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SoundCloud, Merlin Strike Deal on Fan-Powered Royalties

Merlin members — including independent labels and distributors — will explore "new revenue opportunities" via the platform's user-centric payment model.

SoundCloud announced Thursday (May 4) that Merlin members — including artists working with Secretly, Symphonic Distribution, Too Lost, Amuse and Cinq Music, among others — will now have access to its fan-powered royalties program.

Most streaming services pay out based on a pro-rata model, which collects all subscriber revenue and then disburses earnings based on each rightsholder’s share of total streams. Fan-powered royalties, by contrast, direct a portion of every listener’s subscription or advertising revenue to the tracks they listen to. If a user only listened to two artists a month, for example, those two artists would split the price of that user’s subscription (after SoundCloud takes its own cut).

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“At SoundCloud, we’re committed to being artist-first,” SoundCloud CEO Eliah Seton said in a statement. “The FPR model makes streaming royalties more equitable, helps artists benefit directly from their fans, and opens the door for more meaningful fan-to-artist connection. I’m thrilled that Merlin’s extraordinary community of independent labels and distributors, and by extension their artists, will now benefit.”

Merlin CEO Jeremy Sirota added that the “partnership provides our members and their artists with new revenue opportunities, as well as empowering fans to directly support their favorite artists from across Merlin’s global membership. This collaboration will strengthen Merlin’s community of independent rightsholders and provide them, and their artists, the tools to build closer relationships with fans.”

SoundCloud initially launched fan-powered royalties in 2021. “Many in the industry have wanted this for years,” Michael Weissman, SoundCloud’s then-CEO, said at the time. “As the only direct-to-consumer music streaming platform and next generation artist services company, the launch of fan-powered royalties represents a significant move in SoundCloud’s strategic direction to elevate, grow and create new opportunities directly with independent artists.”

In a subsequent interview with Billboard, Weissman argued that the fan-powered royalties program “changes streaming from what today is just accessing a catalog of music into truly more of a community platform.”

“We can provide an enormous amount of information back to artist managers and major labels to actually get at the heart of this,” Weissman added. “Which is, ‘Who are the 10,000 people who are my true fans? That over 30% of their listening time is going to that artist?’”

Warner Music Group became the first major to opt into SoundCloud’s fan-powered royalties last summer.

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While fan-powered royalties — also known as user-centric — were in vogue as one alternative to the pro-rata model, recently the music industry has been discussing a new payout model that Universal Music Group dubbed “artist-centric.” In January, UMG announced a partnership with TIDAL to “research how, by harnessing fan engagement, digital music services and platforms can generate greater commercial value for every type of artist.” In March, UMG announced that it had partnered with Deezer on a similar initiative.

It’s still unclear what the artist-centric model would look like. On an earnings call, UMG CEO Lucian Grainge stressed that artists should be “rewarded for the fans they bring in [to subscribe to streaming services] and the engagement they drive [on those platforms].” Michael Nash, UMG’s executive vp/chief digital officer, noted on the same call that streamers can do “a better job of monetizing these high integrity, high-intensity artist-fan relationships.”

While TIDAL and Deezer test out new possibilities, Merlin members will explore the potential benefits of the fan-powered system. “We’re excited that SoundCloud is taking the lead in experimenting with a revenue model that many indie labels have been intrigued about for years,” Jasper Goggins, president of Merlin member label Mad Decent, said in a statement. “We’re happy to be a part of testing this new model through Merlin and we look forward to seeing the results.”