Has SoundCloud Turned Its Back on Its Users in Favor of Major Labels?

SoundCloud co-founders Eric Wahlforss (left) and Alexander Ljung (right)

“We have an opportunity to mold behaviours [sic] and make new things that never have been seen.”

Those are the words of Alexander Ljung and Eric Wahlforss, SoundCloud’s co-founders, in a 2011 video feature hosted by adidas on YouTube. The remainder of the three-minute clip includes thoughts like, “There were so many broken things on the web that you could improve and make ten times better. And make new stuff. In some way that’s where it started.” Basically, it’s your run-of-the-mill entrepreneurial change-the-world-isms, but it’s happening in a world that actually matters to so many of us: music. But some eight years since starting SoundCloud, when they “realized [they] had to fix” the Internet, the Berlin-by-way-of-Stockholm businessmen have seemingly hit a wall.

That wall is one made evident by the following comment on the adidas clip, which hadn’t received user feedback since 2013: “Hurry up and fix soundcloud then! ;) ”. It’s a brief, potent message aimed squarely at Ljung and Wahlforss, two guys so adamant about repairing a broken system that they apparently didn’t realize they can become part of the problem of stifling creativity in the music industry.

Over the past month or so, a growing number of producers and DJs have voiced their displeasure with SoundCloud after receiving takedown notices on remixes, edits, mashups, mixes, etc. often without any warning. Universal Music Group has been cited as one of the major shit-starters in this whole debacle, apparently shutting down accounts and deleting tracks it feels infringes on its copyrights. Mixmag reported that SoundCloud told one user that Universal removed his songs and “that SoundCloud had no control over it.” When the producer wanted to know why this happened, he was told that “they (Universal) don't tell us (SoundCloud)” which part of your upload was infringing.”

Lakim

Lynchburg, Va.-based producer LAKIM has been particularly vocal about the removal of one of his tracks, a remix of Kanye West’s “New Slaves.” The takedown notice arrived with the message that two of his songs had been removed to date—one more and his account was up for termination. As a result, LAKIM acted quickly and took down 10 similar remixes, which he said had well over 700,000 plays (you can find them all in one place on Bandcamp). That number isn’t surprising given the fact his remix of Dwele’s “Lady,” a joint effort with fellow producer Sango, is at 220,000 plays as of this writing.

In a quick discussion over the takedowns, LAKIM revealed his biggest gripe, and it has nothing to do with his work being removed. “What is bothering me the most is SC neglecting the community that put them in the position they're in and essentially built them into what they are now,” he told me. “I feel like they are cutting these deals with the majors in an effort to save face and cover their ass from giant lawsuits.”

He went on to say that the issue isn’t just SoundCloud but major labels in general because “[t]hey've always been afraid of adapting and I think they are looking at these remixes the wrong way.” Producers clearly get buzz from these remixes, he said, but they also lead to “increased free exposure and promotion for the artists we're remixing.”

“We are making a mainstream and uber commercial song more palatable for the common listener whose main source for music isn't the radio,” LAKIM said. The “we” in this situation is the producer sect at large but also a group of artists he calls his brothers: Soulection. It serves as both a collective and label for artists who specialize in mostly instrumental music—rising DMV rapper GoldLink is now in their ranks—and some seriously noteworthy remixes. One of the most well-known Soulection affiliates is Kaytranada, whose remixes moved from bootleg to official (Disclosure, AlunaGeorge, etc.) after growing a huge following on, you guessed it, SoundCloud.

House DJ/producer Kaskade is also among the frustrated SoundCloud artists—he received a takedown notice from a piracy group hired by Sony—and he stepped up as one of the first big-name producers to voice his frustration with the site’s plethora of takedowns. His frustrations began with the removal of his bootleg of Calvin Harris’ “Summer” and they quickly grew when more than 30 takedown-notice emails hit his inbox. In addition to threatening to delete his SoundCloud page—it’s alive and well with nearly 800,000 followers—Kaskade argued in an eloquent Tumblr post that labels (in his case, Sony) are really fucking up here. He made the point that a freely downloadable (and sharable!) bootleg remix like his can lead to so much potential revenue for labels:

“They (the SoundCloud listeners) become familiar with the artist, and seek out other material. Maybe they buy that. Maybe they talk about it online. Maybe they go to a show. Maybe they simply become a fan and tell a friend.”

If you have had a conversation about copyright issues and music in the past decade, chances are that you, too, have made or heard these points before. And they’re certainly salient, but there’s more to it than that. It’s not up to someone like Kaskade or the thousands of bedroom producers/DJs to conjure up the future-revenue ideas for labels. That is the job of the labels, which are apparently just not hiring (or listening to!) the right people. Or, even worse, they’re not learning from similar business models elsewhere that some of them already have in place!

Bloomberg reported on July 10 that the “buzzy digital-music service” is close to signing deals with the three remaining major labels: Universal Music Group, Sony Music Entertainment, and Warner Music Group. The deals would provide SoundCloud with “licenses to continue playing songs from the biggest labels and avoid potential legal disputes,” Bloomberg noted, while the labels would get a 3-5 percent stake in SoundCloud and a chunk of future revenue.

Later on in the article, the biggest issue facing the Berlin startup is revealed: “SoundCloud hasn’t developed much of a business model.”

It’s true. Aside from any revenue deals not made public, the main revenue fuel for SoundCloud is its subscription service. You can sign up for a free account, but you’re only allowed to upload two hours of sounds. Go for the “Pro” account ($6/month or $55/year) and you get four hours; go “Unlimited” ($15/month or $107/year) and, well, you can upload all the music you want. It’s not clear just how much SoundCloud is making off of these subscription services, but numerous business sites report that the company is valued at upwards of $700 million—likely based on its potential, not its revenue.

It’s worth noting, that these licensing talks between SoundCloud, the majors, and publishers started (to our knowledge, anyway) in March.

Look at YouTube, which could be called SoundCloud 1.0 when it comes to the majors figuring out how to work with creatives and get what they argue is their fair share. There are a shitload (read: too many) fan-made clips using music from major labels, but they’re allowed to exist because labels can monetize the videos and make bank from those clips. Seriously.

In an interview with The Toronto Star, Francis Keeling, the global head of digital business at Universal Music Group, revealed that those fan-made clips “are actually generating more money for record labels than the official music videos posted by record labels.” While you’re first reaction may be “holy shit!”, it’s not that surprising—an absurd, short video featuring a popular song snippet is more likely to go viral than a four-minute music video.

A writer on Gigaom argued that SoundCloud will probably just mimic YouTube in making money off the “copyrighted” content. He wrote that “[w]ith a YouTube-like approach to content monetization, labels could start to make money every time a bedroom DJ’s mix finds a new listener.” If SoundCloud does go this way, does that mean we’ll be hearing advertisements before each remix, mashup, mix, etc.? Whatever, it’s better than nothing right? Maybe.

The thing is, these takedown notices haven’t just popped up out of nowhere, as revealed on the Serato message board post from 2011. The user who started the thread wanted to know if anyone else had encountered these copyright notices and takedowns, asking “Isn't soundcloud mainly for djs ?” The replies showed that even then a growing number of the SoundCloud faithful were growing tired of these issues and moved to competitors, namely MixCloud. And for the remixers, Legitmix offers a smart business model that benefits the sampled artist and the producer/DJ. The remix sells for $2.29 with $1 split 70/30 between the remixer and Legitmix while the remaining $1.29 covers the price of the original track on iTunes.

So why, then, is this SoundCloud thing such a big deal? The ramifications for so many artists who basically helped the site/service become what it is today. If you think for a second that SoundCloud got to where it is based of major labels using it, you’re fooling yourself. Sure it helps that they all take advantage of the site now, but what about the producers and DJs who dominate the up-and-coming page with bootlegs, covers, and mashups?

Also, where does it all end? If labels are really that out of touch that they’re hellbent on taking down DJ mixes/podcasts, what about when the DJ performs live and plays a song he or she may not have the copyright to? Should we expect some kind of piracy police to hit the streets and take care of this apparent issue? I know those are rhetorical, borderline-absurd questions, but so is this whole goddamn mess. It’s a slippery slope waiting to get slipperier.

Going back to the adidas video, Alexander Ljung and Eric Wahlforss appeared to be two nice guys looking to make a difference online: “We actually wanted to start a place on the web that made it simply for people to share their sounds. We wanted to make the sound as common on the web as picture, video and text.”

But now that they’re there? We’ll see what happens.

Andrew Martin lives in North Carolina and is the co-founder and Editor-In-Chief of Potholes In My Blog. He's on Twitter - @Andrew_J_Martin

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