HOW SOUNDCLOUD’S BROKEN BUSINESS MODEL DROVE ARTISTS AWAY

n December 2012, as part of a major redesign, SoundCloud introduced a feature called the repost. Similar to Tumblr’s reblog or Twitter’s retweet, reposts were designed as a way to help new music spread virally. But from the start, artists abused the feature by constantly reposting their own tracks, pushing them back to the top of their followers’ feeds every few days. Artist collectives made agreements to repost one another’s songs, and eventually, a popular music blog was caught selling “slingshot” packages that included paid reposts. Fans and artists alike loudly complained — but SoundCloud, which was busy fighting an existential threat from major record labels, didn’t address the abuse for nearly three years.

In the meantime, artists and fans alike flocked to rival services like Spotify, Google, and Apple. Ask the artists who first turned SoundCloud into a premier destination for discovering new music and they’ll tell you that they abandoned it only after years of neglect on the platform. Interviews with artists, producers, and managers illustrate how SoundCloud squandered early enthusiasm for its service with a messy transition to a paid business that ultimately made little money for artists — or SoundCloud — while driving away the listeners and creators that were its lifeblood.

SoundCloud declined to comment.

Founded in 2007 as a kind of YouTube for audio, SoundCloud became popular among a wide swath of outsider artists. It helped fuel the rise of EDM and the raw, grunge-inspired genre that came to be known as SoundCloud rap. The company’s monthly audience grew from 11 million in 2011 to 175 million four years later. Along the way, investors came to value it at $700 million.

“Early on, I had a website with 15 megabytes of storage that I somehow crammed low-res MP3s onto,” says RAC, a Grammy award-winning DJ and record producer. “SoundCloud was the first [music-sharing platform] to take off in a tangible, life-altering kind of way. It initially solved the hosting issue. This was a big deal in 2007–2008. It’s almost laughable in the age of infinite cloud storage, but it was very expensive to host your music online. As Myspace was failing, there was a huge vacuum for a simple and easy music player.”

SoundCloud experimented with a variety of business models, including content-related ads and charging the creators for premium accounts that host more audio. But much of the audio uploaded to its servers contained derivative copyrighted material: DJ sets, mashups, and unofficial remixes using songs the SoundCloud artists didn’t have rights to. As those tracks racked up millions of views, record labels pressured the company to crack down. While the company worked to develop its paid platform, the service began to fray around the edges. SoundCloud’s increasingly confusing system of paid tiers caused contention for creators and their teams: unwarranted song takedowns ruined PR for new releases, labels pulled music off SoundCloud against artists’ will, and those who had helped make SoundCloud a force from the beginning now found it had simply stopped paying attention to their needs.

Now SoundCloud’s future is uncertain. Acquisition talks from both Twitter and Spotify fell apart. In 2014, Twitter said its reasoning was that “the numbers didn’t add up.” Sony pulled out of streaming agreements in 2015, citing a similar concern of “a lack of monetization opportunities.” The company’s valuation is sinking, and on July 6th, it announced it had laid off 173 employees — 40 percent of its workforce — and shut down its London and San Francisco offices.

Musician RAC in his studio
Musician RAC in his studio.
 Photo: Deckstar Management

For many members of the SoundCloud community who talked to The Verge, the trouble began in 2012. That’s when the introduction of reposts, along with the service’s surging popularity, began to attract bad actors who flooded the site with what amounted to undisclosed advertising.

“You could repost infinitely and it would always be at the top of the feed,” RAC says. “I’m definitely guilty of using this until my fans started complaining about it.” Tyler Burrett, founder of the label TrapStyle, says he still uses a service called SCPlanner that links together dozens of SoundCloud accounts and schedules reposts in advance.

“Reposts really ruined what a label is and means,” says Burrett. “It took away so much value from blogs and networks, as it allowed for people to start and create pages and ‘labels’ with minimal effort.” With reposts, it was now trivially easy for artists and promoters to artificially boost the number of streams a song had received. “I know this is going to sound bad coming from one of the bigger reposters on SoundCloud,” Burrett says, “and I’ll probably catch heat going on record saying this: I wish SoundCloud took away reposts.”

SoundCloud finally instituted reposting limits in 2015, suspending or even banning users who abused the feature, but it was arguably too late: years of unchecked abuse had flooded users’ SoundCloud feeds with mediocre music pushed through by artists, labels, and blog accounts, much of it paid for. And it wasn’t a secret. “Everybody was doing it,” says RAC. Burrett agrees. “[SoundCloud] not grabbing a hold of things allowed for all sorts of early misuse to happen.”

It wasn’t the only public spam problem SoundCloud ignored. Services emerged allowing artists to buy thousands of fake listens, likes, or followers, often for as little as a few dollars. For years, SoundCloud’s help community has overflowed with users complaining about bots, and the company has made few efforts to address it. To this day, SoundCloud says it can remove fake users only if they are manually reported, and even if it does, it has no way of removing fake plays on a track. Anyone can artificially and permanently boost their numbers through purchased plays and strategic reposts. They still do.

THE SPOTIFY SITUATION

Meanwhile, another challenge to SoundCloud gained strength in 2012: Spotify. Launched in Europe in 2008, the company expanded to the United States in 2011, offering new users a six-month free trial of all-you-can-listen, major label music. In 2012, Spotify introduced an embeddable player that could be added to blogs or social media profiles, allowing users to play music without leaving the page. A few months later, the company introduced a web player.

For millions of users — including one-time SoundCloud devotees — Spotify proved irresistible. It also offered record labels the business model that they would come to insist on everywhere else: fully licensed tracks in exchange for guaranteed royalties. And while Spotify has had its own skirmishes with labels, the basic structure of its deals with the labels set a template that SoundCloud would soon be pressured to follow.

It took until 2014 for SoundCloud to hammer out its first label deal with Warner, and another two years to secure Universal, Merlin, and Sony. But it wasn’t until 2016 that the company introduced SoundCloud Go and Go Plus, paid monthly subscriptions that grant users access to as many as 150 million tracks. That includes the derivative works that labels find so vexing, but only about half of the major label content you would find on Spotify. The service launched without major artists including Katy Perry, Rihanna, Arcade Fire, Grimes, One Direction, The Beatles, and Radiohead; many would later be added. But to some reviewers, it was dead upon arrival, with many criticizing its confusing interface as a major issue. “The lack of big hits isn’t Go’s only problem: the service is also really, really difficult to use,” our colleague Jake Kastrenakes wrote at the time.

SoundCloud currently has six tiers of usage: three for listeners, and three for artists, one of which is available by invitation only. It’s chaotic, and one result of that chaos is that SoundCloud is overrun with duplicate tracks — one in front of the paywall, and one behind. “The major labels did not make it easy, nor did their rigid music ingestion and distribution systems,” says Steve Aoki’s manager, Matt Colon. “SoundCloud wasn’t purpose built for that.” Artists often tolerate the duplicates because, in most cases, they would rather get the exposure to their work and support the free version with the higher play count, even if it leaves them grumbling about SoundCloud’s product. “It makes no sense to take them down,” says artist Jai Wolf. “[My song] ‘Like It’s Over’ has almost 1 million plays on the non-monetized upload and 24,000on the monetized one. It’s all so strange and messy. I don’t care about royalties off SoundCloud because it’s almost negligible.”

Just as on Spotify, the economics of SoundCloud came to favor the biggest stars, at the expense of the smaller, up-and-coming artists. The latter group was no longer a priority. “Their changes were hard on people that were in the middle, and they were hard on people that were at the bottom,” says producer and DJ Kill The Noise, “people that didn’t have label representation, or anyone to help mitigate the new rules.”

SoundCloud’s embrace of the major labels had another important side effect: it discouraged the remix culture that had originally helped the site thrive. Though a content identification system had technically been in place since 2011, SoundCloud began to enforce it much more strictly once deals were in place with labels. Suddenly, longtime accounts were being suspended, tracks were being removed, and “strikes” — SoundCloud’s term for instances of copyright infringement — were issued aggressively. Artists that were issued strikes had little recourse, and were often told to take their problem up with the original rights holders— that is, if they could get in touch with SoundCloud to begin with. “I have clients billed on the second line of North America’s biggest festivals,” says Will Runzel, a manager with Prodigy Artists and Collective Talent Buying, “and I don’t even have an 800 number.”

The content identification system was notorious for false positives, and was now also flagging songs that had sat untouched on profiles for years. Many artists came to feel they were being penalized for doing the very thing that popularized SoundCloud to begin with. It continues to be unreliable, sometimes issuing strikes against artists for uploading their own songs. (For years one of the authors of this article uploaded mixes and original content to SoundCloud; three years ago, she was issued a strike for uploading a song she produced.) “There wasn’t any forethought into how it would affect the community,” says Kill The Noise. In a tweet, the artist Alison Wonderland agreed: “SoundCloud gave artists power and reach then took it back.”

As SoundCloud faltered, Spotify began attracting more artists to think of it as their primary publishing platform. Making it on SoundCloud came to be seen as a stepping stone, not the end goal. “If a track did well on SoundCloud, you could consider giving it a proper release on iTunes or Spotify,” says Colon. “If it underperformed, then you’d know not to expend any more time or energy. I certainly wouldn’t call it the primary outlet for many artists.”

THE PARTNER PROGRAM

If SoundCloud had a chance to escape the punishing economics of major label deals, it likely would have involved On SoundCloud, a program it introduced in 2014. (Initially On SoundCloud had three confusing tiers of its own. There’s now one tier, known as On SoundCloud Premier.) Similar to YouTube’s partner program, On SoundCloud Premier offers members — and SoundCloud — a way to make money from their music directly.

The public description is vague, and SoundCloud has been coy with details about how it works. A source familiar with the program says On SoundCloud Premier generates revenue in two ways: content-related ads, and working with brands to create sponsorship packages, which are then offered to On SoundCloud Premier artists, sometimes for tens of thousands of dollars. The artists grant brands the use of an unreleased song, or create visual banners and artwork behind existing tracks, and SoundCloud also guarantees a certain number of impressions. SoundCloud does that by promoting certain tracks within its feed; a SoundCloud post from 2015 touts tracks that were advertised using the On SoundCloud Premier platform, via brands like Jaguar and Microsoft.

Invitations to the program were slow to roll out initially, and three years later, it remains invite-only. SoundCloud never announced a number of partners after the first 100 joined, and those who belong to it aren’t all that thrilled with the program. “The payouts are less than one-tenth of other platforms,” one manager, whose artist is part of On SoundCloud Premier, tells The Verge. Moreover, the manager says SoundCloud is often months late on these payments. “My energy’s on Spotify and Apple Music. I don’t see a reason to be spending time on something that’s not making us money.”

The manager says SoundCloud’s artist relations team was top notch, but the recent layoffs hit it hard. “I found out two weeks after the layoffs that our rep was gone,” the manager says. “I don’t know anyone at SoundCloud anymore.”

SoundCloud’s founders have said for years that they’re working on “multiple tools for monetization,” but most of the indie artists upon which SoundCloud built its name still have no options to participate in the limited monetizing programs SoundCloud currently offers. All the while, the company is still aggressively policing content and issuing strikes while accepting creators’ monthly payments for accounts and placing ads on their content. For some artists, it feels like betrayal. Salva, a producer who has worked with Future and Young Thug (and at one point in 2012, had the most popular track on SoundCloud), deleted his account on Saturday. At the time it had 144,000 followers. “I’m not making money,” he tells The Verge. “25 million plays, and zero dollars.”

While many creators have not yet outright deleted their accounts, they’ve mostly moved on to focus on other platforms, primarily Spotify. They say they aren’t rooting for it to fail. SoundCloud still serves a need, especially for a new generation of basement producers who, with fresh eyes, see the magic that others recognized in the service years ago. Unfortunately, at this point, it’s hard to see if SoundCloud can meet that need the way it did during its early years. Instead of a tight-knit community, SoundCloud is now fractured, gamed, understaffed, and its relationship with creators feels very one-sided. “People have Stockholm syndrome with SoundCloud,” says Kill The Noise, “and they’re like, ‘Well, I’m willing to be taken advantage of because what would I do without it?’”

Some industry executives believe SoundCloud was ultimately outmatched by larger, savvier players. “In my opinion, they bit off more than they could chew,” says Nick Catchdubs, co-founder of the label Fool’s Gold. “Spotify spent a decade turning streaming subscriptions into a consumer product, and Apple literally invented the modern digital music store years before that. So I don’t know how anyone could think SoundCloud could pivot from DIY, user-uploaded content to a functional (let alone competitive) retail service overnight. And the change disregarded what made people mess with SoundCloud in the first place… it tried to be all things to all people, yet the end results were alienating on all sides.”

[source:-theverge]

Post Author: Loknath Das

I am a blogger with the main motive of writing articles at my choice of level. I do love to write articles and keep my website updated regularly , if you love my article then be sure to share with your friends as they would love to read my article...