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Deep Dive

Why Streaming Platforms Are Getting Into Distribution

TikTok and SoundCloud have ventured into a crowded market that rival Spotify abandoned after less than a year. Here's why they — and a number of artist managers — think they can succeed this…

In March, TikTok officially launched SoundOn, a distribution and marketing service. TikTok’s global head of music, Ole Obermann, said the aim was ensuring that “every aspiring musician in the world” thinks, “‘I want to start my musical career and journey and I’m going to do it on TikTok.’”

The platform’s move was hardly unprecedented. Music distribution is one of the industry’s recent gold rushes, and streaming platforms are among the companies that have taken an interest in the space. Spotify for Artists launched in September 2018 (though it was discontinued the following July). SoundCloud started offering premium users distribution in 2019. This year, Tencent expanded its Tencent Musician Platform into an initiative dubbed One-Click for All, which allows artists to distribute their music to more than 150 platforms.

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Executives at longtime distributors, speaking on the condition of anonymity, view these new entrants with a shrug. “It’s like, ‘OK, sounds good,’” says one veteran in the sector. But managers who want their artists to have as many options as possible — competition usually means more service for less commission — are more receptive. And while SoundOn is still in its infancy, they’re especially curious about its ability to give their acts a competitive advantage on TikTok, since that platform is widely believed to be the crucial proving ground for any contemporary hits.

Veteran distributors’ professed indifference to digital streaming platforms nosing into their business is understandable given Spotify’s brief entry and speedy exit. As Jeff Price, one of the founders of TuneCore who left the company in 2012, points out, “There’s already a market solution — there’s TuneCore, CD Baby, DistroKid; everyone and their mother has a distribution service. Why do these streaming companies need to do it?”

SoundCloud presents its move into distribution as a natural step for a platform that has long served as a springboard for young artists, particularly hip-hop acts, looking to break through. “If we’re the beginning of that journey, of building a fan base, the next step on the journey is to do that off-platform, distribute to all the stores around the world and extrapolate the SoundCloud fan base outward,” says SoundCloud president Eliah Seton, who served as president of independent music and creator services for Warner Music Group before taking his current position. (Seton is not the only former Warner executive leading a recent push into distribution; Obermann served as the company’s chief digital officer before leaving in 2019.) SoundCloud has cut deals with several acts, like Lil Pump and Tekno, who used to work with major labels.

When a streaming service with the reach and influence of SoundCloud or TikTok adds distribution and artist services, on paper, it has the potential to be “the best record label in the world,” Price says. “Not only can it provide distribution, it can provide the marketing and promotion to drive consumers to listen to that artist in a way that a record label can’t.”

But Seton says SoundCloud is not attempting to replace labels. “What’s important is that the competition and the innovation between distribution and artist services companies is spurring more options for artists,” he says. “They can do a traditional deal on the second album rather than the first. They can do a license rather than give up their rights because they already have traction. We want to create that optionality.” (That said, sources familiar with SoundCloud’s distribution deals say they come with stiff upstreaming clauses if artists attract major label attention.)

SoundCloud acquired Repost Network in 2019 to help bolster its distribution efforts, and TikTok’s SoundOn is powered by TuneCore, although some of those sources believe that TikTok is seeking a new partner. These companies’ reliance on already existing distribution platforms is a big reason for established distributors’ “So what?” reaction. “All these other distributors are very dismissive of them and think there’s no way they have their shit together yet,” says a manager familiar with SoundOn’s offering.

To incentivize managers and artists, SoundOn’s introductory distribution offers are generous: Artists keep 100% of their money in year one; TikTok’s cut rises to 10% in year two. (In contrast, artists say deals with SoundCloud’s Repost that involve no advance require acts to give up 20%.) And some bigger independent artists like Russ and Lovelytheband have negotiated the ability to distribute music to TikTok through SoundOn but use other distributors to push their music to other streaming services. Pitching for playlisting is such a crucial part of marketing that veteran label executives say they’re hedging their bets because they’re concerned that SoundCloud and TikTok will have a difficult time getting their rivals, including Spotify and Apple Music, to add artists that they distribute.

This flexibility is attractive — why not connect with SoundOn if you barely have to give anything up? — but it also makes SoundOn’s early impact on the larger ecosystem tough to gauge. Before TikTok moved into distribution, it was already helping break singles. Songs would go viral and established labels or distributors would swoop in and sign the performers. This dynamic is still playing out in the same fashion. Muni Long, for example, worked with SoundOn to help her hit “Hrs and Hrs” take off on TikTok; she’s one of the most prominent acts to test the service. But she subsequently signed a deal with Def Jam, which took over her distribution.

Sources familiar with SoundOn’s pitch appear to be split into two camps. Skeptics say TikTok won’t skew its algorithm in favor of a track, and its marketing strategy — which offers access to a team that can discuss best practices and sometimes provide banner ads and playlisting on the platform — is vague. Some also say SoundOn needs to improve its ability to pitch songs that have traction on its platform to other major streaming services to get them on playlists, though this is a common complaint from artists in distribution deals regardless of their partner.

Those sources who are more enthusiastic about SoundOn note that it is still in its early stages and may generate even more upside as it builds out its A&R and playlist-pitching capabilities. (Tim Reynolds, who previously held A&R positions with RCA, works closely with SoundOn, according to sources.) In a statement, Obermann said, “We’re committed to expanding the offering and building on the expert team we have in place and the high levels of service we’re already offering.”

He also emphasized that SoundOn was “providing huge opportunities for artists” through brand partnerships. “Brands are using these songs [distributed through SoundOn],” Obermann added, “and it’s driving success on TikTok as well as on more traditional digital services too.”

Sources familiar with SoundOn’s pitch say its deals are beginning to shift toward a more traditional model — funding artists and recouping expenses. Those sources say the company is offering upwards of $50,000 in combined advance and marketing budgets for new artists to work on small projects. (A representative for SoundOn declined to comment on questions about its deals.) The magnitude of these offers is roughly similar to the distribution deals being offered by SoundCloud, according to sources familiar with the company’s offers.

Despite longtime distributors’ skepticism of SoundOn, several managers still see it as an option worth exploring for a young act that is looking for exposure without a long-term commitment. After all, these managers say, if they sign a young artist to a major label or distributor, many of their strategy sessions will focus on achieving momentum on TikTok. In a world like that, “an opportunity to work directly with TikTok was a no-brainer,” says Alex Barragan, who manages the SoundOn artist Ashley Mehta.

“We’re talking with them about a real deal, one that favors the artist,” Barragan adds. “If and when a label deal does make sense for us, we’ll be able to have the leverage to get exactly what we want.”