Jam

SoundCloud just got a $75M investment — but it's going through an awkward phase

Thursday, February 13, 2020 by Robinhood Snacks | Disclosures

Before Spotify and Apple Music... You turned to Pandora for "stations" that matched your mood, fiercely skipping to find that one song. But when you tired of Michael Bublé-ish, you'd turn to edgier SoundCloud — your go-to for mashups and 50-minute tropical house mixes. The Berlin-based startup has been out of the limelight for years, but it just got a $75M investment from Sirius XM (which, coincidentally, owns Pandora):

  • Street Cred: Described as "the YouTube of music," SoundCloud embraced user-generated tunes and became a place for up-and-coming creators to share their songs. It helped launch Chance the Rapper, Billie Eilish... and Elon Musk's EDM career).
  • Growing Pains: Due to difficult licensing and monetization issues, SoundCloud almost went bankrupt. In 2017, it laid off nearly 200 employees and raised emergency funding.
  • Identity Crisis: As other streamers struck deals with the big record labels, SoundCloud started favoring ad-revenue-generating music from big stars at the expense of lesser-known artists, introducing paid subscriptions and licensed music.

Still around... SoundCloud made $127M revenue in 2018. But it's moved further from the DIY roots that made it popular, while still lagging on the mainstream/money-making front. FYI, both Twitter and Spotify tried to acquire SoundCloud — and both deals fell apart.

THE TAKEAWAY

SoundCloud was late to the 'License Game'... Its early biz was more like users uploading songs to YouTube without copyright licenses. Now, record labels insist on licenses to use their artists' music (they can get paid on streams). Spotify was quick to strike these license deals, letting it to offer many more songs/artists (and draw more subscribers). By the time SoundCloud made its 1st label deal in 2014, Spotify and Apple Music were already leaders.