As most people have heard by now, the music streaming company Soundcloud is reaching a critically low point in its 9 years of existence, following reports this summer that it faced bankruptcy with potential to shut down and having laid off 40% of its staff, closing offices in London and San Francisco. Problems such as a lack of monetization, costly record labels and misplaced business decisions come into hand when analyzing their downfall, maybe a sign of need to change the way we listen to music and the lessons we can learn from this.
The Berlin based company over the recent years has hit obstacles alongside backlashing business decisions, which has deterred its financial position as well as power amongst investors, possible acquisitions and streaming competitors such as Spotify or YouTube.
There are a lot of complications that need to be considered when talking about Soundcloud’s downfall, to begin, the concept of this service is to be a publishing tool which allows musicians to distribute their music for free, part of the reason why its user base has exponentially grown over the years alongside heavy investment in infrastructure. This is also why we’ve seen many artists come from this platform, from rappers to DJs, Soundcloud has given the foundation for talents to grow and get their names out there. This isn’t to mention the large archive of music from all genres which people are able to discover and is currently being saved in case the website was to shut down. The problem was set out from the beginning however, the company ended up struggling to monetize the service, its ads clashing with artist’s music even when they had paid to be featured and the late arrival of their subscription service ‘Soundcloud Go’ in 2016 not persuading people to pay for something they had enjoyed so far for free.
Leading on from this, this resulted in massive losses for them, $44 million in 2014 and $52 million in 2015, counting the fact that many users had now moved on to other music services. Soundcloud also ran into licensing issues with label companies by prioritizing finding artists to post on its service instead of making deals, just like Spotify, meaning when copyrights law came to terms with how digital music should be handled, the company was left with no choice but to take down remixes and lots of music, keeping firm control on what was being uploaded much like YouTube for example. This led to more controversies, anger and listeners turning away, amongst its frustrating lack of integration amongst platforms like Facebook as well as Twitter.
Another problem which all music streaming services face is having the right to certain label’s artists and their music, knowing the power record companies such as Sony, Universal as well as Warner Music have over everyone, they’re also looking to make money. This means companies such as Spotify and Soundcloud pay massive fees to labels to gain access to their artists, something critical to keep listeners but which comes at a heavy price considering the already low amount of revenue they make from their low fees. Even Spotify, currently the biggest music streaming service is losing a lot of money, paying back half its revenue to record companies, having barely any royalties for artists (considering how much little money is made from a click to stream), raising a lot of controversy on whether it’s even profitable for artists to put their music on there. This does raise the question, are music streaming services even sustainable? Only time will tell.
Unable to make money, interest from Twitter and Spotify to acquire the platform fell through and several top executives moved on which showed to be a worrying sign for the company as well as investors. Since the recent news of Soundcloud’s soon-to- be end, artist Chance the Rapper has jumped to help and two private equity firms are in talks to possibly buy stakes in Soundcloud, which would result in a great loss in the company’s independence but again, everything comes at a price.
Overall, if the music streaming service were to shut-down, it would be a tragedy for the culture and vast music that can be found on there, even through all the complications, Soundcloud is the reason a variety of artists can be listened to, it’s the reason many have made it to where they are today as well as the many who are yet to be discovered. It’s been a great platform for people to upload their music, to connect with listeners, to be experimental and has been important for different genres to this day – there is a lot to be thankful for. However, Soundcloud has over the years made decisions which has pushed itself away from its community-based feel, becoming more of a search-engine like Youtube and Spotify, based on algorithms and data. It’s hit legal roadblocks and faced challenges from other companies which have made it hard for them to fully integrate across different platforms, costing them a part of their audience, artists as well as identity.