SoundCloud has struck a multi-year licensing deal with Universal Music, signing on the second major label ahead of a planned subscription service launch later this year. The deal will also allow SoundCloud to monetize Universal tracks with advertising, and even includes user-generated uploads that are based on Universal’s music.
“At UMG, we have long-embraced empowering entrepreneurs and innovative services such as SoundCloud,” said Universal Music Group chairman and CEO Lucian Grainge in a statement, adding: “We look forward to working with SoundCloud and supporting the company’s evolution into a successful commercial service.”
The deal with Universal had long been in the making for SoundCloud. Rumors of an impending announcement first surfaced last summer, but those talks reportedly stalled after SoundCloud got sued by rights holders in the U.K.. SoundCloud settled that lawsuit last month, clearing the way to bring Universal on board.
SoundCloud’s end goal is to build a music service with multiple revenue streams. The company started to experiment with advertising for select publishers last year, and is now getting ready to extend those ads to music licensed from Universal and other partners. In addition, the company is also looking to launch a music subscription service in the U.S. and other countries later this year.
Subscription music with an ad-supported tier — that may sound familiar, as it is pretty much what Spotify and others have been offering for years.
However, SoundCloud has a unique proposition that few others can match: The service always allowed independent creators to upload their own songs and DJ mixes. The Universal deal and others the company is striking with rights holders also cover these user-generated uploads, much in the same way YouTube monetizes user uploads for rights holders.
This means that Universal will be getting its share of advertising and subscription revenue generated with a DJ mix that includes their artist’s music, even if it has been uploaded by an unknown bedroom DJ without prior consent of the major label. The result isn’t just potentially more revenue for rights holders, but also a vastly bigger catalog than most other subscription services.
SoundCloud already has more than 100 million track available on its platform, and will likely get millions more through its partnership with Universal. The company has also previously signed a deal with Warner Music, and now just has to get Sony on board to actually launch its subscription business.