Documents indicate that SoundCloud may become a paid subscription service in the future. A leaked contract shows plans for a multitiered subscription service, which provides publishing royalties to copyright owners.

SoundCloud has carved a unique niche in the world of audio streaming. The service acts as a "YouTube of audio," allowing members to upload content and listeners to access streams free of charge, and, in some cases, to also download tracks and mixes at no cost. SoundCloud currently sits in a gray area of illegality, and record companies have recently expressed their disdain for the company, arguing that proper royalties are not being paid to the artists and labels whose music is hosted on the service. Recently, several record labels, including Sony, pulled various content from SoundCloud.

Before more content is removed, SoundCloud is looking to legitimize itself and ink royalty agreements with record labels. While SoundCloud remains one of the most popular music streaming vehicles, with over 100 million tracks uploaded, it has still not managed to create a solid business model for long-term profitability. Now, a new leaked document shows how the company plans to drive revenue while stabilizing its content platform — by charging listeners for content via a subscription plan that will complement its current free, ad-supported service.

A leaked 19-page proposed contract between the National Music Publishers Association and SoundCloud details royalty payments to be paid by the company based on two separate paid subscription tiers, which will both provide an ad-free experience for users and allow downloading of varying amounts of content, with "full access" granted for the top tier and a "limited" amount allowed for the less expensive tier.

The company just inked a separate deal with Merlin, which represents the global publishing rights for over 20,000 independent record labels, representing more than 10 percent of the global digital rights market.

One area in which SoundCloud trumps competitors like Pandora and Spotify is the EDM area of the music spectrum, where the service acts as the go-to spot for DJs and remixers to post their latest mixes. How to monetize the royalty payments for a stream or download of a mix consisting of numerous separate recordings or a remix or mashup of several tracks is one of the challenges SoundCloud faces as it moves toward subscription-based revenue generation.

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