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Twitter has made an investment in SoundCloud for a reported $70 million and if you’ve been following the story between the companies, you have to ask yourself “Why now?”
About two years ago Twitter almost acquired SoundCloud before walking away at the last minute, and an acquisition certainly would have made a lot more sense at the time, even though it might not have changed the futures of either company.
Back then Twitter wanted to capitalize on its high profile music users like Taylor Swift, Justin Bieber and Katy Perry, who had massive followings on the service (and still do) but weren’t able to take advantage by directly serving up their music to them. SoundCloud was struggling with both monetization issues (which still exist) and licensing problems, and theoretically could have provided the infrastructure for Twitter to transition to at least a partial music service.
Many think that Twitter was better off for walking away from the deal and keeping the focus on its core business, which in theory worked fine except for the fact that the company’s user base has plateaued in the meantime even with a focused agenda not diluted with delivering music.
SoundCloud has actually come a long way in that it now has signed licenses with the three major record labels, and has since worked hard to roll out its $9.99 monthly subscription service called SoundCloud Go. Still, it’s a cash-starved company and needs another round of funding to stay alive, so having Twitter as an investor in this round is most welcome.
That said, the benefit for Twitter isn’t as apparent. It’s not getting any of the technical goodies that come with an acquisition, and it’s buying a piece of a company that essentially hasn’t grown in valuation since its last go around.
In fact, out of all the music streaming companies currently in the space, SoundCloud may be the most baffling. It’s long been a boon to artists, bands and songwriters as a tool for free music distribution, and at that it may very well be #1 in the space. That market isn’t large enough to add enough subscribers to make the platform go however, and may be tapped out already. Attracting regular music consumers to its paid Go service may be limited to electronic music fans, since the platform is a favorite of DJs, but that genre seems to have plateaued as well. [Read more on Forbes…]
It’s been rumored for months, and it’s finally happened. SoundCloud has launched a subscription tier to its streaming service called SoundCloud Go and it’s priced at what’s now become the standard – $9.99 per month ($12.99 for iOS).
The fact of the matter is that SoundCloud Go seems like it’s more to appease the major labels than anything. All 3 majors have now licensed their catalogs to SoundCloud in an effort to get a piece of the DJ remix space they’d been missing.
As for the consumer, there’s not all that much of an advantage. The free tier provides 125+ million tracks while the SoundCloud Go offers the same plus an “expanded catalog” (no idea what that means), offline listening, and it’s ad free.
One of the big problems for consumers is the lack of big names on the platform, or extensive catalog from major label artists, although the platform seems to be adding more content to Go today. Still, the majority of available songs consists of remixes or user uploaded tracks.
SoundCloud has had a major problem with DJ remixes using unlicensed material, and has had to revoke the subscriptions of many of them as a result, which has led to bad blood in the community and mass defections to MixCloud and Dubset. It’s going to be difficult to get them back, if for no other reason than from a logistics standpoint of moving a catalog to a new service.
It appears that SoundCloud Go will pay artists according to their market share, which means that the top 1% will continue to enjoy a higher revenue stream regardless of whether they own the copyright of their material or not.
SoundCloud currently has 175 million active users, so even a conversion rate of 5% would make it a player in the streaming space with nearly 9 million subscribers. SoundCloud Go is only available in the U.S. market for now, but will roll out globally later this year.
By the way, you can avoid the extra $3 iOS charge by signing up on your desktop instead of your iPhone.