SoundCloud, the music streaming site whose free content has caused friction with major record companies, sealed a deal Thursday with leading independent labels.
The agreement comes as SoundCloud works on creating a subscription service to be launched later this year, amid growing competition in the booming streaming market.
SoundCloud said in a statement it had reached an agreement with Merlin -- which represents 20,000 independent record labels and distributors -- to offer unspecified payments when music is uploaded on the site.
SoundCloud, launched in 2008 in Berlin by Swedish designers, was designed to allow musicians to post their recordings in what quickly became a favorite promotion technique.
One of the most famous success stories was the New Zealand teenager Lorde, who self-released her work in 2012 on SoundCloud and quickly became an international superstar with a major record deal as her song "Royals" went viral.
But the growth of SoundCloud -- it reports 175 million unique visits a month -- has created unease among record labels, who are concerned that high-selling artists or their fans are releasing work for free in the guise of promotion.
Charles Caldas, the chief executive officer of Merlin, said that the independent labels were eager to work with SoundCloud in the long term.
"The independent label community has long embraced SoundCloud as an innovative marketing and discovery platform, and Merlin is pleased to partner with the service at the next stage of its evolution," he said in a statement.
SoundCloud in November reached a deal with the Warner Music Group, its only agreement with one of the three big label conglomerates.
Conversely, talks have proved difficult with Sony Music which has sought to take down tracks by some of its top-selling artists including Adele.
Merlin covers more than 10 percent of the digital music market, more than any player other than the three majors.
Merlin includes indie labels with cult followings including Matador, Merge, Domino and Warp Records, covering a variety of artists such as Jack White, Interpol, Arcade Fire, Tom Waits and Brian Eno.
SoundCloud has also started to introduce advertising as a way to generate revenue.
It has not yet revealed details of its forthcoming subscription service, which comes as on-demand streaming leader Spotify faces growing competition from rivals including Deezer, Rhapsody, Rdio and Tidal.