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SoundCloud has been hemorrhaging money, future may be in doubt

on February 12, 2016, 12:40am

Last year saw the demise of two major players in the streaming music arms race; Grooveshark ceased existence following a lengthy legal battle with major labels, and Rdio was acquired by Pandora after filing for bankruptcy. Now comes word that SoundCloud is facing an uncertain future.

According to a newly revealed financial report, SoundCloud has lost more than $70 million over the last two years. Though the Berlin-based company claims to have nearly 200 million users worldwide, it’s failed to turn this huge user base into a profitable operation. Even the introduction of ads doesn’t seem to have helped.

As Billboard notes (via Ars Technica), most users don’t pay to listen to music on the platform (the available paid memberships are mainly geared toward DJs/producers who upload their own material). The average revenue per user is said to be 11.2 cents, a measly statistic when compared to SoundCloud’s fellow “freemium” competitors Pandora and Spotify, who pull in about $11 and $27, respectively, per user.

In response, SoundCloud raised $77 million in funding last year, and plans to seek futher investment in 2016 in order to maintain operations and achieve positive cash flow, Billboard reports. The company expects to operate in the red for several more years as it negotiates licensing deals and invests further in its platform. SoundCloud recently struck licensing deals with Universal Music Group and Warner Music Group, reportedly in exchange for equity stake in the company.

In the financial report, the company’s board of directors concluded “they have expectation that [SoundCloud] will have the adequate resources to continue its operational existence for the foreseeable future.” However, the directors also concluded that “there are material uncertainties facing the business.”

Late last year, it was rumored that SoundCloud would soon be launching a proper paid subscription service. However, considering nearly half of Americans think streaming services are too expensive, going that route might not be in the company’s best interest.

 

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