That Leaked Contract is a Glimpse into Soundcloud’s Future

Digitalmusicnews.com scooped everyone yesterday by publishing what appears to be an agreement between Soundcloud and independent music publishers. That contract (embedded below) shows how desperate the streaming service is to legitimize its content, pivot its business model toward more of a pure-play subscription streaming service and offers another clear glimpse of what a “legitimized Soundcloud” might look like.

SoundClound Licensing Contract With National Music Publishers' Association

As mentioned here and elsewhere, Soundcloud is attempting to pivot its business model from one which charged musicians for storage and streaming to one which charges users for streaming music from Soundcloud and advertisers for reaching those users. The existing model wasn’t exactly a success: despite charming investors, Soundcloud netted less than $15 million in total revenue last year and has never come close to turning a profit.

If the contract is any guide, Soundcloud envisions three tiers of service for listeners in the future, including:

• The free, ad-supported tier, with pre-rolled ads running before monetized tracks.
• A second tier hiding under the “Additional Subscription Features” category, removing ads and enabling some downloads. The extent of this tier is unclear, because there’s also…
• A third tier called “Soundcloud Full Catalog Subscription Service” which would seemingly be the same as “Additional Subscription Features” but encompasses every track on the server.

In the future, using Soundcloud as 100% of users today use Soundcloud would be merely an “enticement” to try to upsell listeners to a paid tier.

If this sounds a lot like Spotify, you’re right – it’s a hell of a lot like Spotify. The single unique business proposition that Soundcloud has to offer listeners is the relationship they have with small and unknown artists – a relationship which has taken a beating as Soundcloud continues to scrub its service of uploads deemed “infringing” upon copyright.

Oh, and not to bury the lead, but per the draft agreement, Soundcloud will also grant publishers total access to the “Soundcloud Takedown Tool” – the control panel which removes “infringing” music from the service. This would presumably be offered to the other major labels as well: