A new report indicates that SoundCloud's negotiations regarding a licensing deal with UMG (Universal Music Group) have stalled. The sticking point appears to be recent litigation initiated against SoundCloud by PRS for Music, the UK Performing Rights Society.
SoundCloud has been under intense pressure in the past year to legitimize the content offered on its service by entering licensing deals with the copyright holders of the material. The streaming service has grown exponentially in the past year and has become a top streaming source of EDM music — which includes DJ mixes and mashups that contain derivative works, samples or snippets of other artists' work incorporated into a new work. The complexity of monetizing these types of productions is one of the main issues with which SoundCloud has been contending.
One major label, Warner Music Group (WMG), secured a contract with SoundCloud last November, which addressed the issue of derivative works and gave the label a five percent stake in the streaming service. Sony Music has taken a hardline tactic thus far, removing all of its label's content from SoundCloud until some sort of agreement has been reached.
That leaves Universal music Group (UMG), which was reportedly ready to finalize a deal with SoundCloud along the lines of the WMG deal, after months of tough negotiation. Now, that deal has reportedly been put on ice as a result of pending litigation in the form of a recent lawsuit by the UK Performing Rights Society, or PRS, which represents publishers and writers holding copyrighted material in that nation.
"After careful consideration, and following five years of unsuccessful negotiations, we now find ourselves in a situation where we have no alternative but to commence legal proceedings," PRS announced in a recent statement.
Sources indicate that UMG, which is also by far the largest of the three big music labels, does not want to get involved with SoundCloud now that the PRS litigation is pending. PRS is not only suing SoundCloud as a corporate entity, it is also suing investors and partners in the service, which would certainly include UMG if it was to agree to a deal with SoundCloud. Therefore, Universal is apparently adopting a watch and wait stance, and the deal is on hold.