Warner Music Group become first major to adopt SoundCloud's 'fan-powered' royalties system

Warner Music Group has become the first major label to adopt SoundCloud’s ‘fan-powered’ royalty model that distributes royalties according to how much individual users listen to an artist's music.

The 'fan-powered' royalties scheme was announced in March 2021 and is described by the streaming service as “a more equitable and transparent way for independent artists who monetize directly with SoundCloud to get paid.”

The old model, known as the pro-rata model, sees artists get paid based on their share of total streams on a platform — with the streaming service usually taking away around 30% in "overhead costs."

In April, SoundCloud’s model officially launched with statistics showing that of 135,000 independent artists on SoundCloud surveyed, 60% earn more royalties compared to using the traditional pro rata model.

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An investigation from Midia Research and SoundCloud reports that out of the 118,000 artists using the FPR system 56% said they earned more over using the pro-rata model used by other streaming platforms.

The report also shared: “FPR’s greatest value is the insight that it provides into artists’ biggest contributing fans, helping artists better monetise their fans and navigate the industry-wide shift towards fandom fragmentation.”

SoundCloud has said according to Resident Advisor: "Under FPR, each fan's subscription or advertising revenue is distributed among the artists they listen to, rather than being pooled under the traditional pro-rata model the music industry has been using for over a decade.”

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"The evolution of the music industry brings new ways to create, consume and monetise," said WMG's chief digital officer, Oana Ruxandra reports Resident Advisor.

Ruxandra adds: "As the ecosystem expands, WMG is focused on advancing and experimenting with new economic models to ensure the opportunities for our artists and their communities are maximised. SoundCloud has been an amazing partner in connecting artists and fans, deepening our relationship will allow us both to proactively build for the future."

Becky Buckle is Mixmag's Digital Intern, follow her on Twitter