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(Credit: Ryan Arnst)

Music

Warner becomes the first major label to adopt a fan-powered royalties system

Warner Music Group has adopted SoundCloud’s ‘fan-powered’ royalty system in which royalties are distributed to artists based on how many individual users listen to their music. In doing so, they have become the first major label to adapt to a new, fairer system.

SoundCloud had initially launched its royalties scheme in 2021, claiming that it was “a more equitable and transparent way for independent artists who monetise directly with SoundCloud to get paid”.

The model that had come before it was known as pro-rata and meant that artists generated revenue based on their individual share of the total streams on the music streaming platform. SoundCloud then took a share of 30% to account for their overhead costs.

However, now that Warner Music Group has taken SoundCloud’s royalty system on board, each artist credited with having earned royalties from a particular recording will earn a share based solely on each stream of that specific recording.

However, Media Research has recently conducted a report based on 118,000 artists on SoundCloud who are using the new fan-powered royalty system, according to which 56% of artists said that they were making more revenue by using the old pro-rata model rather than the new model.

Many other streaming platforms, including Spotify, currently use the pro-rota model. However, this is likely to include the prominent artists who took a large share of SoundCloud’s takings because of their dominance. The report claimed that “[Fan Powered Royalties] uncovered the foundation of a new fan economy that ‘corrects’ much of the inequity and misguided incentives under the pro-rata model. FPR presents opportunities for artists of all career stages to reimagine their relationship with their fanbases – especially their most loyal fans.”