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SoundCloud Has a New Pile of Cash, and Wants to Cut Deals With Big Music

The "YouTube for Music" doesn't have licensing agreements with the big labels. Now it wants to change that -- and it has the cash to make it happen.

Peter Kafka covers media and technology, and their intersection, at Vox. Many of his stories can be found in his Kafka on Media newsletter, and he also hosts the Recode Media podcast.

SoundCloud, the startup that wants to be the YouTube for music files, has raised a big round of funding — $60 million, led by Institutional Venture Partners along with contributions from The Chernin Group and other investors.

As The Wall Street Journal notes, the round, which values the company at around $700 million, closed months ago. What’s just as interesting is what the company intends to do with the money: It’s currently in discussions with the big music labels about deals to license some of their songs.

That’s the reason SoundCloud and its investors have been mum about the deal until today — they were concerned that if the news about their new money got out, it would increase the price tag for their deals.

That logic seems flawed — if Doug MacMillan and I have heard about SoundCloud’s deal, then it’s hard to imagine that the labels’ lawyers and BD guys wouldn’t know about it.

In any case, the money, and the talks, signal a new chapter for SoundCloud.

In its early days, the service, which lets anyone upload music to the Web and share it with anyone else, was a free-for-all that hosted a good deal of copyrighted music.

As the company grew up, and took on funding from the likes of Union Square Ventures and Index Ventures, it made efforts to clear out copyrighted music from its servers — or to at least give copyright owners the ability to take down their stuff if they didn’t want it there.

That left SoundCloud to focus on a service that appealed to amateur musicians/noise-makers, as well as some professionals and labels that wanted to use it for marketing reasons.

But SoundCloud was still in a gray area, rights-wise.

Last year, for instance, Twitter intended to use SoundCloud as a partner in its ill-fated Twitter Music app. But music industry sources say that when the big labels got wind of Twitter’s plans, late in, they protested loudly, arguing that Twitter would be promoting a service that didn’t have the rights to their songs.

SoundCloud disappeared from Twitter Music before launch.

The music industry has gotten a lot more flexible about licensing deals in the past few years — because it doesn’t have a choice — so SoundCloud can certainly get something done with them. But it won’t be cheap. Good thing they’re flush.

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