SoundCloud CEO Michael Weissman: The Music Week Interview

Five years ago, SoundCloud seemed to be on the verge of collapse, set to fall by the wayside in the streaming gold rush. But now, under the leadership of CEO Michael Weissman, it is on an innovative new path. Following this year’s Music Week Awards win, we meet the New Yorker to find out how he’s rebuilding the company and to talk NFTs, the metaverse and why the industry needs to take a long, hard look at its relationships with artists and fans… WORDS: JAMES HANLEY PHOTOS: ANDREW LIPOVSKY Seven years before her anointment as Glastonbury’s youngest ever headliner this summer, a then 13-year-old Billie Eilish started recording songs with her brother Finneas and uploading them to SoundCloud “just for fun”. One of the tracks, Ocean Eyes, exploded and just like that, Generation Z’s first global superstar artist was born. But Eilish has never forgotten the digital platform’s role in her rise. “SoundCloud is the GOAT,” she declared on Germany’s OMR podcast in 2019. “SoundCloud is the only reason I am anything – 100%. We are in a time where anyone can make music and SoundCloud is the only reason we can all do this.” Eilish is one of the many future megastars to cut their teeth on the next gen streaming service and audio distribution platform – an ever-swelling list that includes the likes of Post Malone, Lorde, Bad Bunny, Juice Wrld, Marshmello, Sza, Khalid, Lewis Capaldi, Doja Cat and Megan Thee Stallion. If success has many fathers, then SoundCloud CEO Michael Weissman must feel like a proud parent. “Billie Eilish is an example of where it’s just a totally fresh new sound,” grins the personable New Yorker (who is about to become a father again IRL, as it happens, and is word perfect on Harry Styles hits thanks to his 10-year-old). “Then there was the SoundCloud rap era and, interestingly, there is a lot of incredible dance music coming out of the UK now. I was just in London and it’s got such great energy. I think that’s because the last two years have not had that kind of vibrant feel.” Not all that long ago, you could have got good odds on SoundCloud surviving, let alone thriving, into 2022. Launched in Berlin in 2007, it hit hard times a decade later, leading to drastic cost-cutting and widespread layoffs as auditor KPMG cast doubts over the company’s “ability to continue as a going concern”. Weissman was initially brought in as SoundCloud’s chief operating officer from the video platform Vimeo. He was part of a new team of executives tasked with turning the struggling service around in the summer of 2017 after it secured $169.5 million in funding from global merchant bank The Raine Group and Singapore-headquartered investment company Temasek. Available in 190 countries and territories, SoundCloud houses more than 30 million artists and 300m tracks. Over 135,000 acts are now monetising their work directly via its distribution and services arm, Repost, while its consumer subscription and advertising businesses are established in 19 countries. “We’re the next generation of what a music company should be,” says Weissman. “If I said today, ‘How do you build a music company in 2022?’ Well, I’d have connections with fans, a thriving community of emerging talent and the ability to work with those artists at all stages of their career. That’s essentially the ecosystem we’re trying to build.” Weissman says that the fact that SoundCloud straddles streaming, social and services is ultimately a strength. “While some people think of us as a streaming service and some people think of us as a creator, distribution and product set, there are actually multiple things [about our business] that allow an artist to stay with us from their bedroom, to emerging, to becoming a superstar,” he says. Weissman – who has been in pursuit of the music business since he gave up acoustic guitar in high school and started managing bands – was elevated to president in 2019 before succeeding his ex-Vimeo colleague Kerry Trainor as CEO at the start of 2021. Last year, CFO Drew Wilson told The Wall Street Journal the business was “at the doorsteps of break-even” and anticipates a net profit by 2023. “Trying to build a music company in 2022 requires the best talent across creative, music, business, product and technical,” Weissman asserts. “I like to think of myself as someone who leads through their team.” Among a series of intriguing hires, the firm has welcomed ex-Twitch head of music Tracy Chan as SVP of creator, former UMPG veteran Jessica Rivera from Mass Appeal as global SVP & GM and Maurice Slade from Epic Records as head of marketing. Troy Carter also joined the board as strategic advisor last year. After our interview, however, following similar moves by others in the tech sector, SoundCloud revealed plans to reduce its global workforce by around 20%, due to the “challenging economic climate”. Weissman made a point of praising staff in the announcement, reinforcing his commitment to push SoundCloud forward. The ground-breaking work of its global teams was underlined by victory in the Music Consumer Innovation category at the Music Week Awards, in recognition of its user-centric fan-powered royalties (FPR) initiative launched in 2021. SoundCloud says the “transformative” approach has created a “more equitable and transparent” system for its 135,000 independent monetising artists. It reports that, on average, independent artists earn 60% more through FPR compared to the traditional pro-rata model and five times more month-by-month since launch. The claims have been backed up by recent analysis from MIDiA, based on real-world data generated from 118,000 artists who have used the model for almost a year. It concluded that FPR has enabled more artists to move up into higher income brackets, with a 9.2% increase in artists earning between $1,000-$10,000 from April 2021 to February 2022, and 63% of acts with 100 to 100,000 fans earning more from their fans than pro-rata. “We don’t do it for the awards, but it was a nice surprise,” smiles Weissman. “We try to lead what’s next, and that means pushing and experimenting – trying to find the thing that’s going to lead the business for the next 10 years. That is just built into our ethos and getting recognition for things like FPR, in that context, was spot on to everything we try to do. I know the team there had a fun night as well.” A further milestone arrived in mid-July, as SoundCloud and Warner Music Group announced a global licensing deal that saw the major become the first to adopt FPR. WMG’s chief digital officer & EVP, business development, Oana Ruxandra, emphasised the major’s desire to “experiment and advance”, and described SoundCloud as “an amazing partner in connecting artists and fans”. Today, Weissman hints that other companies may follow suit, suggesting that FPR can “bring new products and commercial opportunities to all majors and independents”. Previously, SoundCloud announced Portishead’s 2021 cover of ABBA’s SOS garnered six times more royalties than it would have under pro-rata, with 3% of their most dedicated fans contributing 91% of that total. “We’re going to be sharing more case studies, but overall, independent artists make more money with FPR and that is because they have dedicated fans; it’s less about passive listeners,” stresses Weissman. The success of FPR, suggests Weissman, is indicative of the culture at SoundCloud, which announced the acquisition of Singapore-based AI music tech company Musiio in May. Weissman says they snapped up the business because it “hit the sweet spot” between music and tech. “We try to take risks and be brave with every decision,” says Weissman. “If we’re not taking risks, we’re losing steam. FPR, overall, is risky, but we have a lot of confidence that it’s the right move to shift our model forward.” SoundCloud moved into Tileyard Studios in London this spring, although Weissman remains based in the firm’s New York office. “I was born and raised in New York, and somehow I never left,” he laughs. “New York is such an inherently culturally important city. We have teams in LA and we’re starting to hire a lot of people in Atlanta, which is the centre of hip-hop culture. We’ve got folks in London and in Germany as well, so New York sits at the intersection of all that.” Joining Music Week over Zoom from the Big Apple, Weissman engages in a frank discussion on improving the streaming ecosystem, monitoring the metaverse and how to shore up SoundCloud’s future… You arrived at SoundCloud during a tumultuous period. What had gone wrong exactly? “I think what had gone wrong before was growing too fast ahead of the company’s pace of growth. It’s always about balancing where you’re putting your bets and investments today with when you’re going to get a return on those investments. And I think the company may have made a few mistakes on that.” How did you set about rebuilding the business? “It was difficult financially, but one of the things that struck me was there were very few companies in technology that had a vibrant feel and community, and SoundCloud was one of those. If SoundCloud were to go away, music at large would be harmed and it’s rare to say that about other streaming services in the market. The community was vibrant, the fanbase was growing, SoundCloud rap was just hitting its growth curve and those are things that you can’t replicate and you don’t need to fix. Some of the financials needed fixing, but that core culture community and platform was inherently strong. What we’ve done over the last four or five years at SoundCloud is hone the business model to what it should be, which is about artists and fans connecting directly. That is the core. Unlike labels who licence music to streaming services, but have no real connection directly to a fan, – and streaming services that licence music from labels – we’re trying to bridge that gap between the creative side and the consumer distribution side.” What’s to stop the company failing again in the future? “At this stage, what could stop our momentum would be... A lot of it is about our internal execution. We have healthy relationships with rights-holders, labels, publishers, we have really strong relationships with the artist community and we’ve always had great relationships with music fans around the world. Now, obviously, we’re not immune to economic trends, but we’re in a good spot overall.” How does SoundCloud actually help break talent? Walk us through that process… “There’s some magic, some special sauce, some technology, some human interaction. There are a few ways in which we do it. One, is that it happens entirely organically. Someone uploads a song, it gets into our algorithms, they share it on socials, people pick it up and it starts virally going out into the audience. Two, is we comb through lots of music on SoundCloud to find talent and then put in place ways in which that talent can work with partners. We have a partnership with Quality Control, a hip-hop label based in Atlanta. We help spot and identify talent early and then put the creative energy and resources in place to continue those artists’ careers.” Where does SoundCloud fit into the streaming ecosystem overall? “SoundCloud is a unique place where independent artists and superstar artists can live together. We have such an incredible breadth of music on the service from all parts of the world, from all levels of artists. It’s where emerging independent talent can come, thrive, and then build to become a superstar – and I don’t think you see that on any other service.” Is there a level playing field in the streaming sector? “It’s a playing field that needs to change. The paid streaming model has given us the playing field we have which, candidly, has been unbelievable for the industry. The industry is back to growth after years of decline and you can’t refute that. But I think the playing field definitely needs to evolve from one that rewards massive amounts of passive listening, to [finding] ways in which artists and fans can interact, transact and build relationships together.” So, how do we get there? “If you think about how music has evolved, CDs were around for about 20 years, the download market for 10 to 15 years and the streaming model is about a decade old since Spotify first got licensed. It’s always those 15 to 20 year increments, and what that means is that we’re at the point in which a new model needs to emerge. To do that, you have to experiment with the way in which revenue is built out and the ways in which artists and fans can then grab data and find insights together. And then, ultimately, it’s the way in which fans and artists interact and drive commerce. Now is the time to experiment. You shouldn’t be experimenting when things are going down, you should be experimenting when things are even better. It’s a better time to take those risks.” What compels someone to become a SoundCloud subscriber? “People who listen to music on SoundCloud are typically deeper music fans. They want to find new things, experiment and discover – to dig through crates of music to find what’s next and be there before everyone else. They also listen to music on other streaming services – we’re typically one of the only streaming services that’s used with something else. So music, discovery and also community – we have a large number of communities that have been formed [on the platform].” Do you get the sense that Spotify cares about SoundCloud? “I think so. We’ve run a lot of music through Spotify and a lot of artists who started on SoundCloud make it to the top of the Spotify charts. We have good relationships with the team there. I think they’re headed in a slightly different direction. We’re squarely focused on the music space, whereas they’re broadening their offering much more as they try to capture more subscribers.” How can you grow your own subscription base? “Through better products, better services, new business models and getting closer to the artist. I think a lot of streaming services have started to stray away from the artist and focus on volume of plays, when that fan and artist connection at the end of it is really the key.” What is the perception of the company within the wider industry? “We’re definitely changing the perception to more of a core part of the music ecosystem versus a smaller streaming service. Also, we are trying to do more to educate artists around what we can offer: from uploading music to SoundCloud, to the ability for artists to now distribute through our services, to providing more services for artists as they grow in their career. So while there is a consumer and fan-facing part of SoundCloud, there is a big artist-facing part of SoundCloud as well.” In what other ways can you help artists? “There is so much: education on how to use different platforms, what to watch out for when you’re starting a music career, what to look out for in a contract, how to build a fanbase... Mental health support is something else we’re very focused on. In today’s world, burnout is a big thing and we’re always making sure that artists have a healthy balance of growing their craft, but also not burning out early like a lot of others have.” Who do you consider your competitors to be right now? “There is no one who is really a direct competitor. We look at the ecosystem and it’s a combination of streaming services, social properties and artists and label services businesses at large. But when you start to unpack our strategy, you see it’s a unique offering. We punch above our weight in a lot of ways and operate in a very unique part of the ecosystem. Whereas YouTube is more user-generated, high volume, SoundCloud is the place where you put your best new assets.” Do you need the support of the majors? Or is SoundCloud’s attention fixed on the indies? “No, we need the support of the majors because the majors are great partners. We obviously have major label music on SoundCloud and it’s been a thriving part of our business. We continue to find ways in which we can work directly with majors to promote and help artists at early stages in their career and help build those artists up. It’s a very symbiotic relationship because, at the end of the day, we both have the same goal. We continue to power and fuel that new music coming into the ecosystem. Without that, the industry loses its lifeblood.” Can you elaborate on how fan-powered royalties can change the music business? “It’s clear that as an artist, building that dedicated fanbase – whether it’s 30 people, 100 people or 100,000 people – is the key to the whole thing. In a lot of other places, you could see 10 million people listening to your music a month, but it’s really about the 10,000 true fans that are there to listen specifically to you. And building those relationships is inherently key to becoming a musician. We’re just putting the economics in place for that to happen. Nothing necessarily needs to change, it just provides more clarity on how to find and build out your fanbase.” Are you really being fair to artists though? Or could it be argued that they are still inadequately compensated? “One of the biggest challenges in music right now is that there’s a cap on how much a fan can actually provide to an artist, right? So if I pay $10 or £100 a month [for a streaming subscription], that’s essentially the ceiling on how much I can put back into the music ecosystem. What happens is that fans’ revenues are capped, they go into a pooled ecosystem and are basically spread out to artists based on their market share of plays. What we’re ultimately trying to do is say, ‘I’m a fan and I want to support this artist directly... I’m willing to pay £1, £2, £5, £100 a month for that artist and I should be able to.’ Ultimately, we’re putting the pieces in place to get to that point where there’s variability in the amount of fan money going into the system.” So why do you think that model hasn’t been adopted more widely across the industry? “It’s hard for me to say. We see how it works directly on SoundCloud and it makes a lot of sense. We’re inherently more social, more directly fan-oriented via things like chat, messaging and offering ways in which artists can contact their fanbases more directly, so SoundCloud works really well. I’d love to see others try to experiment with the model. It may not work on all services and I'm not necessarily saying it needs to be a one-size-fits-all. Actually, I think that is one of the problems in the market today – we’re trying to apply a singular streaming model across all services, but not all services are built the same.” What was your reaction to last year’s DCMS report calling for a complete reset of music streaming? “I think it’s the right intention and the right focus area. There should be more discussions directly between streaming platforms, rights-holders and policymakers, and I do think that we need to find ways to work together to experiment more on new models, features and tools for artists to make more money. That’s where the conversation needs to go.” With that in mind, what’s the next phase of fan-powered royalties? “It is really about building two things: providing artists with the data and insights to speak and connect with their fans, and finding new revenue opportunities so that fans and artists can directly transact. It can be extended. What we’ve done so far is the earliest phase. There are multiple ways and examples in other media that provide a lot more revenue opportunity for the music industry at large.” You have previously discussed the importance of the metaverse and NFTs, is that the direction SoundCloud is heading in? “I’m definitely keeping my eye on what’s happening in Web3, blockchain and crypto. That market’s had some real challenging months with the drop in Bitcoin and crypto prices, but we’re looking at how those markets evolve. When I was growing up and buying CDs or cassettes, I owned those and it was my collection. In streaming, we access music in a different way. Web3 is a way for that ownership feeling to come back into music and I think that’s a powerful thing. Now, whether it changes the royalty model and the way publishing is paid out, maybe – it might be a better version of it. But it’s really about that ability for people to actually have a stake in the artists they’re trying to support.” What makes you sure that NFTs are what fans want? “It’s like Steve Jobs said, our job is to figure out what they’re going to want before they do. I don’t think a lot of people can define what the metaverse really is. It’s a multi-dimensional digital world in some capacity, but until it’s there, you don’t really know. Thirty years ago, if someone said, ‘Do you want an electric car?’ You’d probably be like, ‘No, those things are ugly and slow.’ And then Tesla came along and you could see why electric cars can be powerful, so you almost have to build it before people realise what they’re interacting with.” But what makes you an authority on the metaverse? “I’m always curious at seeing trends, learning and finding experts in the space to create a dialogue with. I’ve been trying it out myself: I purchase things in crypto, I’ve minted NFTs, I’ve tried to see how all the technology works. We tend to be a tech business as well as a music business, and we’re always trying to modernise.” Does the industry think about fans enough? “Probably not – I think the industry thinks about streams too much. The industry should start thinking about different levels of fandom and fans in different stages of their discovery life cycle. Finding a new artist for the first time is different to saying, ‘This is my favourite artist.’ We have to think about those behaviours and modes of fandom differently and find ways we can enhance it and allow fans and artists to connect at different points. People always ask, ‘Does the industry worry about artists enough?’ But you rarely hear the other side of it.” Lastly, where do you see the music business going from here? “You’ll see more direct fan-artist tools, features and revenue models from SoundCloud. I think the next cycle will be more about the artists and figuring out how to get the consumer model to work. And then finally, [is the question of] how we all figure out how to navigate an ever-changing world that, for the last two years, has been moving in different directions. It’s time that we all start looking at what’s next and get ahead of it.”

Music Venue Trust CEO Mark Davyd’s monthly deep dive into live music’s biggest issues... I’m sure that were you to assemble all these monthly columns into a collated bestseller – well, I can dream – then they might run the risk of unfortunately just appearing to be a regular opportunity to whinge and to try to make everyone feel guilty. That isn’t the aim of these opinion pieces, but it is the regrettable consequence of two things in the music industry bashing up against each other. On the one hand, we can point proudly at what we have done in the last 10 years and say that we are truly bouncing back after a decade of digital impact and the shock wave of the pandemic. Previously unimagined revenue streams are starting to flow into the system. Universal’s recent 2021 financial report, and even more its Q1 2022 report, show an industry that is not just bouncing back after Covid, but is in rugged and robust health. Our largest festivals are back and sold out to fans eager to return to live music, while Ed Sheeran is adding all the dates he can to a seemingly endless tour, creating thousands of jobs and incredible experiences for people wherever he goes. Recognising the incredible work that has gone into obtaining those fantastic results – and we really need to acknowledge the extraordinary efforts being made by so many in the live industry to get people back to work and get shows back – it is reasonable to say that the top of the pyramid of the music industry has probably never been in better financial health. And yet we have long-term, systemic problems for a huge swathe of artists, writers, crew, staff and venues who have not yet made their way towards the top half of that pyramid, and many who probably never will. They are struggling to survive. Music Venue Trust is aware of 26 venues who have survived the pandemic with the support of their communities who now face imminent permanent closure. Grassroots artists, writers and crews are simply giving up, unable to hold out on wages significantly below minimum wage long enough for the break they need. There should be nothing more frustrating for people in our industry than to see an artist with incredible unrealised potential forced out of the career they love because they simply cannot make ends meet. At one end, we have fantastic revenues being generated, returning us to the sort of health last seen in the boom time of the late nineties. At the other, venues being closed down and people quitting altogether because they can’t pay rent. This gap between the top of the pyramid and the foundations is not unique to our industry, we can see it all around us in our society. But we aren’t the government or the opposition, and we aren’t driven by political dogma. The problems of inequality we have in our industry belong to us, they are our responsibility and it is up to us to solve them. You don’t have to be Leon Trotsky to work out that this model in our industry is not sustainable. The wealth of our industry is built on potential. If we continue to allow that potential to slip away the wealth will eventually evaporate. Reprints and repackaging of back catalogue will tide us over for a few years, and Netflix placements for Kate Bush and TikTok trends will continue to generate much appreciated revenue. But, ultimately, new music, new artists and new experiences are the fundamental core of our business. So why is this happening? Grassroots Music Venues aren’t closing because they failed to land a sponsorship deal or missed their target for a multi-million bonus. They are closing because the very basics of the function they perform for the whole industry require them to take risks with their programming. Grassroots venues are closing because the very basics of the function they perform for the whole industry require them to take risks with their programming Mark Davyd The job we all need them to do is to put on music nobody knows or likes yet. As soon as they have created something people want to see, it is the job of the whole industry to take that away from them and put it in front of more people. That inherently creates an economically unsustainable model; attempting to sell a product nobody yet knows they want, investing into it until people do want to see it, then losing it at the very point where you might expect a return. It is precisely what we all, collectively, need them to do that results in them effectively being, at best, not-for-profit entities. Every venue that closes is a potential point of aspiration, inspiration, creation, and development permanently lost. Whole swathes of young people in the UK are now hours of public transport away from their nearest potential life-changing moment when they could first encounter original live music. You have to be able to see it to want to be it. The closure of a single venue in Preston, Bideford, Newport, Derby or Galashiels may not feel like it should be at the top of your list of concerns, but it represents young people who will never get the option to be it because they never got to see it. Every single closure represents lost potential for our industry, we have to stop just letting it happen and take direct action to prevent it. That action needs to start by every single person in our industry resetting their thinking. Everyone needs to understand that the existence of these venues carrying out research and development on our behalf isn’t a luxury we can simply take for granted. We need to build the sustainability and resilience of these venues into our circle of responsibility, into our model of what we need to do to create new talent and, yes, into how we consider the financial distribution. That way we can ensure that we continue to enjoy this foundation stone of the work we all do.

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