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Friday, March 18, 2016

Sony and SoundCloud have done the deal everyone was waiting for


Written by Tim Ingham — Exclusive: Sony Music Entertainment has not only licensed SoundCloud, but taken equity in the streaming business as part of the deal.

Watertight sources have told MBW that contractual terms have been agreed between both parties, following on from similar agreements with Warner Music Group in late 2014 and Universal Music Group earlier this year.

The world’s second largest record company, Sony will not only receive stock in SoundCloud, but has also been invited to participate in the Berlin-based platform’s next funding round.

Having all three majors on board means SoundCloud is now free to launch its much-mooted subscription service in the coming months.

(There is no word about Sony/ATV signing a licensing agreement for publishing rights – if one is still required. But with Sony Corp announcing a $750m acquisition of the Jackson Estate’s share in the company this week, SoundCloud must feel its chances have been given a boost.)

In addition to WMG, UMG and Sony, SoundCloud has also signed licensing agreements with Merlin, which represents 20,000 independent labels worldwide, in addition to publishing collective the NMPA.

“SONY WILL NOT ONLY RECEIVE STOCK IN SOUNDCLOUD, BUT HAS ALSO BEEN INVITED TO PARTICIPATE IN THE PLATFORM’S NEXT FUNDING ROUND.”

All of these deals have been signed on the basis that SoundCloud adds a subscription tier to its offering sooner rather than later.

Last year, Sony and SoundCloud appeared to be a fair distance away from a deal.

The major removed content from some of its biggest artists in May 2015.

Sony-signed producer Madeon was upset enough to tweet that the music company was “holding [its] own artists hostage”.

Such problems have now been consigned to history.

According to SoundCloud’s latest accessible annual fiscal reports, the Berlin-based streaming service lost €39.14m ($44.19m) in 2014 on revenues of just €17.35m ($19.14m) – without any significant royalty payments to rights-holders.

Within those figures, administrative expenses (staff and other business basics) grew 67.8% to €47.74m ($52.7m) in the year.

Despite these severe losses, SoundCloud’s headcount grew by 21% to 236 people in 2014 – with an average annual wage of €79,980 ($82,253).

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