How long can Spotify and Soundcloud "tahan" losing money?

Artistco

New member
Spotify and Soundcloud are the 2 largest online music players in the world. Interestingly, both share the same root, they are from Sweden. Co-incidentially they all started with the letter "S". Anyway, both Spotify and Soundcloud are currently facing their own challenges.

Soundcloud is closed to be bought over by some equity funds to keep them afloat. If that is true, Soundcloud will be very different from where they are now. Actually, Soundcloud now is already very different from when they started. The subscription model is totally not working for them. Quite simply, the market doesn't need another Spotify. So what's next for Soundcloud is anybody's guess.

Spotify is huge, much bigger than Apple Music. As of July 2017, they have 140 millions active users, of which 60 millions are paying subscribers. Based on their 2016 reports, their revenue increased from US$2 billions to US$3 billions. But their losses also increased from US$200 millions to US$600 millions. Pretty scary numbers. Soundcloud losses looked really small compared to these Spotify's figures. [https://www.musicbusinessworldwide.com/spotify-storms-past-60m-subscribers-now-adding-2m-month/]

Recently there were debates about Spotify fake artists, strategically placed in their playlists, to reduce payout to musicians. Many thought that they are trying to control their losses with such an approach. Spotify has so far denied such claims. [https://www.musicbusinessworldwide....uch-in-streaming-comes-back-to-transparency/]

Before the fake artists matter can be addressed, there is another claim about fake streaming, or commonly known as "zoombie fans" in China. But these guys are really smart. In short, they help boost musicians streaming numbers, Spotify pays musicians about 0.4 cents per stream (depending which country the fans are from, ranges from 0.2 cents to 0.7 cents), the "zoombie fans" company gets to split the monies. To put into real world perspective, to make US$2,000, a musician needs to have 500,000 streams. The question in every musician's mind is how long before I can hit 500,000 streams. [https://www.musicbusinessworldwide....artists-its-time-to-talk-about-fake-streams/]

The above are some of the challenges that such music app companies are facing now. They have been around for very long but not profitable. Their shareholders are getting impatient and the founders are forced to react to the constant losses.

Streaming, like optical fibre, are just technologies that serve the musicians and fans, and also the recording companies. I don't see anything wrong with the advancement of technologies. The question definitely lies with what type of business models sits on top of these technologies. I guess freemium model does has its advantages and disadvantages. Looking at Spotify, from the angle of the company and musicians, it seems the disadvantages are outweighing the advantages. If it is not helping the musicians who are responsible for the music contents, it is not going to last.

If you wonder why I wrote this tread, that's because I am involved with building a new app. I hope this can start a discussion where I can collect inputs that matter to musicians. So, please feel free to comment.
 
Both Spotify and Soundcloud are market leader in their respective market. They will be difficult to replace unless it is their own undoing.

As long as they continue to grow their metrics, they should still be as sexy for the investor to pump in new funds.
 
Maybe you are correct that they are too big to fail.

This is a projected number for 2017. Somehow growing the metrics may not be enough. At this rate, they will need lots of faith from the investment community to loan https://www.musicbusinessworldwide....n-in-revenue-but-how-much-money-will-it-lose/

In any case, investors had stopped funding Spotify with cheap capital, they had since switched to convertible bond, which is a form of loan. When investors invested in shares, the monies come with zero cost. Spotify can burn it without much consequences to its founders. But convertible bond means Spotify needs to repay the principle + interest to the bond providers if they cannot met the conditions set, which is to be listed by 2017.

Another piece of interesting news, our very own Temasek Holdings is reported going to rescue SoundCloud, http://www.straitstimes.com/busines...ce-soundcloud-said-close-to-sale-of-stakes-to. If it materializes, Singaporean is going to own a piece of SoundCloud.
 
anyone heard about this new one called "smule", apparently for mobile only :)
Interesting app although haven't hear of them until now. Thanks for sharing. Cannot tell how they are compensating musicians and artists. Hopefully not another for exposure only.
 
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