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Money at SoundCloud has in the past flowed in one direction: you, the uploader, pay for premium plans, and SoundCloud gets the cash. Now, for the first time, money is going the other way – from the service to artists and labels.

In the process, that means one significant change: SoundCloud listeners will begin to hear ads.

It’s been interesting to watch the reaction – from people losing their minds over ads appearing on the service to more measured responses and genuine interest in the service “growing up” and adding income to become sustainable. This of course collides with worries about SoundCloud’s recent deals with major labels. Clarification: SoundCloud has not announced any such deals; while there has been public discussion about majors and their role on SoundCloud, those discussions are in fact speculative. But before we get into opinions about the changes, let’s first understand just what has changed for those of us who use the service.

SoundCloud is this week rolling out advertising, first to their invite-only premier partners – that is, producers like big labels or publishers (including titans Sony and BMG). Later on, says SoundCloud, those those ads are also will be available as an option for all paid users who want to earn money from their content.

In addition to the advertising option, SoundCloud has also adjusted its plans. Here are the facts.

There are new plans, with new names – and more upload time.

At all levels, you get more upload time than before – even on the free plan. SoundCloud tells CDM:

Partner:
Entry to the Partner level is free. Partners get 3 hours of free upload time per account (up from 2), basic features and stats
Pro:
Pro Partners get more upload time per account (6hrs, up from 4), plus expanded features and stats that help them build and connect with their audience.
Premier (the new tier):
Premier Partners have the opportunity to make money on the platform by placing ads against their content, get unlimited storage, premium stats and account management support.
For now, access to the Premier level is by invitation only.
We’ll be rolling it out to more creators over time.

(No word yet on whether CDM, as the world’s single largest media source for people who care passionately about the connectivity of hamsters and control voltage, will be invited to be a premier partner. Seriously. We’re like the BBC World News of turning houseplants into synthesizers.)

Ad plays will get you paid, and more money goes to you than goes to SoundCloud.

While the rest of the Internet aches about this change, yes, ads could theoretically make you money. Now, I asked SoundCloud if they could tell us something about how they’re allotting revenues.

“Every time users see or hear an ad, artists get paid,” a SoundCloud spokesperson tells CDM. “We’re offering a sustainable business model that benefits SoundCloud and creators, with the majority share of revenue being paid out to Premier Partners.”

That is Premier Partners for now; SoundCloud tells us that the larger share of money will also go to you when ads become available to you later on.

Ads only impact the United States, at first. Ads will only target the US, and only be heard in the US. That makes some sense, as it’s the largest listening audience on the site. It seems a no-brainer that this will extend to other markets in the future if it’s a success.

What will the ads sound like? You’ll definitely hear them – think something along the lines of what you see on YouTube, only longer, and… you know, sound.

SoundCloud tells CDM, “audio ads will be occasional, skippable after 15 seconds, and up to 30 seconds long.”

You can opt out of ads on your content. Don’t want ads on your content? Like so many labels and producers, you use SoundCloud mainly to promote record sales (even on vinyl) and live gigs, and worry about making your money there? No problem – this is an opt-in service.

You’ll eventually be able to pay not to hear ads. For now, even if you pay for a subscription to SoundCloud, you’re going to start to hear ads on content, if you’re in the USA. For a lot of us who spend most of our time listening to small labels and independent artists (and, for those of us outside the United States), that won’t really be noticeable. But if you don’t like it, SoundCloud does confirm to CDM that eventually they plan to offer subscription opens for listeners who don’t want to hear ads, ever.

No details on that plan yet. SoundCloud calls it a “consumer” subscription and says it’ll be detailed in the “months to come.” That implies it won’t be bundled with uploader plans, but it’s early days yet, so probably too soon to make any assumptions.

Read up on the changes in the official announcement on the SoundCloud blog (penned by none other than founder Alex):
Introducing On SoundCloud, our new creator partner program

Analysis: this could be a win for uploaders in more ways than one.

The most significant concern I continue to hear from SoundCloud users – the DJs and producers who made the service the success it is – comes down to worries about their content being removed. EDM giant Kaskade is probably the best-known of these users. But SoundCloud has always faced a balancing act between licensing and users. Recent licensing deals with Universal Music Group may indeed allow them to directly flag content they believe they own. On the other hand, that’s better than issues like false positives, in which artists were surprised to see their own uploads incorrectly flagged.

The Kaskade story is telling. It’s not so much an indictment of SoundCloud as it is the way record deals are structured. The truth is, many labels today are likely to benefit from their artists uploading their music – especially because someone like Kaskade might have more followers and more engagement than his label. Some of this responsibility will lie with SoundCloud, in finding better ways to arbitrate communication between artists and labels and to channel legitimate copyright complaints (including disputes about removals). Some of it lies with labels, to work with online services and their contracts so that they maintain good relations with artists and everybody is able to promote the work they own. But just dumping on SoundCloud may miss the underlying point – and this could be one step further, even for those of us who aren’t on majors (and aren’t necessarily huge fans).

A lot of the worry about SoundCloud has centered on their new-found collaborations with big labels. But while the premium partners are getting the features first, there isn’t yet evidence that SoundCloud will favor majors – in the way that YouTube has. (You can read how distasteful I found Google’s tactics.)

Furthermore, a lot of this false positive business seemed to stem in part from automatic algorithms rooting out music that artists had legitimately uploaded. My advice: if you’re going to upload DJ mixes, upload them to MixCloud, which has a licensing structure better suited to that music. But SoundCloud still impresses as a service for producers’ original music. The player and upload features, the stats, the community and discovery features all remain unmatched for content makers. And it seems SoundCloud has an opportunity to roll out opt-in advertising options that some producers might like, in the way some YouTube uploaders have – and you can ignore them if you don’t want them.

While we’ll have to see, I wonder if the more formal relationship between SoundCloud and labels will stop the brute-force approaches to content takedown. That is, I would have the opposite reaction to the apocalyptic Cory Doctorow take. Now if SoundCloud has sorted its licensing deals with majors – or if this advertising model could open up such deals, it may mean they’re free to keep uploading their content, and the rest of us can share our own productions. The challenge for SoundCloud is the business challenge they’ve always faced: they have to keep the service useful enough to us that we keep paying for it. For now, that’s money I’m glad to spend.

For a great read on all the issues, Ben Sisario for The New York Times has one of the most complete and balanced looks at SoundCloud’s state of affairs today:
Popular and Free, SoundCloud Is Now Ready for Ads

  • genjutsushi

    Im glad that those that which to have ads can have them, but they are not forced on everyone. So someone wishing to just share their music (for the love of it) can do so without having adverts. Nice balance.

  • chaircrusher

    … in which Soundcloud becomes the next MySpace. There’s a huge market opening for new sites that fill the niche that Soundcloud originally filled.

    I’ve never been big into SoundCloud since I’ve paid a nominal amount each month for a web server where I have unlimited disk space and bandwidth for my music. ‘Unlimited’ until I have enough downloads to start saturating the server’s bandwidth, but if I get that popular, it’s a good problem to have…

    • http://pkirn.com/ Peter Kirn

      Yes, but this is self-correcting. Don’t opt into ads, and people keep listening – which means for a lot of the music, nothing changes.

  • Shane McGill

    Oh well, and I think it’s the end of something good. They’re positioning themselves now to get bought out – time to check out alternatives. The whole ad-stuff is total bull, just saying’, balance – schmalance!

  • Tauros E

    I think everyone wants to make income from their content but wouldn’t a 15 second add prevent someone from waiting for the content? We’ll see how this works out.

    • ElectroB

      True, even though I agree with this move, 15 seconds sounds too long.

      The whole advertising thing is basically a sort of BS theater we all engage in while a true digital business model is not found.

      No one wants to listen to ads, but we need to get paid / we want our favorite artists to get paid.

      So we all pretend we don’t turn the speakers volume down and skip the ads after a couple of seconds, advertising companies and media conglomerates are happy and cough up the money, and musicians get a few cents that supplement their actual music sales, money from gigs, etc.

      This is all ridiculous and terrible, but apparently it’s the best we can do until rampant piracy can be circumvented somehow – if ever.

      Having said that, the smart thing will be ads every 5 songs or so (like Spotify) and keeping them short – otherwise you risk driving people away.

    • http://pkirn.com/ Peter Kirn

      Yeah, there may be some magic to that five seconds on YouTube… though I suspect audio listening is slightly more passive (and a lot of people ignore fairly long ads on Spotify)

    • Hans Schnakenhals

      I don’t think the more passive argument goes with services like soundcloud. People listen to spotify like a radio station that knows their tastes better. Soundcloud on the other hand, at least for me, is a source where I actively look for / check out songs. That difference in engagement negates the passiveness threshold that would make ads barely noticable. And that engagement is what should have been taken into account when planning for ads.

  • LLCoolJeans

    I imagine we won’t be making much money on these. Might consider it though. My soundcloud is mainly for joke tracks that I don’t expect anyone to enjoy, but I still manage about 10-20 plays per day.

  • gunboat_d

    listeners will get ads only on songs that come from Premier members? that’s biggest question. i understand that as a Pro member, for now, my songs won’t have ads and i won’t make money from my music. my concern is that in the future, all songs will have ads, but only Premier members get the money from the play.
    idk. there is just enough wiggle room in all the sound cloud’s explanations to sow fear into people who ‘just want their music to be heard’. i’d really hate for SC to turn into YouTube. I’d rather they try and be Vimeo.

    • http://pkirn.com/ Peter Kirn

      No, I clarified this specifically with SoundCloud. If you opt into ads, your money from those plays goes to you, not to the Premier members.

      The issue is, right now only Premier members can opt into ads. But that’ll change.

      I still think for most of us, SoundCloud isn’t about revenue; it’s about attracting fans. And so we may be unwilling to trade some of those fans for money by adding ads.

    • gunboat_d

      yeah, I never put videos on youtube so I have no idea how ads work there. if I can elect to not have ads on my page, then I’m cool with this. and if an artist I like starts putting ads on there, then I’ll probably listen to them less, just like I skip a lot of stuff on youtube with pop-ups and ads.
      I suppose this is all down to the issues with labels and re-mixes and mash-ups, but I suppose it would be a wise move to not elect to have ads on music that uses somebody else’s music (or covers of big songs).

  • papernoise

    Well this was to be expected. Can’t blame Soundcloud on trying to turn their investments into profit and I think it’s a positive thing that they actually share these. They could just have put ads everywhere like other do… or make you pay for your tracks to actually be seem by somebody like a certain other social network does.
    It’s also positive and somehow respectful that they let the author of the content decide if they want to put ads on their music or not.
    I think I’ve never seen a youtube ad until the end, actually I don’t think I’ve ever not skipped a youtube ad in my life, if I can’t skip it I just search for another video or forget about it altogether. But I know I’m a minority, youtube ads work, as weird as it might seem. So maybe even Soundcloud ads will work.
    I can’t help thinking that putting ads on your content is not the most sustainable way to make money with your music, it might work at the beginning, but somehow I think people will start to get annoyed by everything on the web being cluttered with ads.
    It’s one thing to have banners on a website, but ads that actually force you to watch/listen to them… hmm, personally I don’t think I will like that.

    But then, most people I follow are so niece they won’t bother going premium anyway :)

    • http://pkirn.com/ Peter Kirn

      I’m still not convinced that’s it. The thing is, to go legitimate with licensing music – something long overdue – you need to pay the licensing fees. So rather than getting rich, part of what you do here is provide a model by which the majors are happy with licensing (i.e., by using ad revenue).

      And right, ads didn’t destroy YouTube, did they? Seems that site is somehow still plugging away.

      I’ll be honest, I don’t get all the hair tearing. But, then, we get to wait and see. I think I’ll be proven right. ;)

    • papernoise

      No ads didn’t destroy youtube, that’s what I mentioned in my comment, if you look at the figures, even in-video ads you can’t stop perform really well from an advertiser’s point of view. This means the majority of people is ok with it. Though I can’t help but think that this is not the right way to monetize on content.
      I was seeing this from my personal perspective. As somebody listening a lot to my SC stream I hope the ads won’t be to invasive.

      Then of course you are absolutely right about the licensing thing, I hadn’t considered that, but yeah, that makes sense, since that seems to be the big problem all online media platforms have to deal with. Also Soundcloud is of course is trying to make its platform interesting for the majors, so it all fits.
      I think all the criticism comes from the fact that in the beginning SC was mainly a platform you would upload your own music to, using it as a showcase of your work, but then it started to add more social network and more “listener oriented” features. If on one side music is pointless without listeners (I think we can agree to that) it also meant a certain shift in the platform and I think not everybody is happy with that.
      Just look at the latest iOS app they’ve released, it’s basically a media player frontend for SC, focused strongly on the listener.
      I think this whole monetization thing fits into this evolution and it obviously can’t work without taking into consideration the whole major/licensing affair.
      As you say… we’ll wait and see.

    • Hans Schnakenhals

      Let’s not forget, YT was already the practical almost monopolist in its field and is a lot more widely targeting than sound cloud, not a particularly good comparison me thinks.

    • scotteroc

      I use ad blocker, that’s the only reason I still use youtube.

  • ElectroBlob

    Thanks for the artcile, Peter.
    My thoughts:

    1) I think this is a natural step for Soundcloud – their business model must evolve

    2) I think this will only bring advantages to musicians and composers who want to opt-in and monetize their content;

    3) the opt-in nature of this service is great – if you want to keep your music free, then you can carry on with the same model; if you want to make your online music part of your income, you have a new option within Soundcloud, which is great

    4) it comes as as no surprise that DJ’s are getting flagged down; after all, they make sound collages of other people’s music; as a matter of principle, if someone includes my music in their sound collage without authorization and without paying me, and then tries to promote him/herself with said collage, obviously I’d want them flagged down; the problem is that many labels / media companies try to step all over any notions of fair use, but that’s another discussion;

    5) Cory Doctorow is, as always, full of shite

    6) at this moment, Soundcloud doesn’t look like it will take Youtube’s “business” stance (i.e. ripping off artists); let’s hope it stays that way. I for one am very interested in how this plays out

  • BarbNerey

    thanks for the detailed infos!
    For me as music digger, a 15 or 30 seconds preroll add is not gonna happen. Imagine, you want to listen to some tracks and EVERY time you have to give adds 15 or 30 seconds of your attention. But lets see how this will work out, when its there. Also: why should I listen to adds, while I have a pro-spotify account. And the content on Soundcloud will soon be the same as on every other streaming service once they took down all not official music which was always an unbelievable fountain of inspiration for me. Some labels/artists will keep on uploading snippets of upcoming releases Can you imagine you listen to a snippet of 1 minute PLUS minimum 15 seconds preroll? Me not…

    As a DJ I still have the most plays on my mixes, love the stats they provide etc.. but I expect ALL of them to takendown soon as they ALL have stuff from major labels on it.

    The best alternative for DJ-Mixes right now is: https://hearthis.at/ You can even use your soundcloud page to upload your mixes there.

    • http://pkirn.com/ Peter Kirn

      No, there I absolutely agree.

      I think you’re fairly nuts to add 30-second ads to your content.

      And I think for mixes, SoundCloud isn’t the best place to go (thanks for hearthis …)

      Time for a comparison of those sites, because I’m absolutely with you there. Still, for promotion of original music and live performances, I still like SoundCloud, and I don’t see how this changes anything for me as a user, which is why I was puzzled by some of the extreme reactions.

  • J.Martins

    Problem is not only the Ads. Problem is the stupid marketing plan E.g.: After many years watching all kind of ads in Youtube, only last month one ad caught my attention and I could watch the entire ad.. That was one from Analog Machines. So even Youtube tracing all my activity (music video clips, subjects on music production, live concerts and some times gaming), they only show me that expensive new car I couldn’t afford, some new cosmetic I will never ever have some interest, some bank i ever haven’t a account etc

    If the tracks I will listen they place some ad like, the sound from that new VST, some samples from a interesting sound pack, samples from a new synth..maybe.. MAYBE i could listen

    • http://pkirn.com/ Peter Kirn

      Well, yeah, the messaging here – and on their deals lately – hasn’t been entirely clear. So, if people are losing their minds, it may suggest something’s not quite going right on messaging, at least in some circles. (I’m not going to armchair quarterback SoundCloud’s PR department, just continue to try to get the actual story.)

  • Robin Renwick

    Soundcloud died for me as a company, when i realised that their recommendations for who i should follow had no relation at all to my music taste, or to who i was following. It was obvious from that moment that they had no care for their user base, and indeed, had no real real understanding of the music preferences of their users. That was a sad day, as before, i had thought the interface and the medium as being quite useful.

    • http://pkirn.com/ Peter Kirn

      Wait, I don’t follow. You were using recommendations before?

      Not to state the obvious, but why not just ignore the recc’s?

  • takethemoneyandrun

    Scrappy startup loved by independent artists raises over 100 million euros from VC’s, moves into swanky new office and now bets its future on the likes of Katy Perry and Chris Brown by offering them an invite only membership to their new exclusive premier club. Even if they end up opening this up to all their members we all know that the only ones truly benefiting will be those mainstream acts that average 2-5k plays everyday!

    • http://pkirn.com/ Peter Kirn

      Well, interestingly, “trending audio” right now includes Iran’s water shortage. (You’re right about the trending music.)

      But the flipside may be that for the non-mainstream music, this whole thing actually changes nothing. It’s as useful, or not, as it was before.

    • gunboat_d

      that is a great thing about SC; lots of public policy podcasts that are outside the normal channels like iTunes radio or other ecosystems.

  • NRGuest

    I’m curious, people complain about ads, but the promise of advertising revenue is what gets these companies that offer free services off the ground in the first place (that or selling user data, which in my opinion is much worse). If we don’t support sites after they advertise, eventually investors will catch on and sites that offer free services will stop existing.

    Of course, that may not be a bad thing, depending on your perspective. But from a non-musical perspective, an ad supported internet is probably one of the best ways to keep the internet free, open, and democratic for the vast majority of people. The alternative seems to be requiring subscriptions.

  • Filo

    I will never buy anything from ads. So whats next?

  • itchy

    there must be another way for soundcloud and users to make money without going the marketing bullshit. no one wants ads its just clogging up the internet.
    ill get back to you with a solution shortly

  • subbasshead

    Same as Youtube, I think the blame lies with the person who uploads content AND enables ads/monetization – it is not compulsory and while some people do make money from monetizing their Youtube videos they also have to own their choice to make our viewing/listening experience considerably worse in the process. Unless you are getting very significant number of plays I would question whether it is even worth attempting to make some pitiful amount of $ via enabling ads that no one wants to see or hear.

    I much prefer the model VIMEO is based on – no advertising, and you can choose to pay for better services.

  • subbasshead

    I will NEVER enable ads on any of my content, but as a listener/viewer/audience member where is the option to pay a yearly fee to NEVER SEE OR HEAR an ad? I would have thought that was an easy function/service to offer & a more reliable form of income eg I would pay $50 a year to never ever see ads on Youtube. I will never click on an ad so google are never going to get a significant return from showing me ads, whereas I will pay $ to avoid them

  • Frank

    Solution:

    1) As a listener i will simply unfollow anyone who puts ads on their stuff.
    2) As an artist, i will not opt in for ads.

    Pretty simple, actually.

  • fernando

    I can understand why SoundCloud want to do this and in terms of legitimating themselves from a licensing/revenue perspective it makes sense and could possibly even be attractive.

    But, I’ve struggled for a long time to see how SoundCloud will really improve on the artist discovery front. I have nothing against DJs & remixes of course, but it frustrates me that when I look for the genres I write in, most of what comes up in searches is not original new songs, but DJ sets, remixes & the odd cover.

    I feel like there’s something missing in SoundCloud’s development, in the search algorithm and tools given to creators in order to make it easier for users to find relevant new material to enjoy.

  • Breaking Normal

    Time for another startup to swoop in and strike while the iron’s hot. Audio ads are a DUMB idea and people will not support them.

  • SynthEtiX

    Why are people so caught up in “I never want to hear ads on SC”? Strictly speaking from a consumer stand point, I’m willing to listen to the stupid little ads because:
    A) I know that having ads before the songs I like helps support the artist.
    B) Ads are EVERYWHERE.. including the old forgotten FM radio stations. To say that “it just won’t work” is ridiculous b/c it obviously does.

    As an artist, I wouldn’t have ads on EVERY song. Just on the ones that I know people like that I’ve made. If someone entirely ignores something just because they can’t have access to it immediately tells you something about that person’s character.

    It’s like when you go to see perform in a really bad theater productions. You’re there to support, listen, and enjoy.. for them.

    The most important thing is balance. LIMITED commercials on artist pages, not every song.

    • Frank

      Doesn’t matter if you’d only place ads on selected songs – because as a consumer my stream would still be plastered with ad supported songs from a lot of different artists.And yes, i think i would find it to be extremely annoying to have to listen to an ad before almost each and every song in my stream.It’s like the annoyance of the free Spotify quadrupled.And no, it’s totally not the same as Youtube ads because people don’t listen to music – specifically their SC stream – the same way they watch YT.On YT, you mostly switch from vid to vid, whereas music you listen to as a constant stream.Now imagine a music stream that’s interrupted after every single track, that’s totally ridiculous !

    • http://pkirn.com/ Peter Kirn

      Right, but some points -

      1. No, not every track plays an ad. The ads are “occasional,” *and* they’re only on tracks that come from uploaders who opted in.
      2. You can unfollow sources that opt into advertising, if you’re annoyed (big disincentive to them)
      3. You will be able at some point to pay to remove advertising, just as on Spotify. (and see #2 – it’s essential to SoundCloud that they get that functionality quickly)

      Also, have you ever listened to the radio? Or a public radio pledge drive?

    • ElectroB

      Besides the fact that you will not be getting ads on every single song – if you find the ads on the streaming music services annoying, you have plenty of other options, such as paying subscription fees, listening to public or listener supported radio stations (SOMA.fm comes to mind – and even then, they depend on donations to keep going without ads). Or alternatively you can (gasp!) BUY the music.

  • johnjonbringdaphenomenon

    “Can it be that it was all so simple then”

    The innocent days of the internet and soundcloud’s original launch video
    http://vimeo.com/1857085

    • http://pkirn.com/ Peter Kirn

      Yeah, and most of why I use it today was true five years earlier. Not bad, given the way things often go on the Internet. What I miss is the ease of the Dropbox / incoming feed. But the ad stuff everyone is flipping about, that has no real bearing on the service for me.