SoundCloud has become a popular punching bag for the music press. The formula runs something like this: choose a screaming headline predicting the company’s doom, run some out-of-context business numbers and some negative quotes by an unnamed source, then (presumably) rake in clicks.

How bad is it? Well, bad enough that FACT chose to run two articles on the same day. (One was in linkbait listicle form, for bonus points!)

It seems there are three big factors in creating this climate. One, SoundCloud is popular – really popular. For producers and DJs, the site runs near total ubiquity in the same way YouTube does for video. Indeed, whatever high–profile departures from the site you may have seen or impassioned calls to go to competitors, the site has continued to grow. I’m still hard-pressed to find DJs sharing a MixCloud link, let alone something on a more obscure site. Some people love sites like Bandcamp, sure – and they post their Bandcamp releases on SoundCloud to promote them.

Two, user experience has sometimes suffered when the machinery of licensing has failed. No one is going to be happy if they get a takedown notice, least of all in cases where there’s a false positive. This is hardly news – if anything, it seems the situation has improved – but until there’s a solid licensing structure in place, it’s likely to leave users uneasy.

Three, and perhaps most importantly, there’s a vacuum of information about SoundCloud. The company made headlines recently because some 2014 financial numbers were available. But these didn’t present a complete picture, and they’re (obviously) over a full year out of date. The company won’t comment on licensing deals with labels, of course, but they’re also silent on even seemingly basic information like how many producers pay for Pro accounts. Into that empty space, then, it’s easy to pour speculation and hearsay, or to simply make stuff up.

I don’t think SoundCloud is, or should be, the tool for every job. But it remains the most important streaming service on which producers can share music for others to discover. So it’s important to get accurate information – even if that means less than a complete image. Here’s the latest.

New Chief Revenue Officer Alison Moore. Photo courtesy SoundCloud.

New Chief Revenue Officer Alison Moore. Photo courtesy SoundCloud.

SoundCloud has a new Revenue Officer

It says something about the Internet age that a business several years into being would add an executive job position for overseeing actually making money – but that’s the world we live in.

That said, there’s reason to take the Chief Revenue Officer hire at SoundCloud seriously. Alison Moore who fills the position in SoundCloud’s New York office has a huge resume. (Anyone complaining about SoundCloud spending lots of money on salary, this is the kind of highly-qualified person they’re then able to afford.)

Alison Moore seems like the sort of person SoundCloud would dream of having. Her early experience was SVP of Digital Products for HBO, where she handled everything from consumer experience to audience development for the hugely successful HBO GO. And she oversaw the now-defunct DailyCandy, the women’s lifestyle brand (meaning she has some credibility in working on the Internet’s guy bias). What likely got her the SoundCloud gig was overseeing (as GM and SVP) TV Everywhere, NBC Universal’s streaming product.

And if you think working out streaming revenue in music is a nightmare, try TV, with its tangled morass of cable operator interests and entrenched and lucrative broadcast advertising and complex rights ownership. NBC has had some success with TV Everywhere – it’s arguably been (along with HBO GO) a trailblazer and model for the rest of the TV industry. If anyone ought to be able to work out how to make SoundCloud make money, it’s this person.

Back to that absence of information: with SoundCloud mum on what they’re actually doing, and nothing unveiled so far, you could imagine that it’s quiet in the company. But you could also wind up criticizing the SoundCloud of 2014 rather than the SoundCloud of 2016.

For its part, SoundCloud in their statement about Moore claims that “the company expands at a rapid pace.” And they make clear where all of this “revenue” is coming from: “capitalizing on its massive user scale to drive revenue growth via consumer subscriptions and a diversified advertising product offering.”

Last week, I had the pleasure to meet SoundCloud’s new design chief, Prarthana Johnson, at an event called Musiktrends auf der Spree (it was on a boat, enjoying the … uh … March weather in Berlin). Johnson has also recently joined the company (hired late last year), and I understand she’s reporting to Moore. Johnson also has an impressive resume, managing user experience for Microsoft (on Skype) and rising to Skype’s Principal Design Manager.

Focusing on revenue at every level of the product seems to be high on the agenda, and this year looks like whatever SoundCloud has been promising finally gets rolled out.

So what does that mean for the site?

SoundCloud's base of creators - that's you - are one reason it isn't going anywhere. But now it needs to finally get its business model in order.

SoundCloud’s base of creators – that’s you – are one reason it isn’t going anywhere. But now it needs to finally get its business model in order.

The business of being SoundCloud

SoundCloud has publicly said it’s revenue plans involved two basic concepts: one, advertising support, and two, a subscription model.

The company has been saying that for some time; what’s changed is that later 2016 appears to be the timeline. Moore’s hiring certainly points to that, though the company didn’t make any mention of when something would happen in their statement.

Digital Music News has sources that point to October. (In January, DMN’s sources predicted July.) Fall sounds about right to me.

But from there on out, I’m not sure DMN is getting things right. They call the rollout a “transformation,” implying that the future of the company depends on users paying for content.

I think that’s simply dead wrong. SoundCloud has always talked about taking both advertising-based offering (read: free, ad-supported) and a subscription model. Indeed, you’ll see wording in the Moore announcement explicitly says revenue is coming from (1) “consumer subscriptions” and (2) “a diversified advertising product offering.”

Now, that could be ads launched on a subscription-only service. But weirdly, DMN also implies that NBC’s TV Everywhere and HBO GO represent NBC and HBO “struggling companies have been struggling to bring their massive, mainstay content businesses into the digital era, with mixed results getting users to pay.” In fact, NBC’s TV Everywhere launched without any additional subscription fee – ad-supported – meaning this statement is a non sequitur. (HBO GO, now HBO Now, for its part may not have struggled because users don’t want to pay, but rather because HBO viewers are often already paying for cable and haven’t cut the cord, or are busy paying for Netflix, or simply waiting for a new Game of Thrones season to start. Remember when I said TV isn’t the same as music?)

SoundCloud declined CDM’s request to add additional comment for this story on their specific revenue plans. But we can look at past statements. CTO Eric Wahlforss talked in no uncertain terms when I hosted a panel with him at Berlin’s Tech Open Air about balancing both ad-based and subscription-based models.

Also missing from DMN’s gossip stories, SoundCloud is unique in that unlike a service like Spotify or Apple Music, its producer/DJ members do already often pay for the service. (I do, and maybe you do. SoundCloud once comped my subscription early on; I now pay out of pocket because its invaluable.) SoundCloud won’t comment on the number of paid subscribers, unfortunately, saying through a spokesperson only that “there are over 18 million creators using the platform, sharing well over 110 million tracks, and reaching 175 million monthly active listeners.”

There’s reason to think an ad model might work. While Spotify’s ad efforts have arguably stumbled, Beatport’s new streaming offering has already attracted advertising, at least in the US. That suggests more focused offerings might be just the thing to attract ads. And speaking in the highly biased capacity as editor of CDM, I believe a savvy, producer-centered market is more valuable to advertisers than generic listeners alone.

What’s the hold-up? Likely, it’s the challenge of balancing two tasks at once. SoundCloud must both restructure the site and business in order to allow for ads and subscriptions, and get the licensing deals in place to facilitate that. It’s a chicken-and-egg sort of situation, except you don’t have the luxury of anything other than both simultaneously.

SoundCloud did share a statement about their progress with CDM, though:

Over the past year, weโ€™ve continued to bring partners from the music industry onto SoundCloud. Weโ€™ve signed deals with PRS and UMG/UMPG, to add to the nearly 200 deals weโ€™ve already signed, including those with Warner Music, Merlin and NMPA, as well as MCNs and independent creators. Weโ€™re focussing on enabling creators to get paid for their creativity, and on building a financially sustainable platform that our community can enjoy for years to come.

About that whole cash thing

Lastly, let’s deal with this idea that SoundCloud is about to close shop because they’re out of cash. Guess who – DMN – was trumpeting this story way back in July. (I have no idea why there’s a guy dancing in front of a fire in the picture.)

Then, in February, news outlets like FACT seized on a filing of 2014 accounts, which report US$44 million in losses.

Basically, SoundCloud requires investment to keep operating – it’s growing fast, and revenue is delayed. This would be cause for alarm, except that SoundCloud’s massive user success has meant it keeps attracting that needed capital. In a statement provided to CDM, SoundCloud notes it has both incremental capital and credit at its disposal:

SoundCloud filed its 2014 accounts with Companies House in February 2016. Beyond the full-year financials for 2014, which reflect those of a company in a strong growth stage, they show that, in 2015, we secured $77m of incremental capital, some of which came from our existing investors, demonstrating their belief in the future of the company, and the rest of which is a flexible credit line from Tennenbaum Capital Partners, an attractive option for companies like SoundCloud, who have a solid credit rating and are on a clear path to global success.

Anyway, you can’t report about the uncertainty of running out of 2015 cash based on 2014 numbers … in 2016. It’s clear that what remains is for SoundCloud’s ad- and subscriber-based model to roll out, and that it has to be successful.

Why this could benefit SoundCloud users

There’s been a sort of populist thread through discussions I’ve seen that assumes that the more successful SoundCloud is as a business, the less useful it is to its members.

I rather think that the past years have proved exactly the opposite. The whole utility of SoundCloud to someone like me (or you, probably) is to have music and sounds reach a wide audience. It’s been massive investment that makes that possible, from plumbing like a massively scalable infrastructure to the money spent on UX and design and audience development that racks up listens.

And when SoundCloud fails as a business, we suffer. The whole point of the agony of getting takedown notices, of not being able to post DJ mixes, of having false positives identify our music as infringement – this is what happens when a site doesn’t have licensing deals in place. Not to mention, if SoundCloud fails as a business and becomes a significantly different company in an acquisition (or even shuts down), it fails everyone who found utility on the service. Look at social media: I think musicians actually still struggle because Facebook doesn’t make music players prominent in the way MySpace did.

That’s not to say SoundCloud doesn’t deserve competition. A monoculture is not necessarily healthy, either, so I think any conversation about freeing ourselves from reliance on one service is a good thing. At the same time, for a lot of us the ideal involves both a healthy SoundCloud and healthy alternatives.

For now, SoundCloud points us to a study by comScore that shows SoundCloud is the eighth most popular app among USA-based millennials (that’s anyone born 1980 or after). Whatever interesting alternatives may be, that makes SoundCloud simply one of the most popular things on the Internet. And if you’re in the business of making sounds on the Internet, that means your business is tied to theirs.

  • Freeks

    I haven’t seen SC mixtape link for a while. It’s all mixcloud these days. And that is due the takedowns that don’t happen in Mixcloud. Mixcloud also promotes the tracks in the mix so it’s much better for the Artists who have tracks on the mixes.

    Write a follow up in 2017 and we’ll find out what happened. Let’s hope all the best for SC. I work in a company that has been in the position of having most teen users of all services. I do remember all those power points of:”If we charge X$ and if only X% users subrscribe to that we make X$”. It looks REALLY good on powerpoint. Sadly it rarely if ever pans out.

    Advertising might work. Or not. I do online marketing for living and there is few companies that rule the market. Newcomer don’t have easy times. At beginning it will get some traction as adbuyers (me included) will test how it works. But if there is no instant results we go back to what works. It’s too easy to buy good ad space online these days.

    Until now i have uploaded all projects to soundcloud. Next Project EP will be first that i will not have there.

    Btw, Chris Randal of Analog Industries don’t share your view on SC being industry standard:
    (Disagrees so much that he put out new service for Professionals ๐Ÿ˜› )

    • Well, this is more or less the setup to finally talking about Chris’ offering on CDM also this week.

      There are three use cases:

      1. People uploading primarily for purposes of discovery by others
      2. People looking to share music (privately)
      3. People using to share music (publicly, via widget)

      And to those you can add both the “mix” and the original work.

      Chris has something that helps people cover use cases 2-3 without necessarily caring about discovery, and for original work, not mixes.

      But when it comes to sharing music and hoping it gets discovered / lots of plays, I still see SoundCloud by far as the leader. And while I personally have tried to move mixes to MixCloud, I’ve found by far most DJs and labels are reluctant to do that because they see more plays on SoundCloud. (or at least more are reported)

      • Check out Free Music Archive. I have a very weird and obscure album which got downloaded over 59.000 times. And I have seen that happen to a lot of artists using Creative Commons on FMA.

      • Freeks

        Apple is now moving into DJ mixtape business:

        I do wonder how anyone could get discovered from Soundcloud. There is so much noise. I do know major DJ’s who browse SC for new tracks, but they mostly listen artists that they already know.

  • Ed Emberly

    This executive was not brought in as a turnaround artist. She was brought in because the company is prepping for a wind down and hopefully a fire sale.

    Unfortunately, the economics of systems like SoundCloud do not work out. If the streaming costs don’t kill them the licensing costs will, or vice versa.

    • That’s an interesting theory that doesn’t fit her resume.

      And she’s not the CEO.

    • Gunboat_Diplo

      Well if Ed Emberly, famous artist, says it (and backs it up with impressive citations) it MUST be true.

  • Freeks

    Btw, HBO Nordic was hugely succesfull from the get go. It introduced VOD for a lot of people with Netflix. Both of them launched about the same time in Nordics and it was good for both of them as they got massive media coverage. Now both are household services and major loosers are cable companies. Here, live sports and localised kids channels are only content that people need from cable. There is VOD for both, but as they are owned by cable companies they have priced those too high. (probably intentionally)

    What service to use if SC goes down? There is really no point of creating new free service as the streaming costs are too high. Google, Amazon or some other major cloud providers are the only ones who have muscle to run this kind of service for free.

  • Bus-tard

    I’d like this new Chief Revenue Officer Alison Moore to handle my biz too ๐Ÿ™‚

    • Ha, yes, I also want a Chief Revenue Officer. ๐Ÿ˜‰

    • nothingnatural

      It’s true, she does sound very qualified to be in charge of monetizing whatever service you’re offering. She has an impressive resume!

  • I listen to DI FM…a lot. It has lots of channels with different types of music so I can listen to what I feel like. I can do other things while I listen to the stream.

    When I hear a track I like I can get the name of it and then go buy it.

    I can’t do this with Soundcloud. I have to manually sift through ’00s of tracks which means I can’t do anything else while I do this.

    Why don’t DI FM and Soundcloud have sex and make a beautiful child that curates new music across a variety of genres in an Internet radio station?

  • Dopamine Addict

    I just wanted to say thank you for posting this. This is the most meaningful SC article I’ve ever read and I’m thrilled to see this new hire. Sounds like there could be a future for SC after all. I use it every day and frankly feel like its iOS version never lived up to its potential.

  • Free Music Archive offers way more exposure for my music than SoundCloud. My music being shared on Vimeo and downloaded way more than on SoundCloud. Don’t know why, but it’s just happening like that. Licensing might be ok but it’s a super small market. Super populair artists only make a few percent. For less known artists focussing on money is way stupid. Better focus on attention. You could even use CC Zero like does.

    • That is indeed interesting to hear.

      • But YouTube is probably the best service for promoting music. Vaporware got huge using it as well for it example.

    • That is indeed interesting to hear.

  • withakay

    Hey my label KYUBU is in the ‘who to follow’ panel in the screen shots!
    What a strange (but nice) coincidence. It raises the question though, do people follow those recommendations?
    Ahem, also Peter, why are you not following already? ๐Ÿ™‚

  • Stuff

    If SC goes down, you always have MixCloud for your mixes and Tradiio for your music, specially with the news that will come out of Tradiio in the next few months ๐Ÿ™‚

  • GettyImages

    It’s awesome that SoundCloud is hiring stock images

    • The headshot was provided by SoundCloud. I assume Getty is somehow automatically watermarking images it acquired from a press package. That really is her.

  • JussSomeBloke

    The next best thing to soundcloud is this……

  • Claudio Branno

    Well, the lady they hired is far from being a genius. Her name is in the biz since a while and she apparently failed in most of the highly qualified positions she covered (it is also said that she was hired while unvoluntary unemployed for that matter). This said. Revenue model. Fine for ads, pretty given I would say (actually with those huge audience they are taking more than they should), subscription model (for users, not producers) seems to me a suicide. I do find very logical to have producers and musicians to pay if they want to upgrade their account, far less make users pay to listen to music, most of all if this music is coming from wannabe/independent artists when there are other services that are less hipster but work as fine as Soundcloud. It seems to me that, besides having a very nice graphical interface, and being growing exponentially (but, I would say, even my 4 years daughter would make a company grow via investors, it is not really rocket science), they are missing the point, they are not standing out, and matter of fact is that, if they play wrong with their subscription model, they will be likely be parked by musicians (at least those independent that made most of the success of the platform) and be discarted in favour of YT, Vimeo, Bandcamp and so on. If this happens, we all agree I guess on that, bye bye bue Soundcloud. Maybe it will survive in the US (they pay for everything so they won’t matter), but I am pretty sure that user base in Europe will decrease scarily once subscription model comes in place.

    • thirdsun

      I agree, a subscription for listeners would be suicide. What kind of service are they trying to be? They don’t offer the full featured music library Spotify, Tidal, Apple Music or, even better, rdio (used to) to provide – for average listeners these services are actually able to replace the offline library, even if the content is just rented. And all that for 10 bucks a month. I don’t see how Soundcloud can compete with that – and in my opinion they shouldn’t even try.
      It makes more sense to offer a Bandcamp-like service with a percentage cut. Currently Soundcloud is basically a preview and advertising platform for artists and labels. The process of buying happens elsewhere – on Bandcamp for example. However Bandcamp pretty much nails this idea – it’s a fantastic service and as far as I can tell listeners and artists love it. Soundcloud would have to do a lot to offer a similar experience. Plus, I don’t see how a percentage fee from sales and the current flat pro fee could work together – I certainly wouldn’t pay for both and Bandcamp, of course, doesn’t have any flat fees.

      It’s really a tough spot for Soundcloud. I can’t see them offering anything listeners should pay for – they should really focus on offering better premium plans for artists and labels.

  • ceasless

    So if they add advertising, will they share revenue? I expect no one knows the answer to this, but if they add ads while I am paying for their service and then don’t share that revenue back, then they can definitely expect a termination of my subscription and an end to our relationship.

    • Yes. SoundCloud has committed from the beginning to doing a revenue share with content producers from advertising.

      The one question mark is really DJ mixes – Beatport has said DJs will actually see revenue. SC may only reimburse the producers, not the people assembling the mixes.

  • Randomer

    Gosh, I sure do hate gossip about soundcloud. Well, better get back to writing my gossip article about soundcloud!

    • Well, no – doing research and talking to SoundCloud is not the same as building a story around, say, one unnamed source. Sorry.

  • harris p

    The article above shure is an interesting read. Anyways, I think there is a problem when you monetize the upload and the stream. Especially if you have so little you can offer your artists. A short article about this can be found below…

  • Steve Richardson

    Great article.

    It’s always been a simple question of quality for me, a pro music account doesn’t equate to 128Kbps MP3 files in my book. I’d have quite happily continued my subscription if they made streaming decent quality audio an option. Simple.

    I agree that a subscription model of this kind isn’t going to make me rush out and sign up again, and who doesn’t use adblock? I’m quite bewildered by it all.