MySpace has long since yielded its position as America's dominant social-networking service to Facebook, but well after civilians stopped using it to stalk high school crushes, MySpace remained the preferred platform through which musicians provided free streams and downloads. Recently, though, MySpace has been shedding musicians in droves—and not just because it's infested with spambots, its audio player is creaky and crash prone, and a late 2010 redesign made its profile pages load even slower. Just as Facebook has lured away the general public by offering a cleaner, more efficient, and less sketchy experience, Bandcamp and SoundCloud have lured away musicians.

SoundCloud is one of the most promising sites stealing MySpace's music market share. Founded in Berlin in 2007, it improves on MySpace's music service for both artists and fans. Its player runs smoothly and predictably, usually with little or no lag, and gives users the option to make any song downloadable for free—a feature MySpace discontinued years ago. SoundCloud displays a waveform for each track, and allows listeners to tag specific points on it—the transition to the bridge, say, or a DJ's segue between songs—with comments. The service is free for nonpremium users, who can keep up to two hours of material on their accounts.

Compared to MySpace, SoundCloud has a simple, transparent architecture—it's much easier to embed SoundCloud-supported songs on blogs and other social-networking services, and visitors are much more likely to be able to play them there. Programmers can easily incorporate SoundCloud's underlying code too: to name a few, the NanoStudio app lets users send recordings directly to their SoundCloud pages, the TuneCore app syncs with users' SoundCloud libraries to simplify digital distribution and sales, and the Hype Machine app tracks how many plays users' SoundCloud songs get via the popular music-blog aggregator. SoundCloud also has a no-frills social-networking aspect—aside from commenting on tracks, users can favorite songs, follow one another, send direct messages, and more.

SoundCloud conspicuously advocates for Creative Commons licensing, a progressive alternative to traditional copyright, by foregrounding it on its home page and pitching it to users as part of the sign-up process. And until recently the site has seemed to take a hands-off approach to the content it hosts, perhaps because it hasn't become a popular channel for pirates—SoundCloud assigns a separate player widget to each track, so people looking to share entire albums tend to prefer sites like RapidShare and Mediafire, which make such an operation considerably simpler and more anonymous. SoundCloud's apparent laissez-faire attitude, along with its affordable ways to share hour-plus tracks, has made it especially popular with DJs, who have so far been its most numerous and vocal users.

"I know DJs who play sets now completely comprised of stuff they find on SoundCloud because it's so underground," says DJ and Fool's Gold label cofounder Nick Catchdubs. "Like you'll find remixes that you've never heard before. You'll find artists that you've never heard before, before they even get to the point of being blogged or being Hype Machined."

But DJ dominance of SoundCloud may be coming to an end, for two reasons. First, in the past several months the site has taken off with artists working outside of dance music and hip-hop. SoundCloud broke the million-user mark in May 2010 and now claims more than two million; a SoundCloud link has become as de rigueur in rock bands' promo e-mails as a MySpace link once was. Second, and likely related to the site's rapid growth, SoundCloud recently started policing uploaded audio files for copyrighted material not owned by the uploader.

In December I started seeing complaints on Twitter and Facebook from DJs and producers using SoundCloud: they said that some of their work, specifically DJ mixes and remixes incorporating copyrighted material, were disappearing from the site, and that they were getting apparently automated messages from SoundCloud saying they'd violated the Digital Millennium Copyright Act, a 1998 federal law governing intellectual property on the Internet. Most of the messages I heard about identified the rights holder as Universal Music Group.

According to Audible Magic, a Bay Area company whose website describes its business as "monetizing, protecting, measuring, and verifying content," SoundCloud began using a customized version of its software on November 1. Audible Magic maintains a database of copyrighted music and video on behalf of rights holders and offers services to social networks, ISPs, music-hosting sites, and other organizations to help them stay on the right side of the DMCA. Audible Magic CEO Vance Ikezoye says, "It's all determined by the copyright holder, how they want to set their business rules. We have a lot of artists who view, for example, peer-to-peer as being a promotional mechanism for them. So they might register their content with us because they want people to get access to it, and we register it with the business rule of 'allow for use anywhere.'"

Ikezoye portrays Audible Magic as basically agnostic about copyright—the company sees itself as a way to sort things out, whether that means straight-up busting pirates or just making sure bloggers don't get hassled for sharing tracks an artist has given away. Audible Magic's products identify audio tracks using a sonic fingerprint, similar to the way familiar consumer apps like Shazam and SoundHound work; like those apps it can ID songs from short samples, like the excerpts that commonly appear in DJ sets. (Audible Magic allows rights holders to clear their material for uses like remixing.) DJs are upset that SoundCloud's implementation of this service zaps entire hour-long mixes, even if they contain just a small segment of a single copyrighted track. Many view such mixes as transformative of their source material and thus protected under fair use. They feel betrayed by SoundCloud, given that DJs were the early adopters that helped the site reach critical mass.

"I never saw SoundCloud as a place to, you know, host somebody else's MP3s," says Wayne Marshall, a DJ, ethnomusicologist, and postdoctoral fellow at MIT who blogs at wayneandwax.com. "Everything that I came across there was transformed in some way, whether as a remix or in the context of a mix or what have you. So it seemed to me like they were doing a good job keeping it from becoming another Imeem, which ultimately got so hobbled with really flagrant file sharing that it just couldn't pay the bills. So I think that a lot of people were surprised that SoundCloud had kind of courted that community and then at the very moment that the service was taking off, you know, with a sort of broader audience, that it kind of turns around and goes back on what seems like had been the policy before that."

SoundCloud's decision to use Audible Magic points to a larger question: How big can a music-hosting service get while still supporting DJs and remixers? Is it possible for a site large enough to show up on the radar of the major labels to avoid accepting the majors' strict-constructionist views of copyright?

"Deejaying is essentially playing other people's music," says Catchdubs. "Most people kind of realize that it's 2011 and we know what the deal is with a DJ mix, especially when you're not putting it up for sale. You know, I think there is a bit of a disconnect between the socially accepted uses of copyright and sort of what is legally down there on paper and, you know, the decision-making process of major-label legal departments and the RIAA and shit like that."

Marshall says YouTube provides a clear precedent of a site getting big enough to provoke a copyright crackdown. He also points out that such crackdowns tend to interfere with the promotional power of user-generated content. "'You're a Jerk' by the New Boyz became a huge hit because hundreds of people uploaded videos of themselves dancing to it," he says. "But then as soon as they got signed and that song enters the official database, then all the videos get flagged and get muted or audio-swapped or taken down or whatever."

SoundCloud representatives declined to answer my questions for this column, instead directing me to a page on the SoundCloud blog that addresses the site's new "content identification system." That page points out that the system will allow users who upload content to SoundCloud to find out if their work is being distributed without permission by other users; it also reassures users that there's a "simple dispute process" to resolve cases where content is flagged in error. But the words "fair use" don't appear, except in an aggrieved comment left a month ago.

SoundCloud is at a crossroads here. Right now its practices appear to defer to rights holders, allowing labels and publishing companies to determine almost unilaterally what counts as infringement—a stance that puts an undue burden on uploaders whose employment of copyrighted material might meet the criteria for fair use. Were SoundCloud to take the nobler and more difficult path, it would devise a policy that could differentiate between DJs and remixers on one hand and pirates on the other. Of course, it's easier and cheaper for SoundCloud to just keep serving DMCA notices to its most passionate users—though taking that route could drive off enough of them to make it very expensive indeed.

"If it becomes too annoying," Marshall says, "people are going to pick up and move to the next thing. That's what I've been observing in all of these things. Either the platform completely disappears, or something easier with less hassle pops up."