SoundCloud's cautious rise
January 14, 2011
Earlier this month, SoundCloud, a young German music sharing startup announced a partnership with Audible Magic, a media identification and copyright tracking provider, to identify copyright breaches and to automatically take them down.
This move also comes at a time when the company has gotten new attention from investors: on January 8, the company announced that it had received $10 million (7.48 million euros) worth of combinded funding from Index Ventures in Geneva, Switzerland and Union Square Ventures in New York.
The steps may seem understandable as sources close to SoundCloud claim that they are receiving letters from lawyers regarding copyright claims with an alarming frequency.
In short, the company, which has been expanding its Berlin offices and just surpassed two million users, is starting to find its financial and legal footing as it matures into the online music world.
Music and audio sharing community founded nearly three years ago
SoundCloud, which was founded in Berlin in April 2007, has a business model based on the success of social media platforms focused on the sharing of sounds.
"The easiest way to think of it is what Flickr is for photos, we're very equivalent but for sound instead," explained Alex Ljung, the company's co-creator and chief executive.
"It's a social sharing platform for the creators of sound content so music audio interviews, lectures, stuff like that. We have a lot of different kind of users, music producers in all kinds of genres, record labels, the music industry."
Like Flickr, which has a "freemium" business model, a basic level of service is free, and a year "pro" service costs 29 euros ($39) per year.
Part of the company's success is in its enabling of users to share their audio further afield than the SoundCloud website itself. The SoundCloud audio wave form or "widget," can easily be embedded into blogs, forums and websites and can be made enabled either stream only or as a downloadable file.
It also allows users to link their track through to online music retailers such as iTunes or Beatport.
Some users unhappy about content ID measures
However, while the site continues to expand, it has had particular success with the DJ and electronic music scene.
However, many mixes can contain tracks that the artist doesn't own the particular rights to - and that's something SoundCloud is cracking down on.
Not surprisingly, some users aren't too happy about the site's increased regulation.
On their January 5 blog post explaining the moves, some users called the company, "a joke" and warning this would be "another foot in the grave for SoundCloud."
"I've had my own DJ mixes taken down off SoundCloud," said Dean Driscoll, the PR manager for Minus, a Berlin DJ agency and record label.
"My mixes were taken down because of two rather obscure tracks that were over 20 years old, that not many people know about!"
Like many DJs who take a similarly liberal stance when it comes to intellectual property sharing, Driscoll argues that even if musicians are illegally sampling or file-sharing, there is a net benefit to musicians.
"I work for an independent label but we need people to be able to hear the music before they buy it and people hearing the music will lead them to seek that music out and buy it," he said.
"I've discovered and purchased much more music on DJ mixes and podcasts than from watching an ad on TV about a major artist."
Recent legal cases may concern SoundCloud
SoundCloud may wish to avoid the recent lengthy legal battles of a Swiss file sharing company, RapidShare, which earlier this month won a case in the Higher Regional Court of Duesseldorf that had been filed against it by the video game company, Atari.
Atari had asked the court to impose additional prevention measures on the website to prevent a new video game from being illegally shared on the RapidShare website. Previously, RapidShare had won court copyright infringement cases in Germany and the United States, where plaintiffs had argued that its was liable for damages due to unauthorized downloading.
However, Driscoll opined that SoundCloud shouldn't be caving to perceived pressure from established record labels.
"The shame with the difficulties that SoundCloud are going under at the moment is mainly because, as always, there's an older generation at that the major record labels who don't understand how people consume music anymore," he said.
Author: Jonathan Gifford, Berlin
Editor: Cyrus Farivar