Three major record labels are set to take an equity stake in Germany-based music streaming service Souncloud in return for withdrawing legal threats, Bloomberg has reported.
Universal Music, Sony Music Entertainment and Warner Music are in talks with Soundcloud over a deal that would involve them licensing their music to the service in return for stakes in the company sized between 3% and 5%, along with a share of future revenue.
The deal would value Soundcloud, which has raised more than $120m from media company Chernin Group and venture firms including Kleiner Perkins Caufield & Byers and GGV Capital, at $500m to $600m, according to two people familiar with the talks.
Another source disclosed that that valuation would be beneath the $700m valuation touted for Soundcloud’s $60m series D round in March this year.
Two industry representatives told Bloomberg that record labels have maintained a good relationship with Soundcloud, which has about 250 million listeners each month, because it works well as a way to introduce new music to a large number of fans.