Is SoundCloud in Troubled Waters?

In a blog post, SoundCloud’s CEO, Alex Jung announced that he will lay off 173 employees and wrap up business in the London and San Francisco office, focusing on the Berlin and New York office. “By reducing our costs and continuing our revenue growth, we’re on our path to profitability and in control of SoundCloud’s independent future,” wrote Alex. He further adds, ‘In the competitive world of music streaming, we’ve spent the last several years growing our business, and more than doubled our revenue in the last 12 months alone. However, we need to ensure our path to long-term, independent success. And in order to do this, it requires cost cutting, continued growth of our existing advertising and subscription revenue streams, and a relentless focus on our unique competitive advantage — artists and creators.”

Experts consider the layoffs as a defensive move as the company has been reporting massive loss of revenue over the years. If rumors are to be believed, then the company may be up for sale at a pretty low valuation figure. As of now, SoundCloud values itself at \$1.2 billion but financial reports indicate a shaky position as the company secured a \$70 million credit.

Once upon a time, SoundCloud was the Lord of online music especially since it was built as a user-generated radio, an audio equivalent of YouTube where users could upload or stream any kind of audio and have the world listen for free. Pop singers like Lorde and rappers found their stardom through SoundCloud as they posted their music for the world to listen. Ever since 2007, the channel made a mark in the music industry and became a go-to music platform for users worldwide. SoundCloud was the DIY of music and artists used the platform for creating stellar work of music art. D.R.A.M’s Cha Cha, Post Malone’s White Inversion all got a record deal and a platinum album thanks to SoundCloud. Major studios and recording artists like Zedd, Damian Marley, NPR are still using SoundCloud to share exclusive content found nowhere else. The platform was pretty much like a stage for music enthusiasts to share their record for the world to listen, comment and share. Those who gained access to SoundCloud’s Pro and Premier account could get extra hosting features and post analytics – making it a social media platform for music lovers. It gradually grew to become the world’s largest streaming music service with a record of 175 million listeners and 12 hours of audio uploaded every minute.

Things were good until Apple Music, Spotify, Amazon Music, Google Play and other giants came along. The mobile devices provided by Apple and Android had their respective music apps by default. Apple users enjoyed the perks of Apple Music (27 million paid subscribers) while other users had Spotify (140 million users) and Amazon Music to turn to. While many have resorted to making comparisons between these music stream companies, they have failed to acknowledge that the platforms have differing business models and features. SoundCloud is a publishing platform, Spotify a music streaming and Apple Music an app exclusively for Apple users. Despite the differences though, these new music platforms seem to have an edge over SoundCloud with their innovative content marketing strategies such as allowing musicians to curate a playlist for their audience which increases brand following and likeability.

In an interview with Wired, Casey Rae, a music and media professor at Georgetown University highlighted the company’s essential challenges, “SoundCloud is facing three primary pressures; It has to grow past a certain threshold even though growth will naturally plateau; manage high expectations from investors; and rely on a business model that requires them to pay at least 70% of available revenue to content license holders.” That’s a tough deal to crack especially since Apple and Spotify are bringing in subscribers by the millions.

Online music is getting extremely competitive especially since the new and the old are competing to give users an optimal experience in music listening and sharing. SoundCloud may be in dire waters, but other companies aren’t exactly in paradise either. Users don’t want high costs for music, some even want free streaming all day long. These companies have to play it smart and make sure they keep the user base and be able to earn a profit at the same time. If SoundCloud wants to be at the top of its game, it needs to think of new partnerships, marketing strategies and probably produce its own content.

It’s too early though to make obituaries to the platform especially since it has shown considerable gumption in standing up to competitors like Spotify and Apple Music. Until a few years ago, Pandora was SoundCloud’s rival, but recently the company too sold a 19 percent stake for \$480 million. Now SoundCloud may risk the same fate as observed by Jim Griffin, a longtime digital media consultant, who thinks SoundCloud which was, ‘once a good place to stand for those with audio needing to reach the world,’ is now, ‘looking for a chair in a savage late round of musical/media chairs.’

The competition is stiff and most of them may not be profitable, but they remain part of a culture and are used by people to fulfill various needs. Some people want a simple radio streaming platform, some want a music-streaming platform with downloading options, some want a mobile app to integrate with their music collection and some want a novel form of music as offered by SoundCloud. It’s up to users to decide which platform resonates with their music needs the best. Some users make use of multiple platforms at a time where they publish audio on SoundCloud and use Spotify to stream music. At the end of the day, it all boils down to the user’ preference and their connection to music. Companies that understand this relationship can make it last in the long run.

Farah tries to keep up with the fast-paced tech world by writing about it. She covers latest tech news and writes informative pieces to help her readers make informed decisions about their tech preferences.