Money at SoundCloud has in the past flowed in one direction: you, the uploader, pay for premium plans, and SoundCloud gets the cash. Now, for the first time, money is going the other way – from the service to artists and labels.

In the process, that means one significant change: SoundCloud listeners will begin to hear ads.

It’s been interesting to watch the reaction – from people losing their minds over ads appearing on the service to more measured responses and genuine interest in the service “growing up” and adding income to become sustainable. This of course collides with worries about SoundCloud’s recent deals with major labels. Clarification: SoundCloud has not announced any such deals; while there has been public discussion about majors and their role on SoundCloud, those discussions are in fact speculative. But before we get into opinions about the changes, let’s first understand just what has changed for those of us who use the service.

SoundCloud is this week rolling out advertising, first to their invite-only premier partners – that is, producers like big labels or publishers (including titans Sony and BMG). Later on, says SoundCloud, those those ads are also will be available as an option for all paid users who want to earn money from their content.

In addition to the advertising option, SoundCloud has also adjusted its plans. Here are the facts.

There are new plans, with new names – and more upload time.

At all levels, you get more upload time than before – even on the free plan. SoundCloud tells CDM:

Entry to the Partner level is free. Partners get 3 hours of free upload time per account (up from 2), basic features and stats
Pro Partners get more upload time per account (6hrs, up from 4), plus expanded features and stats that help them build and connect with their audience.
Premier (the new tier):
Premier Partners have the opportunity to make money on the platform by placing ads against their content, get unlimited storage, premium stats and account management support.
For now, access to the Premier level is by invitation only.
We’ll be rolling it out to more creators over time.

(No word yet on whether CDM, as the world’s single largest media source for people who care passionately about the connectivity of hamsters and control voltage, will be invited to be a premier partner. Seriously. We’re like the BBC World News of turning houseplants into synthesizers.)

Ad plays will get you paid, and more money goes to you than goes to SoundCloud.

While the rest of the Internet aches about this change, yes, ads could theoretically make you money. Now, I asked SoundCloud if they could tell us something about how they’re allotting revenues.

“Every time users see or hear an ad, artists get paid,” a SoundCloud spokesperson tells CDM. “We’re offering a sustainable business model that benefits SoundCloud and creators, with the majority share of revenue being paid out to Premier Partners.”

That is Premier Partners for now; SoundCloud tells us that the larger share of money will also go to you when ads become available to you later on.

Ads only impact the United States, at first. Ads will only target the US, and only be heard in the US. That makes some sense, as it’s the largest listening audience on the site. It seems a no-brainer that this will extend to other markets in the future if it’s a success.

What will the ads sound like? You’ll definitely hear them – think something along the lines of what you see on YouTube, only longer, and… you know, sound.

SoundCloud tells CDM, “audio ads will be occasional, skippable after 15 seconds, and up to 30 seconds long.”

You can opt out of ads on your content. Don’t want ads on your content? Like so many labels and producers, you use SoundCloud mainly to promote record sales (even on vinyl) and live gigs, and worry about making your money there? No problem – this is an opt-in service.

You’ll eventually be able to pay not to hear ads. For now, even if you pay for a subscription to SoundCloud, you’re going to start to hear ads on content, if you’re in the USA. For a lot of us who spend most of our time listening to small labels and independent artists (and, for those of us outside the United States), that won’t really be noticeable. But if you don’t like it, SoundCloud does confirm to CDM that eventually they plan to offer subscription opens for listeners who don’t want to hear ads, ever.

No details on that plan yet. SoundCloud calls it a “consumer” subscription and says it’ll be detailed in the “months to come.” That implies it won’t be bundled with uploader plans, but it’s early days yet, so probably too soon to make any assumptions.

Read up on the changes in the official announcement on the SoundCloud blog (penned by none other than founder Alex):
Introducing On SoundCloud, our new creator partner program

Analysis: this could be a win for uploaders in more ways than one.

The most significant concern I continue to hear from SoundCloud users – the DJs and producers who made the service the success it is – comes down to worries about their content being removed. EDM giant Kaskade is probably the best-known of these users. But SoundCloud has always faced a balancing act between licensing and users. Recent licensing deals with Universal Music Group may indeed allow them to directly flag content they believe they own. On the other hand, that’s better than issues like false positives, in which artists were surprised to see their own uploads incorrectly flagged.

The Kaskade story is telling. It’s not so much an indictment of SoundCloud as it is the way record deals are structured. The truth is, many labels today are likely to benefit from their artists uploading their music – especially because someone like Kaskade might have more followers and more engagement than his label. Some of this responsibility will lie with SoundCloud, in finding better ways to arbitrate communication between artists and labels and to channel legitimate copyright complaints (including disputes about removals). Some of it lies with labels, to work with online services and their contracts so that they maintain good relations with artists and everybody is able to promote the work they own. But just dumping on SoundCloud may miss the underlying point – and this could be one step further, even for those of us who aren’t on majors (and aren’t necessarily huge fans).

A lot of the worry about SoundCloud has centered on their new-found collaborations with big labels. But while the premium partners are getting the features first, there isn’t yet evidence that SoundCloud will favor majors – in the way that YouTube has. (You can read how distasteful I found Google’s tactics.)

Furthermore, a lot of this false positive business seemed to stem in part from automatic algorithms rooting out music that artists had legitimately uploaded. My advice: if you’re going to upload DJ mixes, upload them to MixCloud, which has a licensing structure better suited to that music. But SoundCloud still impresses as a service for producers’ original music. The player and upload features, the stats, the community and discovery features all remain unmatched for content makers. And it seems SoundCloud has an opportunity to roll out opt-in advertising options that some producers might like, in the way some YouTube uploaders have – and you can ignore them if you don’t want them.

While we’ll have to see, I wonder if the more formal relationship between SoundCloud and labels will stop the brute-force approaches to content takedown. That is, I would have the opposite reaction to the apocalyptic Cory Doctorow take. Now if SoundCloud has sorted its licensing deals with majors – or if this advertising model could open up such deals, it may mean they’re free to keep uploading their content, and the rest of us can share our own productions. The challenge for SoundCloud is the business challenge they’ve always faced: they have to keep the service useful enough to us that we keep paying for it. For now, that’s money I’m glad to spend.

For a great read on all the issues, Ben Sisario for The New York Times has one of the most complete and balanced looks at SoundCloud’s state of affairs today:
Popular and Free, SoundCloud Is Now Ready for Ads