Warner Music Group has become the first major record label to sign a licensing deal with SoundCloud, after the two companies announced the partnership today.
Warner will now receive royalties from the German music-sharing site every time one of the songs that it has chosen to monetise is streamed online.
SoundCloud is also set to launch its own subscription service in the first half of next year, which was reportedly a key factor in Warner signing the deal. The company's CEO Alexander Ljung has asserted that the free-to-listen service will continue after the subscription launch.
The streaming service currently registers around 175 million listeners a month, compared with 80 million for Internet radio firm Pandora and 40 million for the music streaming service Spotify.
Currently, record companies, musicians and songwriters do not earn money from SoundCloud, but users who upload significant volumes of music must pay a monthly fee to the site. Copyright holders are also able to request the removal of content if it is uploaded without their permission.
The site also began displaying advertisements this summer as a means of generating revenue. In addition, SoundCloud also has licensing deals in place with approximately 40 smaller partners, such as independent record labels and artists.
The Warner Music deal, which could see tracks from the likes of the Red Hot Chili Peppers, Bruno Mars and Led Zeppelin appear on the site, means that the record label will receive royalties even if parts of its songs are used for mashups or remixes.
Warner has also confirmed that, as part of the deal, it will receive a stake in the music streaming site in the region of three to five per cent.
A number of other major record labels have expressed interest in working more closely with SoundCloud, but some have expressed concerns regarding the strength of the site's revenue streams.