Spotify is reportedly in the advanced stages of talks to buy Soundcloud. The music streaming service which recently reached 40 million paying subscribers could be purchasing the indie music portal soon. Spotify has been embroiled in a battle with Apple Music over the past year and since the game is for the biggest audience, why not pull in the dedicated music creation community of the largest free music portal in the world?
Soundcloud has over 135 million tracks including covers, remixes, EDM etc. and a dedicated community of 200 million users. But there’s a problem. It has never turned a profit. The company posted revenue of €17.4 million but had an operating loss of €39 million. That’s hard to digest for even the most forgiving and optimisting CEO. Soundcloud Go which is the premium version of the streaming service has the same price point ($9.99) as Apple Music and Spotify so it’s not viewed as a threat as it once was when rumours surrounded it releasing a cheaper music service. Now, if Spotify swoops in and saves the company from loss, it could take away a humongous profit and give voices to the millions of creative musicians on Soundcloud that haven’t made it big.
The Advantage To Soundcloud
Music sales are growing for the first time in years. It seems that streaming services have found the perfect balance between owning paid for music and pirating it for free. For the first time in two decades, music revenues have grown and there has been a 45.2% rise in streaming revenue. Clearly the format is working, but in spite of this, Independent music companies are in danger. So giving them a voice in a streaming service as popular as Spotify could bail them out.
In doing so, not only will Spotify be proving itself a boon to the music industry but gain the respect and admiration of musicians worldwide, effectively stepping ahead of Apple Music. The latter had received a lot of praise from musicians by offering them a big chunk of the revenue from its streaming service and proposing larger royalties for artists overall.
Spotify will bail itself out in the process too. Spotify’s revenue rose by 80% to €1.95 billion in 2015 but it still didn’t make a profit. It’s losses rose by 10% to €173 million. Soundcloud could nudge it just above the loss line. Since most of Soundcloud’s users are used to listening to free music, the ad enabled service in Spotify will be perfect for them. And since 10.1% of the company’s revenue comes from ads, this little chunk could boost its revenue past the break even point.