Warner Music supports user-centric billing on Soundcloud

AEverything in one pot or only distributed among the artists actually listened to: This is how the debate about the distribution method of the music streaming services can be summarized in a nutshell. The standard for all major services, whether market leader Spotify, Apple, Amazon, Youtube Music or Deezer, is currently the “pro rata” model, in which all income is collected and distributed to the respective rights holders according to the market share of a work.

The Soundcloud platform, in turn, announced in March 2021 the introduction of user-based distribution of funds, usually called UCPS (“User Centric Payment System”). At Soundcloud, the system is called “fan-powered royalties”. Soundcloud was the first service to introduce the billing form.

However, the step had a major catch: Because UCPS is only used for around 135,000 artists so far, namely all those who upload their music to Soundcloud themselves and use one of the paid offers of the service; the basic condition to be compensated on Soundcloud for the use of his music.

In total, works by around 30 million artists are available on Soundcloud. For a fundamental switch to UCPS, which the French service Deezer has been trying to do for years, the consent of all rights holders and, for example, the collecting societies would be required.

Warner Music is transitioning

Soundcloud has now been able to convince one of the largest rights holders: Warner Music announced on Thursday that performers from Warner labels can also use UCPS in the future, instead of the pro rata system. For all other artists whose music is available on Soundcloud and who work with a digital distributor or a label – i.e. not directly with Soundcloud or now Warner – the “pro rata” model will continue to be applied.

The step fits into the picture: In 2014, the third-largest music company in the world behind Universal and Sony Music was the first of the three music giants to conclude a license agreement with Soundcloud for the use of the Warner catalogue. Warner has also been generally open to UCPS in the past.

Sony and industry leader Universal Music are at least signaling a willingness to talk. After many years with the current model, it is “absolutely legitimate to discuss changes. We are also in talks with everyone involved,” said Universal Europe boss Frank Briegmann in the autumn of last year of the FAZ.

What can a change bring?

Proponents of switching to UCPS argue, among other things, that particularly popular genres such as pop or rap are preferred by the pro rata system or are cross-subsidised by listeners of other music. In addition, UCPS promotes transparency and promotes fan-artist bonding, especially since the current model, with its pure focus on the number of streams instead of the number of actual listeners, facilitates manipulation.

The other side, in turn, refers to significantly higher administration costs if individual bills have to be created for each user, and of course a streaming subscriber ultimately pays for access to the catalog of more than 70 million songs from a purely technical point of view and not like when buying one Plate exclusively for this.