Following on from the Spotify fake artists story, this week, another music streaming platform is under the spotlight with questions around its survival coming to the fore. It has been reported that music streaming platform SoundCloud is facing closure having laid off 40% of its staff and only having enough funding left for 50 more days of operation.
SoundCloud has been struggling financially for a while having lost around $52 million in 2015, while its new subscription service SoundCloud Go has largely flopped. The company is denying it faces closure with co-founder Alex Ljung saying that rumors about a possible closure are just noise. In a statement, Ljung stated, “the music you love on SoundCloud isn’t going away, the music you shared or uploaded isn’t going away because SoundCloud isn’t going away.”
There is speculation that Chicago rapper Chance the Rapper could be helping the platform survive. He tweeted last week that he was “working on the SoundCloud thing”, while the word is possible buyers are lining up including Twitter and Spotify.
The recent financial struggles of both SoundCloud and Spotify have brought into question again the perilous state of music streaming and the ongoing issues around coming up with a model that is both financially viable and fair for artists. To assess SoundCloud’s situation and place it within the wider music streaming context Sam Smith spoke to Public Address blogger and media commentator Russell Brown.
Sam: Is this the end for SoundCloud?
Russell: We’ve been kind of looking at the end of SoundCloud for a few years now and it manages to limp on. I think SoundCloud’s problem is that in the last three years it’s had to put all its energy into satisfying the major music owners. So getting deals with Universal and the others and trying to show that it’s doing something about copyright infringement. And it’s had to do that rather than improve its service. However, the funny thing about SoundCloud is it’s huge, it’s nearly four times the size of Spotify in terms of actual users. One hundred and seventy-five million people a month use SoundCloud and yet it can’t make any money.
Sam: And I guess putting this situation into the wider context within digital music distribution we just haven’t really got to the point where the financial model is quite right yet in terms of revenue and also paying artists fairly.
Russell: No exactly and SoundCloud has a particular problem in that it is ten years old and it rose at a time when digital sales were still relevant. And increasingly sales are becoming irrelevant it’s all about streaming revenue. So SoundCloud’s model of streaming a track that you might like that you then might go and buy if it’s available doesn’t really apply anymore. It’s still a very useful promotional device, but music owners now expect any stream to deliver some speck of revenue and that’s what SoundCloud is struggling to do.
Sam: And clearly aside from I guess Apple Music most digital streamers are struggling financially. I mean just last week it was found out that Spotify had been filling their playlists with fake artists. Tidal have problems, Pandora it’s a very tough market, isn’t it?
Russell: It’s a really brutal market and below that tier, you’ve just named you’ve got the likes of Deezer and a few others and they’re struggling as well. It’s a very difficult market to make money in if you’re operating the service, things have started to turn around if you happen to own the music. And we’ve seen that in music industry revenues everywhere, including New Zealand in that streaming revenue is starting to work, but it really only works if you own a lot of copyrights, or if you are a very big artist. So yes it’s a difficult time.
Sam: Is there a perfect streaming model out there just waiting to be implemented or is it more about trial and error at the stage?
Russell: They are pretty much the same and they all cost pretty much the same. I think we’ve found a benchmark at around 13-15 dollars a month for all you can stream. In terms of models, New Zealand-owned Baboom originally conceived by Kim Dotcom does something different to all the other streaming services in that it splits the revenue at the top, not the bottom. I mean people imagine that if you listen to Street Chant and the Phoenix Foundation and nothing but all month, a lot of people who have a Spotify premium account imagine that the money goes to those two artists. It doesn’t, it goes into a big pot and then gets divvied up according to overall plays. This suits those big others and the big record companies very well, it’s terrible for small artists.
Sam: If SoundCloud was to end how bad would this be for small and independent artists?
Russell: If SoundCloud was to end there are more than half a dozen services that are already trying to do what SoundCloud does. There are things like Hear This which is pretty much a SoundCloud knockoff but has some quite nice features that SoundCloud hasn’t been able to get round to developing. I think the audience would gradually flow to one of those other services, but it would actually leave a big hole. There’s so much music out there and it would leave even the major music owners without a really important promotional vehicle. So it wouldn’t be great, but I mean we’ve been looking at SoundCloud dying for a little while and it seems to be able to keep going.
Sam: I guess there is the chance that it could be bought out by a big company?
Russell: I think that’s its best hope definitely. You’ve had Twitter look at it, you’ve had Spotify look at it, I guess Apple which has lots and lots of money won’t be interested because it has its own service, but I think even Google has looked at it. I think that’s actually SoundCloud’s best hope for sure because it’s struggling to make money with the model it’s got. I mean it introduced SoundCloud Go, which is about the same price as all the other streaming services, but of course, with a much smaller library, I mean do you know anyone who has a SoundCloud Go subscription?
Russell: Exactly because all you get is the ability to play the full versions of those major label preview tricks that are just the most pointless thing on SoundCloud. They are like that because of the view that we are in the streaming era, streaming is revenue so if you’re going to stream a track you have to pay for it.
Sam: If SoundCloud was to close would you be sad about that?
Russell: I would be very sad yes. I’ve got tracks up on SoundCloud and I use it all the time and apart from anything else SoundCloud has a really good embeddable player. Spotify embeds which are possible are horrible, Bandcamp’s embeds aren’t that great either, but SoundCloud actually has a really nice embeddable player and I use it every week. I do a music post on my blog every Friday and every Friday there are SoundCloud embeds in there and it would be really sad to lose them.
Sam: I guess that’s the thing with SoundCloud, I mean a lot of people use it as a record keeper of music, don’t they?
Russell: Yeah absolutely and I think it’s actually changed what music blogs are as well. Music journalism as expressed in music blogs now is less like a magazine or a newspaper and more like a radio station because you can actually present the music you’re talking about. And that’s been a really big and interesting shift, but if SoundCloud goes there’s going to be a whole lot of broken embeds on my blog.
Listen to the radio interview here.