Industry Insider Austin Staubus from ItsNoRequests shares some insight into the potential outcome if Soundcloud fails to recover from its latest financial woes.
Consumers of music love to rip on Soundcloud. I see the relatable meme content that budding producers and DJ’s share on Twitter dot com about the platform’s demise. I get it. Soundcloud’s content identification system took down your unapproved future bass remix of The Weeknd’s brand new single. Did you think Soundcloud would always be the wild west? Soundcloud’s explosive growth forced the house that Alexander Ljung built to play ball. The major labels came calling. Soundcloud had to cut licensing deals to survive. Now Soundcloud is embroiled in its biggest battle to date.
Soundcloud is battling to stay alive.
Last week, Soundcloud sent shockwaves through the blogosphere with the announcement that they had let go 40% of their workforce to “achieve profitability” and ultimately “control Soundcloud’s independent future”. It’s easy to read between those lines. Soundcloud is spending more than its making. It’s been doing so since its inception in Berlin in 2008. Catered meals. Apple laptops. Free headphones. All the hallmarks of a stereotypical Silicon Valley startup burning investor cash. It’s never been profitable despite “doubling its revenue in the past 12 months”. Das ist sehr schlecht. Soundcloud isn’t an outlier in that respect. Many large tech companies (I’m looking at you Snapchat) never achieve profitability. In this current climate, user growth and engagement seem to be more important than a company’s bottom line, but I digress.
Soundcloud’s potential failure has wide ranging implications.
Soundcloud’s failure would have an immediate impact on the hip-hop and dance spaces. These genres rely heavily on Soundcloud to reach their core demographic. Artists like Travis Scott, Major Lazer, and PartyNextDoor routinely leverage the platform to push their records. Many fail to realize that the most streamed genre on Soundcloud is hip-hop, by a large margin. Check the “Top 50” charts on Soundcloud. Speciality distribution companies like EMPIRE and house labels like Toolroom Records would be hit the hardest. Even juggernauts like Spinnin’ Records would feel the heat. Their ability to market and promote their releases would be greatly affected, which ultimately hurts their bottom line. Labels and distribution companies that rely on Soundcloud will have one less tool in their arsenal to promote their releases.
In addition, Soundcloud’s failure would have an impact on independent curators like Aux London, Trap Nation, and Dancing Pineapple. Combined, these curators have millions of dedicated followers and are instrumental in selecting and breaking records on Soundcloud. A single re-post from either of these channels can mean the difference between 10,000 plays and 150,000 plays. Support from these channels is highly sought after. In fact, some curators offer paid “PR” services that are essential to building an artist’s brand. Soundcloud’s potential failure would wipe out the curator ecosystem, which is bad news for artists and labels leveraging these services.
Further, Soundcloud’s potential failure means Spotify only becomes stronger. According to Soundcloud, the platform has 175,000,000 monthly listeners compared to Spotify’s 75,000,000. If Soundcloud fails, it’s likely that a large percentage of their users will migrate over to Spotify, as hip-hop is the most streamed genre on both platforms. In fact, Spotify’s “Rap Caviar” playlist tops the platform with a whopping 7.2M followers. Compared to Soundcloud, Spotify is still a black box for many artists on the rise. Most labels and artists are unfamiliar with how the data driven platform works, how to be included in popular corporate controlled playlists, and who they should pitch their records to. And it’ll only get more difficult for smaller artists, as there are very few decision makers that control these highly coveted playlists at Spotify. Being included in playlist is like finding a needle in a haystack. Impossible? No. Improbable? Yes.
Finally, Souncloud’s failure may spell the end of popular radio shows that live on Soundcloud like Oliver Heldens’ “Heldeep Radio”, Don Diablo’s “Hexagon Radio”, and The Magician’s fantastic “Magic Tape” series. Even though many of these artists don’t put together these shows on their own, they serve as resources for fans, listeners, and DJ’s to discover new records. They’re immensely influential and being included in these popular radio shows can make or break a remix or original mix. If Soundcloud fails, it’s likely that these shows will move over to Youtube or Mixcloud (some already have) but they won’t have the same impact. The concentrated userbase simply isn’t there.
Soundcloud’s potential failure doesn’t just affect Soundcloud or its investors. It affects everyone who’s on the platform. That’s why you should actively root for Soundcloud’s success, not its failure. Despite their strategic mistakes, they’ve built an incredible platform that truly champions the little guy. Many artists and labels have Soundcloud to thank for touring the world and making their dreams a reality.
If that’s not reason enough to root for Soundcloud, I don’t know what is.