SoundCloud adopts 'fan-powered royalties' that will pay artists based on listening habits instead of the number of streams

• SoundCloud announced it will pay artists royalties based on "overall listening time."
• Paying "fan-powered royalties" breaks from the standard model that pays artists based on streams.
• "The more fans listen on SoundCloud, and listen to your music, the more you get paid," SoundCloud said.

SoundCloud on Tuesday announced that it will pay artists royalties "based on a fan's overall listening time," breaking a long-standing industry standard of "pro-rata" payments.

SoundCloud's new payment model will pay royalties to artists according to users' listening habits, rather than pooling revenues to be distributed among all artists on the platform based on their share of overall streams.

"The more fans listen on SoundCloud, and listen to your music, the more you get paid," the company explained on the site it created to announce the new payment model.

"Many in the industry have wanted this for years. We are excited to be the ones to bring this to market to better support independent artists," SoundCloud CEO Michael Weissman said in a press release. "As the only direct-to-consumer music streaming platform and next generation artist services company, the launch of fan-powered royalties represents a significant move in SoundCloud's strategic direction to elevate, grow and create new opportunities directly with independent artists."

The new payment system, which will begin on April 1, is "backed by an extensive artist education campaign and direct, ongoing outreach with the independent artist community and industry partners," the company said.

The announcement was accompanied by the tagline "Artists deserve to be paid fairly." Many independent artists and others in the music industry have taken aim at the small royalties paid out by major streaming services like Spotify.

Spotify, which has 155 million paying subscribers, generally pays between $.003 and $.005 per stream, meaning artists need to earn about 250 streams to make a dollar. Spotify reported in its most recent earnings that it has paid out more than $25 billion to rightsholderssince the platform launched in 2006.

The Union of Musicians and Allied Workers, a group of more than 27,000 members of the music industry, are calling on Spotify to increase its royalty payment to at least a penny per stream and also adopt a user-centric model similar to the one SoundCloud announced today.

According to the UMAW website, "To pay the median American monthly rent ($1,078) an artist needs to generate 283,684 recurring streams monthly. And to earn $15/hr each month working full time, it would take 657,895 streams per band member."

Spotify, along with Amazon, Google, and Pandora, has been fighting legislation handed down in 2018 by the Copyright Royalty Board that would raise the royalty rate for songwriters by 44%. The four companies have been locked in an appeals process and last year gained a "procedural victory," according to Billboard, when a judge threw out the new royalty rate structure.