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It's SoundCloud vs. the World in a War For Your Ears (and Wallets)

Will the mp3 site’s search for legitimacy and attempts to monetize cost them the most important thing of all?
September 19, 2014, 1:05am

The whispers began a few months ago. SoundCloud, the world's preeminent source for playing and downloading free music, was fixing to monetize. Like other media outlets who use the site as way to showcase new music and talent, THUMP's inbox became flooded with takedown requests citing copyright infringement from major labels – mainly Universal Music Group. It was typically a formality, though sometimes a nuisance to address them each, but nothing game-changing. The signs were there, though, that what had been electronic music's wild west for sharing music was about to change.

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This week, news broke that EDM mp3 blog ThisSongisSick's portal faced an even more devastating penalty as their SoundCloud profile—the most heavily-streamed account on SoundCloud, with close to half a billion plays—was indefinitely suspended for copyright violation. This wasn't just a minor disruption, but a potentially fatal move for the blog in addition to perhaps being a canary in the SoundCloud coalmine.

"We had been whitelisted with Universal, Sony, Warner, all these different labels," ThisSongIsSick's founder, Nick Guarino tells THUMP. "Because we were whitelisted, we weren't seeing any copyright claims."

Whitelisting is a practice employed by SoundCloud that allows media outlets to automatically bypass bot-sweeps of audio files looking for copyright-held material. Typically, it means that a profile has earned enough trust with labels, artists and agencies that they can be exempted from your run-of-the-mill violation. The fact that TSIS was suspended in spite of this indicates that something has shifted in the SoundCloud's whitelisting policy enforcement. Though they are only one blog, TSIS's extremely high play count and notoriety amongst fans meant their suspension has already sent ripples through the electronic music world.

As in baseball or the Arizona penal code, it's three strikes and you're automatically terminated from SoundCloud. But that wasn't something TSIS had concerned themselves with until a couple weeks ago. "Basically, SoundCloud came to us and told us we had 40 strikes on our account," explains Guarino. "Because they've now started to develop deals to monetize with major labels, their legal team have added all this extra legal pressure."

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At that time, Guarino says they were sent on a wild goose chase for approval. Even though the overwhelming majority of their posts were authorized by the labels or artist reps who sent them the tracks to upload, TSIS were given a list of "violations" and asked to clear each one with proof of permission. They spent weeks wading through label and agency bureaucracy with phone calls and emails. "With Warner, for example, it took two weeks to clear," says Guarino. "We had to get on the phone with someone, who connected us with his boss and then his boss. We got all the way up to the Head of Digital. He was down to play ball and totally saw our side. But it took two weeks to get to him." And that's just for a single track.

One by one, TSIS addressed every reported violation, only to find the goalposts had shifted. They were handed a secondary list of violations and placed on temporary suspension as of Monday. Each track in question happened to be owned by one of two particular labels. We're withholding the names on account of the developing legal matter, but the larger of the two, you'll need no help in guessing. The other is a smaller, indie-adjacent label with a wide reach. Exasperated but determined, Guarino was surprised to find receptive audiences: "It's funny, all the labels are apologizing about it when we talk to them," he says. "I foresee this working out. I really do."

Assuming that things work out for Guarino and co, the future of SoundCloud still remains uncertain to say the least. Despite becoming an essential hub for music with over 200 million users and, according to the Wall Street Journal, a $700 million valuation, the Berlin-based company hasn't found a successful profit model yet. Their mollycoddling of certain labels in particular implies that those labels might be the furthest along in brokering a monetization deal. It's widely known that Universal already has a blanket arrangement with SoundCloud whereby tracks flagged for violation get taken down without SoundCloud's involvement. That sets a worrisome precedent for SoundCloud-centric media outlets like ThisSongIsSick.

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"Because they've now started to develop deals to monetize with major labels, their legal team have added all this extra legal pressure." - Nick Guarino

In fact, the uneven application of SoundCloud's violation policies suggests a dissonance within the organization about what are appropriate boundaries for the company as it moves forward. So uneven, that they've gone for one of the biggest dogs in the EDM park without having the complete support (or knowledge) of the record labels they're supposedly representing in that act.

Guarino points out that copyright enforcement is a big thing for major labels who have the means to search and monitor all corners of the internet in search of their intellectual property and those who violate their terms. With indie labels at war with YouTube over its new mandatory subscription policy, the refuge their artists had at SoundCloud might be nearing an end as well. Concurrently, sites like Mixify and MixCloud are eager to get in the mp3 sharing game just as streaming services like Spotify, Pandora and newcomer Boomrat are looking for ways to appeal to the tech-savvy, dance music-loving core fanbase that has spurred SoundCloud's meteoric rise since its founding a mere seven years ago.

While it might not move the mainstream media needle, this week's scuffle with ThisSongIsSick has resulted in an ugly, public fallout with the most trafficked account on their network. It isn't clear what is coming next, but it's fairly certain that the site that was once the wild west of modern music has a new sheriff in town… and he's wearing a suit.

Jemayel Khawaja is THUMP's Associate Editor in Los Angeles - @JemayelK