Just as reports of SoundCloud's impending demise started to grow louder, it appears the maligned streaming and discovery service may have taken a major step towards creating a sustainable business model.
According to a new report in Music Business Worldwide, SoundCloud is close to agreeing on a new licensing deal with Universal Music Group that could potentially net UMG significant equity in the streaming service.
Universal also wants guarantees about a paying subscription tier of the service that SoundCloud has in the works.
A MBW source said, "Universal had a couple of aggressive choices: they could either sue SoundCloud, which wasn't off the table, or refuse to play ball with them and watch them slide out of existence as money ran low. But Universal knows that a world with a SoundCloud that it can control is better than a world without SoundCloud full stop - especially if that leads to a hundred clones popping up online."
If this deal becomes finalized, UMG would be the second major to sign on with SoundCloud after months of tense negotiations. Warner Music Group signed a licensing deal with SoundCloud in November 2014, taking a 5 percent stake in the company.
Investors were spooked after Sony walked away from the table and pulled most of the label's high profile artists from the service and have been hesitant to release more money to it.
The Berlin based company launched its On SoundCloud program last year, which gave partnered labels and artists the opportunity to block a copyrighted track or monetize it with ads. In March it announced that the program was netting $166,000 in monthly ad revenue to rights-holders.
This new deal could explain the rash of takedowns and suspensions that occurred in the past couple weeks that has removed a large swatch of copyright infringing mixes and users, but also caught up a few legitimate copyright holders including DJ Plastician and indie label Lojinx in its net.
In April, SoundCloud signed a deal with YouTube's copyright enforcer Zefr, which has increased the rate of takedowns and will be integral in the enforcement that UMG will be looking for.
SoundCloud won't comment on the negotiations.
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