Neil Mohring, head of media at Eversheds, has commented on the news that Soundcloud is to allow advertising on its site.
To date, SoundCloud has operated without licences from content owners. According to Mohring, content owners ‘seem to have taken the view that the promotional value of content freely available on SoundCloud outweighed the value of any royalties ordinarily payable’.
However, as Mohring noted, Twitter recently considered purchasing SoundCloud (for around $2bn, or £1.2bn) but walked away reportedly because without appropriate licensing arrangements SoundCloud was vulnerable to numerous and substantial copyright infringement claims if the content owners’ position on licensing changed. This, says Mohring, ‘would suggest that the move to allow advertising in order to pay artists on the site is one to make SoundCloud more attractive to buyers and investors’.
He continued: ‘If the deal currently under discussion goes ahead, speculation is that Twitter would in future buy out the major’s stake, resulting in a potential windfall for the majors.
‘In the event of a buyout, a key issue for artists and labels would be how, if at all, the labels should account to their artists for that windfall. Artists may question whether they should receive a portion of a label’s profit as and when the label sells its shares.’