SoundCloud is rumoured to announce new plans to “let fans pay artists directly” which some commentators interpret as the music streaming service exploring user-centric payment systems.
While user-centric payments definitely make the landscape fairer and realign incentives by making sure the money generated by fans of certain artists actually end up in those pockets, it’s definitely not a silver bullet solution to make up for the difference between desired and actual revenue artists receive from streaming services. In other words: for the vast majority of artists, the immediate change in royalties from a shift to user-centric would be negligible.
Furthermore, it’s complex to negotiate, as SoundCloud’s VP of content partnerships Raoul Chatterjee pointed out during a recent session of the UK streaming inquiries:
“The whole investigation into user-centric is a very detailed and complex investigation that needs to be taken. It’s one potential path we’re exploring… and it would require industry-wide conversations and support to be impactful.”
SoundCloud is doing ok (especially compared to a few years ago), is reporting growing revenues, but it’s losing relevance. SoundCloud does not have time for lengthy negotiations. As a platform, they’ve lost their footing at the center of music subcultures and the longer it takes for SoundCloud to regain its position, the harder it will become.
Keep the lawyers at the (virtual) negotiation tables, but in the meantime, claw your way back.
Instagram, Bandcamp, and the post-Covid landscape
Two questions.
Firstly, where do music scenes go to connect to stay connected with each other in 2021? I’ve argued that Instagram has usurped community building from SoundCloud. Of course it should be noted that TikTok is playing an increasingly important role there, especially for certain genres. To a lesser degree, groups on Facebook, Telegram, and Discord form places for people to share their latest tracks, get feedback, find people to do collabs or exchange remixes with, etc. As such, they’re also great places for fans to keep track of the latest developments in music.
Secondly, where did musicians turn when they struggled to make ends meet with just the income from Spotify, Apple Music, YouTube, etc.? They turned to Bandcamp in a massive way. SoundCloud, with its creator-centric roots, wasn’t well-positioned yet to accommodate these artists, because what it offers artists hasn’t changed much from its early beginnings. In 2020, being creator-centric meant helping creators make money – and SoundCloud didn’t have much to offer beyond what it offered artists since the service’s early days. That is: a place to upload your music and present it to other people. That addresses a pre-2015~ market need: making music easy to access. Access has been solved. Monetization hasn’t.
Another place that made music easy to access, YouTube, has been SoundCloud’s most important competitor. YouTube, since its early days, has offered social functionality similar to SoundCloud’s, in that one can follow creators (once innovative! Spotify only launched this 4+ years after launch), comment on tracks, and see other users’ profiles.
By 2021, YouTube’s suite has evolved to include membership clubs with monthly fees, monetization through content identification, and livestream monetization through social features that make fans more visible in the chat (similar to Twitch).
This is the landscape SoundCloud must address & find relevancy in.
(more about this landscape in my piece for Water & Music about the rise of the fan-centric music streaming service (paywall))
The social opportunity
SoundCloud was strongest when it catered to its early adopter users or users who exhibit that type of behaviour. Behaviour commonly associated with early adopter users is word of mouth, being a power user, and a willingness to overlook certain flaws as long as the product delivers exceedingly well on its core value proposition. These users are not well-addressed, since the value proposition has diluted over time in order to target wider audiences (e.g. through its Spotify-like subscription service). SoundCloud has made some great initiatives to woo creators in recent years, but the unifying aspect for all users on the platform is its listening experience – and that’s a social one.
People go to SoundCloud to discover new music. To find what’s ‘Next Up’ before it’s uploaded anywhere else. If you’re into a particular type of music, you’ll follow many of the same artists as other fans of that music and you’ll see some of those fans appear in the timeline comments on tracks.
On profiles, which have the same feature sets for fans and for artists, this social functionality is also present by displaying who someone follows and is followed by, as well as any tracks they’ve liked and comments they’ve left. For users who don’t upload any music, the main profile real estate consists of reposted tracks (similar to a Twitter user who only retweets). All of that is social.
Do the majority of users explicitly engage in social behaviour on the platform? Unlikely and it’s probable that a small minority of users create most of the (visible) activity, as on Twitter. SoundCloud is a community product where a minority of users create the value that the majority of users get off of the platform. Unlike Spotify, which tries to help users get as much value out of the catalogue as possible, SoundCloud should focus on the value users can get out of communities and the artist-fan relationship.
Lessons from gaming
This is not dissimilar to what fueled the success of games like Farmville or Clash of Clans. In free-to-play games, the majority of users will never spend any money. Instead, they create value for the ecosystem, so that a minority of users becomes willing to spend (big).
In order to leverage these dynamics, and create revenue for artists, SoundCloud must double down on social. How?
- Step 1: Leaderboards on tracks and profiles. Show off the top fans of tracks and artists. Dedicated fans will want to earn their spot as the top fan. It’s not just fans: if you’re part of a certain music scene and want to make sure you’re ‘seen’, you’ll play new tracks on repeat, so you appear on the leaderboards on day 1. (just imagine K-pop stans, if you find it hard to imagine how fan communities would approach these types of dynamics)
This functionality already exists inside the stats dashboards artists have access to. All SoundCloud needs to do is make leaderboards visible on the various pages and perhaps create a setting so people can exclude themselves from public leaderboards.
- Step 2: Track and profile pages as real estate. Leaderboards create social competition and a way for fans to earn status. Now comes the monetization: let fans pay to claim pages in a non-obtrusive way, similar to how YouTube’s Super Chat feature lets you claim visibility in a chat during a livestream. You could let artists set prices or create some type of market dynamic for this.
- Step 3: Place activity & payment on the same currency. As in gaming, certain users will spend more time creating value through activity and other users will fuel the economy through payments. By creating an on-platform currency, SoundCloud could reward active users with tokens that accrue value as people purchase tokens to spend on the platform with ‘real money’.
The tokens could then help artists mint their work as NFTs and create a more sophisticated dynamic for ‘tracks as real estate’. Basically, artists could earn money from playback, from selling tracks as NFTs, and by making commissions off of people speculating and reselling music NFTs (a commission percentage can be defined in the smart contracts associated with an NFT). From here, SoundCloud could come to function more as a protocol and create a metaverse-friendly version of its other early value proposition: music playback that embeds everywhere. This time with music as a vanity item that all can enjoy, but can only be owned by one person at a time while always staying associated with the creator – even when NFT ownership transfers from one person to another.
As the user-facing part of the platform shifts towards creating more value from the artist-fan relationship and the activity inside fan communities, subcultures, and scenes, lawyers can negotiate with industry gatekeepers to change royalty administration to a user-centric model.
Some of the above is actually what the Audius protocol is trying to accomplish. You could also go a lot further than what I’ve described, as Audius intends and as Mat Dryhurst explored in his essay SoundCrowd: Tokenizing & Collectivizing Soundcloud. Long term blockchain visions aside, for 2021, being a creator-centric company means being a company that helps monetize, so SoundCloud must focus on the short term and employ an “opportunities multiply as they are seized” type of strategy. That means: not standing still to evaluate distant forks in the road, because what you do along the way will determine the paths you can take from that fork.
User-centric is too slow for SoundCloud
Is user-centric streaming the right thing to do? Yes. Will it help SoundCloud in the short term? No, because artists will not see significant enough returns in order for them to drive more traffic to the platform.
SoundCloud must emphasize its community nature, since that’s how the type of value can be created that part of its core users will pay for. That won’t be most of the audience that SoundCloud has been marketing its music streaming subscription to (which can’t beat catalog-centric Spotify or value gap YouTube).
The platform must be selective about what type of behaviour it wants to cater to and the value it can create out of that. For that, it makes sense to use its DNA as a social music platform – something that Spotify, Apple (through Ping & Connect), and others have not been able to figure out. It needs to focus on the users that can amplify community excitement around significant monetization functionality and help make SoundCloud as culturally relevant as it was half a decade ago.
Signed,
A long term SoundCloud user with a 3-letter username: Bas (and more recently Viva Bas Vegas).