Making $$$ in the music industry is pretty hard. Just ask SoundCloud, which has been busy striking deals with music labels in an attempt to end the long-running legal disputes that have stalled its growth.
SoundCloud is the music industry’s equivalent of your edgy mate – the one who knows about all the hottest bands before they get big, but also doesn’t pay for any music. The site’s reluctance to pay royalties to music labels is based on a tenuous legal loophole from the Digital Millennium Copyright Act.
This week, the site signed a much-anticipated deal with Universal Music Group, the music industry’s biggest label. The partnership with Universal gives SoundCloud access to its catalogue of artists and allows these artists to collect royalties from ad revenue when their music is streamed on the site. This puts pressure on SoundCloud to pull in more #PROFIT by increasing ads, keeping some content for its paid subscribers and leaning on the big names who already endorse the platform like Kanye and Miley.
Even for a band like Radiohead, there’s big pressure to turn a profit. Ever since they were dropped by EMI, the band started a canny business model, creating limited corporations that own the rights and royalties for the music on each album: ‘In Rainbows’ (2007) was released under _Xurbia_Xendless Ltd and ‘King of Limbs’ (2011) under Ticker Tape Ltd. As the FT explains, in the unlikely event the album is a flop, the corporate holding structure stops investors from recouping costs by going after gains from other projects.
Radiohead recently set up a new limited liability company called Dawn Chorus LLP, fuelling delicious speculation that a new album is about to drop. Who’d have thought Thom Yorke was also a shrewd businessman?
This originally appeared in Moving Brands Wednesday 20160120.
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