Can SoundCloud Suddenly Find a Revenue Stream? Probably Not

July 20th, 2011--Aspen, CO, USA

Alex Ljung of SoundCloud speaks at the "Drive Time: The Battle for Online Listeners at Fortune Brainstorm TECH at the Aspen Institute Campus.

Photograph by Stuart Isett/Fortune Brainstorm TECH

Alex Ljung, SoundCloud’s embattled CEO, has struck an odd chord in recent days. The empire he built from scratch in 2008 is collapsing around him: Last week the Berlin-headquartered streaming service fired 40% of its staff and closed its offices in San Francisco and London.

A subsequent TechCrunch investigation found that even those drastic measures only gave the company enough cash to survive until the end of Q4 this year. But Ljung has remained defiant. On Friday he was ambiguous about SoundCloud’s plans at Tech Open Air. And on Friday he came out fighting in a statement, posted to SoundCloud’s website, entitled “SoundCloud is here to stay.

“There’s an insane amount of noise about SoundCloud in the world right now,” wrote Ljung. “And it’s just that, noise. The music you love on SoundCloud isn’t going away, the music you shared or uploaded isn’t going away, because SoundCloud is not going away. Not in 50 days, not in 80 days or anytime in the foreseeable future. Your music is safe.”

Few others share Ljung’s optimism. The company is ravaged by a number of seemingly terminal issues. Its commitment to independent music, and low-level creators and DJs, has given it a fervent fandom and significant respect from musicians worldwide. But labels, strangled by the move to digital, are driving ever harder bargains to cling onto their own margins. And streaming’s paper-thin margins are leaving SoundCloud with little to monetize.

The firm’s subscription service, SoundCloud Go, offers little beyond its free version. And most analysts say the 175m audience it last quoted in 2014 is likely to be well off its 2017 figure.

Big artists drive profit. Apple, Amazon and Spotify know this. The latter turned down the chance to buy SoundCloud last year, when Ljung’s company was worth a reported $700m, as it worried the deal may unsettle an IPO it is planning for either the end of this year, or beginning of next. The Swedish platform, which has 48m paying subscribers, is vastly narrowing the space in which SoundCloud can make money. That is unlikely to change.

Some are already ringing SoundCloud’s death knell. The Archive Team, a group of around 150 volunteers, is preparing for the death of SoundCloud, initiating “large scale backing up of SoundCloud soon,” according to a tweet by coordinator Jason Scott.

Others are trying to keep it alive. Of all the company’s recent news, the most striking appeared on Thursday when Chance the Rapper announced via Twitter that he had been speaking to Ljung, adding that he’s “working on the SoundCloud thing.” he then released a new single via the platform, stoking claims he may be planning some kind of financial assistance.

Whatever the 24-year-old Chicago sensation can offer, it is unlikely to overturn SoundCloud’s fortunes. Its most recent funding round generated $70m in debt financing last June. Ljung insists he is embarking on another hunt for investment. But his recent opaqueness will surely do little to impress potential VCs.

SoundCloud’s predicament is a strange combination of a virtuous commitment to independent music, and a murky, Machiavellian attitude to staff and sustainable business. That’s not to say the latter hasn’t propped up many of the tech world’s most successful platforms. But with so much lost in recent months, SoundCloud needs to find a significant revenue boost. Judging by its previous nine years of existence, the company’s obituary writers should open a folder on their computers now.

  • Marcin Niewęgłowski

    Unfortunately, Soundcloud has slept away many years. I remember my first experiences with SoundCloud in 2011. And when I’m looking at this site today I see the same site, without any imprints of tech evolution, development etc. SoundCloud Go was rolled out too late. Especially, when SoundCloud audience have accustomed to current status.

    No doubts, SC had a huge potential to build up amazing environment for underground/ independent music scene. This hasn’t been done and I dunno why.

    Frivolousness has lost this music service as well. That means, when majors started to stake a claim on their music rights. Soundcloud owners haven’t been prepared to this move.

    In my book, the streaming service as business model for music industry is one-way ticket or worse – dead end. Let’s look what is happening with Pandora, SoundCloud and Spotify.