Warner Music Group adopts SoundCloud's “fan-powered” royalties model as the first major label

The first major record label to commit to SoundCloud's "fan-powered" royalty (FPR) model is Warner Music Group.

SoundCloud initially introduced the new approach in March 2021, which distributes royalties according to how much each user listens. In a recent analysis, Midia Research examined the profits of 118,000 SoundCloud musicians who used the FPR method. 56% of the respondents claimed that FPR generated more earnings than the pro-rata model implemented by Spotify and other streaming services.

In a press release statement, SoundCloud said, “Under FPR, each fan's subscription or advertising revenue is distributed among the artists they listen to, rather than being pooled under the traditional pro-rata model the music industry has been using for over a decade.”

WMG and the other major labels have long been against the concept. But this action might portend a change in the entire sector. Prior to this, it was reported that the pro-rata arrangement resulted in the top 1% of artists collecting 90% of streaming revenues.

The report by Midia Research also revealed that “super fans” paid smaller artists more; the term “super fans” here signify listeners whose streams amount to more than $0.10 each month. Furthermore, between April 2021 and February 2022, the number of artists on SoundCloud who made over $1,000 from streaming jumped by 9.2%.

Oana Ruxandra, chief digital officer at WMG, said that the evolution of the music industry brought new ways to create, consume and monetise. She added: “As the ecosystem expands, WMG is focused on advancing and experimenting with new economic models to ensure the opportunities for our artists and their communities are maximised. SoundCloud has been an amazing partner in connecting artists and fans, deepening our relationship will allow us both to proactively build for the future.”