With tech-savvy consumers flocking to music streaming platforms, companies like Spotify and Apple Music are flooding with revenue. So, why is it that one of the most popular streaming platforms, SoundCloud, is actually losing money and facing a potential buyout by Google? Well, unlike streaming services that charge a monthly access fee, SoundCloud is 100% user-generated.
SoundCloud has been losing money the last few years, but 2016 really magnified the costly results of a site made of strictly user-uploads. According to Business Insider, administrative expenses grew 67.8% in 2016. With SoundCloud lacking a viable business model and no way of generating ad revenue, the company is facing serious trouble.
As an effort to increase company revenue, SoundCloud hired former Google exec Holly Lim as CFO to strategize ways to spark financial growth into the company. Now, Google is contemplating buying out the business completely. Coincidence? Possibly.
If the buyout does occur, not only will the platform itself be affected, stakeholders and SoundCloud users (especially local musicians) will see a change. For some, it will heed monetary gain; for others, it may simply shift the way people consume music.
stakeholders will reAp the benefits
Three of the music industry’s biggest names, Universal, Sony and Warner all own stakes in the business, therefore these companies will receive a fortune if the buyout goes through. According to an article by Music Business Worldwide, if SoundCloud was sold for $500m, these stakeholders would get a cut of around $45m between them.
These large corporations are probably praying for the buyout to finalize, but what about local musicians and everyday SoundCloud users? How will this affect the way local music is released and consumed in our society?
Local music streaming trends may shift
SoundCloud has been nicknamed a “free record label” for musicians for quite some time. The platform does essentially what you would have to pay a record label to do: it distributes your music to the public. So, if the buyout does occur, what will this mean for our local music distribution? According to Austin musician and SoundCloud-user Mobley, “if people don’t like it, the herd will migrate elsewhere, as it’s done in the past. Platforms like MySpace and PureVolume come to mind.” Austin one-man band Henry + The Invisibles expands on the topic, saying “with the addition of Google Play’s enormous user base to SoundCloud, the audience size will be definitely be enhanced.” So, maybe Google’s large audience will actually help local musicians bring in more traffic, instead of pushing them out.
Although the buyout is not set-in-stone, the music industry is definitely facing a bit of mayhem in 2017. Whichever direction the two companies decide to go, it is comforting to know while our streaming experience and local music consumption might shift, it will not actually suffer as a result.
(Photo Courtesy of Tech Crunch)