Boasting more rapid ups and downs than an out-of-control roller coaster, SoundCloud continues to encounter more pitfalls than successes in its attempts to rapidly achieve monetization as a streaming audio hosting platform. The latest unfortunate event (in a series of unfortunate events) was the discovery by Billboard that SoundCloud could potentially be sued by the National Music Publisher's Association (NMPA) if the site sells advertising to be used on its pages featuring published music. Precedent for this case dates back to a 2007 NMPA case against similarly looking-to-advertise YouTube.
The 2007 case was settled in 2011, and involved a landmark decision that involved YouTube making up to a $4 million recoupable advance payment for music publishing royalties for user-generated content containing published songs. As well, YouTube was forced to pay user-generated videos with master recordings at a synchronization royalty rate of 15% of net revenue from advertising.
If this case is not settled prior to reaching the point where a suit is filed, which is apparently what is happening, as according to David Israelite, president and chief executive of the NMPA, "[Soundcloud and the NMPA] are in conversation and looking for a win-win situation." Adjusted for inflation, SoundCloud could at minimum be looking at paying the NMPA $4.23 million in advance payments for royalties of illicitly uploaded user generated content using published music. Of course, given that SoundCloud has 350 million users (many of whom are dance producers uploading a constant stream of at one time unchecked for content violation remixes and bootlegs), the $4.23 million number could easily be on the low end of what the potential total could be. As well, given that Soundcloud is operating at an ever-growing gross profit deficit, the likelihood of the NMPA and Soundcloud reaching a deal (that isn't litigious at all) is altogether more than likely.
Insofar as key overall music industry stories to watch (that directly impact EDM), Soundcloud's struggle to turn a positive gross profit is likely one of the most significant.
