07/08/2017
SoundCloud is kinda imploding
- As originally posted by Owen at Charged
It's one of my very favorite music sources — and where I happen to host the podcast — but for the last year it's become evident that something is very wrong at SoundCloud. The company has shipped few features, launched bizzaro paid services and failed to raise capital repeatedly.
This week, the company cut more than 40 percent of its workforce in a move that it described as a "path to long-term independent success." That's a big departure from looking for big venture capital last year, considering a sale, then raising $70m in debt.
The thing is, even though SoundCloud is the platform of choice for 175 million listeners (!) and it hosts millions of indie music tracks, DJs and other artists... the business model simply hasn't panned out at all. At first, SoundCloud hoped to charge artists for hosting their music, but it's not particularly profitable. In 2016, it launched a subscription music service too, but it's not competitive on price.
Spotify and Apple Music have essentially steam-rolled the music space, and the price of royalties is incredibly high for these companies. I suspect we're going to start seeing the music streaming business bottom out, as they realize the margins are slim on almost all options.
Even Spotify is at risk, though , given that the company has a huge disadvantage on iOS where Apple requires a 30 percent cut, and can be undercut on price by Apple Music since Apple doesn't need to pay that fee... and that's pre-installed on all iPhones.
The problem, for me, is that SoundCloud has all the music I want to listen to, while Spotify/Apple do not... but I'm also not willing to pay for a second music service. NYPost reports that Apple is actually considering buying SoundCloud, which would be an incredible coup de grâce to Spotify's discoverability, and would be a move that would make me consider an immediate switch.
I'll be watching the space closely in the coming year. There are a few ways to profitability for Spotify, SoundCloud and Apple... but almost all of them require muscling a few extra dollars off royalty payments which is no easy feat (unless you happen to be Apple).