Universal Music Finds Harmony With SoundCloud

Vivendi SA's Universal Music Group has agreed to license some of its music to SoundCloud, allowing the world's largest music company to collect revenue from the popular audio-sharing platform.

Their deal comes more than a year after Access Industries' Warner Music Group became the first major record company to enter into a similar agreement with the German music-streaming service. The licensing deals emphasize the importance of SoundCloud as a marketing tool for record labels, despite their growing frustration with the paltry revenue that ad-supported music platforms have generated for them relative to the amount of music consumed on such free sites.

In October 2014, shortly before Warner Music signed its deal with SoundCloud, Universal Music Chairman Lucian Grainge said at The Wall Street Journal's WSJD Live technology conference that he still needed to hear what SoundCloud's "business plan is going to be."

Universal decided to work with SoundCloud after watching the company sharpen its advertising strategy, hire ad-sales teams and reiterate its earlier promises to launch a paid subscription service in addition to its free site, according to a person familiar with the matter. SoundCloud had also promised Warner Music it would launch a paid offering.

Universal's deal allows it to control what music it makes available on the free platform, and to adjust the lengths of the snippets of songs that users can share with friends on social media, this person said.

Universal's labels and publishing company will also get access to SoundCloud's "promotional tools, analysis and data to provide recording artists and songwriters with new opportunities to generate revenue and to strengthen their connections with fans," the companies said in a joint statement. Terms weren't disclosed.

Sony Corp.'s Sony Music Entertainment has also been in licensing negotiations with SoundCloud but hasn't reached a deal, removing music by some of its most popular artists from the site last year.

SoundCloud started carrying advertising on its site in 2014 and began sharing the ad revenue with partners that range from individual artists to independent labels.

The company counts roughly 175 million monthly listeners, more than double the size of Pandora Media Inc.'s active monthly user base and roughly double the size of Spotify AB's free user base.

Write to Hannah Karp at [e-mail]

(END) Dow Jones Newswires

January 13, 2016 09:25 ET (14:25 GMT)

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