the group, controlled 82% of the total albums sold in 2012. Universal made up 37.7% of the US Market share.

Also, Merlin, a group of independent labels, National Music Publishers Association, and PRS for Music, a British copyright collection, and performance rights organization, have all completed deals with SoundCloud.

One of SoundCloud's founders, Alexander Ljung, said to TNYT in an interview, "We've got the majority of the music industry partnered with us now." 

Due to all of the licensing agreements SoundCloud has reached, it can prepare to launch a paid subscription plan for streaming services to its 175 million monthly users worldwide.

If SoundCloud makes the move to a paid subscription streaming service, what separates it from the rest of the market? What makes SoundCloud unique?

Here is the kicker: SoundCloud is special for its new music discovery and its social media interface.

Mainstream and underground musicians, artists, and creatives across the globe are able to upload and showcase their audio work to mass audiences using SoundCloud. From there, the mp3 files can be "liked," shared to other social media platforms like Facebook, reposted to other SoundCloud profiles, and embedded into independent websites. Users can also create playlists compiled of tracks already listed on SoundCloud or uploaded files and share them with followers. This is how artists, like Young Thug, Little Simz, and Drake, debut singles and mixtapes to their fans.

Robert Wiesenthal, Warner Music Group's chief operating officer, said in 2014 after the label agreed to terms with SoundCloud, "SoundCloud is a platform built on music innovation and it has a rare ability to drive music discovery while enhancing the connection and collaboration between an artist and their following."

The beauty is that any individual can share content on SoundCloud, and build a fanbase. Entrepreneur, event promoter, and social media influencer YesJulz post her podcasts, with names like Ronnie Fieg and Joe Budden, on SoundCloud.

While Apple Music claims to link artists to their fans with Connect profile pages, the average Joe cannot make a Connect account of his own. The service is not person-to-person interaction, rather more celebrity observation and behind the scenes visuals.

SoundCloud challenges other streaming services because its social networking capabilities offer promotional value to SoundCloud users. The licensing deals SoundCloud has struck allows the shareable content to be more extensive.