Just 10 months after SoundCloud launched its long-awaited subscription service in Australia, the future of the music and audio streaming service is looking bleak.
According to MusicBusiness Worldwide, the Berlin-based company lost close to US$52 million (€51,216) last year, and with funding drying up and no new investors opting in, reports suggest it could fold before the year is out.
A filing at Companies House, the UK Government’s company registration agency, SoundCloud Ltd’s revenues grew 21.6% to US$22m in 2015, but its net losses were up a mammoth 30.9% to US$52m.
SoundCloud had been drip-feeding its plans to launch a full-fledged subscription streaming service for almost two years before the launch of SoundCloud Go. The move was a welcome one; the platform crushed souls of DJs and remix fans the world over in 2010 when they started taking down mixes which incorporated any copyrighted material.
But when it launched $9.99 subscription platform SoundCloud Go last March – complete with all the necessary licensing agreements to keep remixes hosted on the platform – SoundCloud won over audiophiles and kick-started acquisition rumours. High-level murmurs suggested a possible sale to Spotify for US$1 billion in the second half of 2016 – the same price Twitter turned its nose up at in 2014. Now, Google is the reported player eyeing the company, but for half its initial sale price at US$500 million.
Despite being one of the largest streaming platforms in the world with 175 million listeners – and a regular soap box for acts like Kanye and Flume – SoundCloud Go entered a competitive market capped by global players who are also struggling to balance the books (we’re looking at you Spotify and Pandora).
SoundCloud CEO Alex Ljung is optimistic that the move to a premium subscription service will spark a turnaround, but his statement in a Director’s report hints at a gloomy future for the loss-making streaming platform:
“The assumption of a successful launch of the new subscription service is the key element of [our] financial projections for the next three years… [This] bears financial risks regarding the operating results and cash flows of the group.
“The occurrence of these risks can seriously affect the ability of the group to generate sufficient cash to cover the planned expenditures and could require the Group to raise additional funds which have not yet been agreed.
“Whilst the directors believe that the Group will have sufficient funds to continue to meet its liabilities through 31 December 2017, the risks and uncertainties may cause the company to run out of cash earlier than that date […]. These matters give rise to a material uncertainty about the Group’s ability to continue as a going concern.”
Don’t bother directing your sympathies to SoundCloud’s staffers however, the average annual salary at the company was US$95k in 2015, 49% on 2014. Its staff count also grew, hitting 295 people in 2015, up by 25% from 236.