News of re-tooled for monetization SoundCloud hitting a snag in negotiations with major labels at one time wanting to integrate with the German streaming site feels so much like a girl stranded for prom, all dressed up and waiting with no place to go. The key to the deal proposed by SoundCloud to major labels is that SoundCloud would be paying licensing fees for tracks uploaded to SoundCloud to the label in order to earn money from streaming. In falling short of reaching an income split that's amenable to mainstream labels, the negotiations have apparently reached an impasse.
In an article on the Financial Times, Digital Media Correspondent Robert Cookson points out a potential sticking point from SoundCloud's end in why they're potentially low-balling the labels when he states, "SoundCloud does not necessarily need to license an all-encompassing catalogue of music from all of the major labels to develop a sustainable business because it specialises in undiscovered artists and remixes and mash-ups of popular music." Clearly, instead of focusing on just new material, it's possible that labels are looking to SoundCloud to potentially pay a higher rate then say, Spotify and Pandora–services that already stream large portions of label's entire catalogs of music. In SoundCloud likely not wanting to adjust its business model to say, include all releases from a label's classic artists but say, focus on a label's current roster of talent (specifically those of interest to its user base), there's a clear disconnect.
Two major points are of intrigue, here. Foremost, SoundCloud has made its greatest success as a portal for the sharing of EDM. Secondly, major labels (save Universal), are still in the throes of dipping their feet deeper into the EDM pool than just cherry-picking the industry's top producers for album deals. Working with SoundCloud definitely means working with EDM, which still is a financial concern because, well, when major labels did disco and house, disco died and house waned in top-40 mainstream popularity. At present, the music industry arguably isn't financially stable enough anymore to truly be gung ho about dance music across the board. Thus, the idea that major labels may want to reserve the right to post entire back catalogs of music that is likely not EDM (or also SoundCloud's second favorite genre client, rap) is a clear attempt by the labels to hedge bets while still getting in bed with the clearly next-level streaming service.
As far as SoundCloud, the company presently has $700 million in investments, yet in 2012 reported a net income loss of roughly $19.5 million on $13 million in gross earnings, meaning that the company is still operating in the red. The service facilitating deals with major labels a) allows them instant access to a significant revenue stream, and b) if EDM is headed in the direction of major labels, it allows them the access to significantly tie into the star-making and revenue generating scheme of a genre touted to eventually be worth $20 billion dollars. If that number (or a number even close to that number) is even remotely feasible, eventually recouping years of losses seems to be fairly possible in a relatively short time frame.
Obviously, this is now becoming a heavily nuanced story worthy of much more attention and awareness.
