SoundCloud Just Released Their Financial Results And It Doesn’t Look Good

  • Save

According to SoundCloud’s latest financial statement, the company will need to raise a significant amount of money to stay afloat in 2016.

Soundcloud launched in 2008 and has grown to become a well-established, major platform for up-and-coming artists to share their music with fans.  The company was valued at $700 million in a  funding round during 2014, a figure that could increase.  But SoundCloud boasts a massive user base of roughly 175 million active monthly users, and is clearly a heavyweight alongside the likes of Spotify, Apple Music, and YouTube.

 So, where did they go wrong?

The report showed that Soundcloud lost approximately $56.4 million in 2014, which nearly leveled with the $60 million raised via Series D financing that year.  Soundcloud admitted the obvious in its financials: “Our overhead base has increased faster than our revenues.”

However, SoundCloud is staying optimistic along with their investors.  “We’re one of the biggest music platforms in the world and we’re growing fast,” says Alexander Ljung, SoundCloud’s founder and chief executive.  Ljung went on to say, “Over time, SoundCloud will become a financially sustainable and profitable platform.”

Although, the company did state in their filing that there are ”material uncertainties facing the business.”  SoundCloud is well aware that it will take time for them to get out of the red, and expects this to take around three years.

What’s next for SoundCloud?

Last month, DMN reported that SoundCloud made a licensing deal with Universal Music Group for its subscription service. Although terms of the agreement were not announced, these types of licenses typically require significant upfront cash payments. This means that SoundCloud now has to get users to start paying for the service to raise money and fund the venture.  The company also needs to work on a business model that allows them to successfully compete with other major streaming services, whilst retaining it uniqueness.

The report also concluded on another obvious note: “The Group’s business plan shows that further capital investment will be required in the next 12 months to fund the business.”

8 Responses

  1. Cord Pereira

    Time for a new business model. Trash the royalties – eventhough sound cloud doesn’t pay to Joe artist. Trash the spam that is now covering up album art. Give the rights of commercialization to artists – and reverse royalty share to networks based on what they bring in the door. Network sales team sucks. How many mor crappy business models do we have to watch investors lose millions. Pump money into artists! Music is not a product, it’s a currency that can only be monetized by artists that run their business as a media company.

  2. Anonymous

    I don’t know why this company is worth anything. As far as I can tell they don’t have anything proprietary. Exclusivity is limited. They have very few paying customers. Of the 175 million unique visitors, they only have a total of 40 million registered (still free) customers with no mention of their active registered users. Unlike Spotify/Pandora, they don’t seem to have any real business model (good or bad).

    I don’t see what is stopping Facebook, Twitter, Google, Dropbox, etc. from doing exactly what they do, even better, for the same price ($0.00) and completely cannibalizing this company. Or even better, offer real revenue sharing options for creators/uploaders. This company cannot compete.

    • Remi Swierczek

      I totally agree, they’ve no business purpose or any mechanism to generate income. Who is the main investor in this nerdy outfit?

  3. rikki

    no excuses, you are a band or artist, you have to invest in yourself……so that’s the 2 business models free with lots of ads or not free…..

    This means that SoundCloud now has to get users to start paying for the service to raise money and fund the venture.

  4. Rick Shaw

    It’s not that bad. Just get another cash infusion and forge on ahead.

  5. Vick

    I was a paid premium Soundcloud user for a long time like many DJs and Producers…. As a DJ I remixed and mixed tracks for podcasts and promotional mixes. Most of my mixes were taken down for “Copyright” infringement even though it was either a remix, a cover or a DJ Mix. I never posted full artist tracks. Soundcloud used to be the go to place for DJs alike that just wanted a platform to showcase our art and talent…. After over 3 years of payment and faithful service, the closed down my account due to “Infringement” and took down all my work…… I have since moved to other platforms.

    • JDK

      Sadly, a “remix, a cover or a DJ Mix” are not permitted uses of anyone’s music. They are specifically prohibited by copyright law. When SC cut major deals, they had to start to conform to the law and thus they instituted all those new infringement rules.

      I’ve produced and used SC as my main publishing channel from the beginning. I almost always allow any DJ to remix or cover my tracks via the CC licensing that SC had built in. I thought they had a viable path with that model – connecting unsigned and unpublished to DJ community through simple licensed path.

      Now that they are in deals with the majors, that’s no longer viable. I am likely going to cancel my paid subscription this year, as I don’t see them as helpful anymore.