SoundCloud Jumps On the Ads Bandwagon
SoundCloud, the second biggest music streaming service with 175 million monthly users, is known for not paying royalties to the creators of the music played on its site and apps. Though it all seemed acceptable before, with SoundCloud lately grabbing $60m this January from a $700m valuation, questions have begun to raise from music labels about when the company will start paying royalties.
SoundCloud is now answering those questions with its initiative, “On SoundCloud,” with a handful of music creators in the U.S. for the moment.
These creators will now have advertisement shown alongside their audio content, and get a major share of the money paid to SoundCloud by that advertiser.
However, this initiative is only being applied in the U.S., so ads will only be seen on SoundCloud’s own website and mobile apps in the States and not in the tracks embedded anywhere else on the web.
“We see the program as something for all creators. We’re launching with a small set, but ultimately we want to get all creators, whether music or audio, big or small, all over the world to be able to make use of it,” Chief Executive of SoundCloud Alexander Ljung told The Guardian.
Now this advertisement initiative may have dampened our spirits a bit, but Ljung stresses that the creators will have an option to allow advertising for certain tracks, instead of having ads with everything they upload.
The ads are said to be mixture of radio-style audio ads, “native advertising” including promotion of SoundCloud tracks, and sponsorships in case where brands work with individual creators. Launch advertisers include Red Bull, Jaguar and Comedy Central.
“We wanted to avoid this being a bunch of unthought-through ads in your face. You won’t open the site up and see a bunch of banner ads plastered everywhere. It’s elegant,” said Ljung. “Our set of launch advertisers have done a really great job: the experience around the ads feels good.”
For users who still find the well “thought-through” advertisement campaign an annoyance, SoundCloud will soon introduce the option of having to pay a monthly fee to stop seeing ads.
The challenge for SoundCloud and its music partners is finding the right balance now. While this initiative is a positive step because the creators are being paid for their work, the chances that these large amounts of shares and advanced payments may not be catered for by just SoundCloud’s income in the near future, with more creators claiming their share.
The saturation problem may spike due to Ljung’s statement that SoundCloud wants to pay every level of the music industry, from individual artists to the largest labels.
“We’re starting it today with a select group of partners, but it’s clear to everybody that the ambition is to get everyone on there. That would be a huge deal for the industry and for creators.”