SoundCloud Is Now One Deal Away From Being Safe From Copyright Lawsuits

One of the world’s most popular destinations for emerging music has joined forces with the world’s largest record company. The New York Times reported Wednesday that SoundCloud and Universal Music Group have reached a licensing agreement that will give the latter access to Universal’s catalog and pay the former’s artists advertising revenue when its songs are streamed. The deal reportedly also gives Universal the right to experiment with walling off select parts of its catalog from SoundCloud’s free users — SoundCloud has said it will launch a paid subscription tier of its service later this year — and controlling the length of song snippets users can share on social networks.

“We’ve got the majority of the music industry partnered with us now,” SoundCloud co-founder Alexander Ljung said.

The deal is the third of four that SoundCloud needs to close if it wants to insulate itself from the threat of being sued on a massive scale for copyright infringement. In 2014, it signed the first deal, with Warner Music Group. That move was the first public signal that SoundCloud was going to begin pursuing revenue streams beyond the hosting fees it charged its power users. Shortly thereafter, it also signed a deal with Merlin, the negotiating body that represents the interests of independent record labels.

That leaves Sony, the world’s second-largest record company and the one with which SoundCloud has the worst relationship; this past summer, Sony pulled all its artists’ music off the service. Negotiations between the two companies are reportedly ongoing.

Since its launch in 2008, SoundCloud has grown into one of the internet’s biggest destinations for streaming music. The company claims 175 million monthly listeners, more than double the number claimed by Spotify, and many of them are there for music that will never appear on a conventional streaming music service: unofficial remixes and edits of pre-existing songs, DJ mixes, bootlegs, as well as enormous piles of music made by aspiring, up-and-coming artists.

As SoundCloud grew, it evolved into both a resource and an annoyance to major labels, who loved SoundCloud as a marketing and artist discovery tool but hated their inability to extract revenue from it. In August of last year, the British royalty collections society PRS for Music sued SoundCloud for copyright infringement, though the two sides reached a deal that covered previous infringement and also granted SoundCloud a license it could use moving forward.