SoundCloud’s Financial Losses Are Way, Way Worse Than We Thought

SoundCloud’s revenues topped $100 million last year.  That’s great!  But, its losses totaled nearly $100 million in 2016.  It will likely grow even more.  =(

Speaking with the Financial Times just over a week ago, SoundCloud CEO Kerry Trainor confirmed that the popular streaming music platform has exceeded its financial and user growth targets.  The company’s total sales surpassed $100 million.  SoundCloud “has never been healthier financially,” he boasted.

How?  Simple.  Following a very troubled 2017, Trainor shifted the company’s strategy.  Instead of “trying to mimic Spotify,” it now focuses on selling much-needed music creation tools to indie artists.  For around $70 to $100 a year, music creators could use the tools to post great new content on SoundCloud.  In turn, the works would draw in even more listeners.

In the end, the platform would continue having fresh new music for music listeners to enjoy.  Over 177 million tracks on the platform is no laughing matter.  And, more artists, podcasters, producers, and DJs would head to SoundCloud to use the platform’s tools.  After all, they can’t find those on Spotify, or any other streaming music platform.

With Trainor, formerly the head of Vimeo, now in charge, the company may finally find hope for a profitable future.  After a successful fundraising round last August, SoundCloud has “significantly reduced the cash burn.”  It has also achieved a positive cash flow in recent months.  In little less than a year, the company now has a stronger and more significant presence in the digital arena.

The $100 million in revenue the platform received provided a much-needed fresh of breath air for the beleaguered independent streaming platform.  Last year, the company lost multiple top executives.  In addition, its troubled co-founder and CEO ‘stepped down’ (read: was forced) to become Chairman of the company.  Trainor came on right after investors approved a $170 million emergency million bailout to keep SoundCloud from going bankrupt.

It seems that now, the company finally has a winning strategy, right?

Well, not really.

Yet, SoundCloud still faces steep challenges.  Mainly, it hasn’t stopped bleeding money.  How much?  Think close to $100 million.  And, that was just two years ago.  Just wait until it releases its financial report for 2017.

SoundCloud recently published its 2016 financial results through Companies House in the UK.  And, the news is far from pretty.

While the company’s revenues rose 88.9% to €50.3 million ($62 million), net losses also grew 45.7% to €74.5m ($91.9 million).  Cost of sales, which include royalties, increased by 135.9% to €36.1 million ($44.5 million).

In 2016, SoundCloud earned €38.4 million ($43.4 million) from subscriptions and €11.9 million ($14.5 million) from advertising.  69.3% of the company’s revenue came from the US.  It also averaged 296 employees, prior to dismissing 40% of its staff last year.  With salaries, share-based payments and social security included, staff costs alone came to €38.6m ($47.6 million) in 2016.

Despite the company’s growing losses, it remains hopeful that under Trainor, SoundCloud can finally turn things around.  Yet, can creation tools and four different subscription tiers (Pro, Pro Unlimited, Go, and Go+), truly turn things around?  The company thinks so.

The 2016 financial report reads,

“With the aforementioned $170 million financing, plus a focused strategic operating plan, SoundCloud is now positioned for capital-efficient growth.”

Unfortunately, we won’t truly know that until late September.  SoundCloud will publish its 2017 financials, then.

Once again, Trainor, it looks like you have your work cut out for you.

You can check out the complete report below.

Featured image by Petteri Sulonen (CC by 2.0)

5 Responses

  1. sadboy

    so much trashing yet have they done a trillion times more for music that this sh*thole site

    • Remi Swierczek

      WHO ARE you? NAME please, little weasel!
      Only SHAZM beats SoundClound in business model stupidity!
      Time for lunatics to have some MUSHROOM CAKES with clueless CUE to get $600M parachute out of Steve’s goodwill!

      • Remi Swierczek

        … still nothing fresh for music.
        Nerdoland just snowballing to next level of STUPIDITY!

  2. SpacedOut1

    To me the problem with soundcloud is that they are being ridiculous in their approach to monetizing content. There are thousands of Soundcloud users dying for exposure. Soundcloud could open up their years in beta promotional tool to them for a low monthly or one off cost just like Feature FM. They could also charge users for points similar to Repostexchange. They should focus on monetizing their existing musician base instead of music listeners.

    • Remi Swierczek

      …should focus on monetizing their existing musician base…

      YES, LET’S improve SCREWING of the musicians with monthly management fees for GIVING AWAY THEIR UPLOADED MUSIC! Who to f… is behind this NONSENS! Is it UMG again?!