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SoundCloud Facing Legal Action From Labels Before Thanksgiving: Report

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SoundCloud continues to be under fire from several major labels. Unless licensing agreements can be reached, lawsuits will be filed before Thanksgiving, according to a new report.

The trouble at SoundCloud is not letting up, with several of the major music labels preparing to file potential lawsuits against the streaming music service. Universal Music is said to be the most aggressive, as executives at parent company Vivendi are reportedly unhappy with SoundCloud's response to their insistence on being compensated for company-owned material.

Tech Times recently reported that a purge of some sort has begun at SoundCloud, with users who have posted unlicensed material receiving three strikes before their accounts are removed from the service. One user, Dummy Magazine, claims that the removal of its account was based on an objection by Sony, another of the "big three" music labels.

The third of the big three, Warner Music Group, has taken a different approach so far — signing a widespread licensing agreement with SoundCloud, which includes a reported 5 percent stake in the company. The agreement with Warner includes licensing for derivative works such as DJ mixes, in which samples or portions of an artist's material are used in a larger work.

DJ mixes are one of the reasons for the explosion of SoundCloud use, as the streaming service is the go-to spot for the EDM (Electronic Dance Music) community, and it's where most DJs post their latest works. As a result, SoundCloud use has doubled in the past year. The label's big issue with SoundCloud's free streaming of DJ mixes is that the owners of the various samples or song portions included in the mixes are not being compensated.

We recently reported that SoundCloud is planning a premium listening tier for paid subscribers in order to resolve its cash flow issues, which are strongly related to legal fees over the ongoing label pressure. While new investors are avoiding the company due to potential litigation, current investors have reportedly assured SoundCloud they will not allow it to fail.

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