Launch of 'SoundCloud' Go, A Potential Boon For Artists, Labels and Investors

Apr 27, 2016

The list of “free” music streaming services is about to lose another member.

After losses nearing $85 million over the last two years — as reported in the company’s latest quarterly earnings report — SoundCloud plans to launch a new paid-subscriber model later this year.

But the company’s anemic financial performance isn't for a lack of growth. The indie darling grew from 15 million users just four years to the more than 200 million it boasts today. Nevertheless, the company lost more than $44 million in 2014 while pulling in less than $20 million in revenue. Despite that, analysts value the Berlin-based streaming service at more than $1.2 billion.

The new paid tier, dubbed SoundCloud Go, will launch initially in the States and would offer subscribers unlimited, ad-free access to more than 125 licensed tracks for $9.99 per month — $12.99 through Apple.

"SoundCloud as people know it today with the free service and artists' presence is all the same, nothing changes," SoundCloud CEO and co-founder Alexander Ljung said in an interview with Tech Crunch. "SoundCloud Go is an extension beyond that. Those who choose it get the expanded catalog."

The upcoming launch follows months of backstage discussions with the major record labels as SoundCloud hammered out licensing fee arrangements for the first time. It's come to terms with everyone as this point, except for Sony Music, which experts suggest is holding out for stake in the company. The company even signed a high-profile deal last year with The National Music Publishers' Association, the trade group representing American music publishers and songwriters.

"This agreement ensures that when SoundCloud succeeds financially, so do the songwriters whose content draws so many users to their site," NMPA CEO David Israelite said in a release touting the arrangement.

The biggest — and most recent — deal SoundCloud inked came just this year, as they came to terms Universal Music Group, the world’s largest music company.

"At UMG, we have long-embraced empowering entrepreneurs and innovative services such as SoundCloud," UMG Chairman and CEO Lucian Grainge said in a press release announcing the deal. "With this partnership, we're ensuring recording artists, songwriters and labels benefit, both creatively and commercially, from the exciting new forms of music community engagement on SoundCloud. We look forward to working with SoundCloud and supporting the company’s evolution into a successful commercial service."

SoundCloud's bid to go legit is good news for artists, labels and link royalty investors. As digital consumption of music continues to hit record levels — rights holders will see their earnings rise as well.

Out of the more than 30 streaming services operation worldwide today, there are only dozen "free" streaming services remaining after SoundCloud’s transition. So while they may be late to the paid subscription party, there’s still plenty of room for growth in the digital music business. According to the latest numbers from IFPI, the recording industry’s global digital revenues jumped nearly 7 percent to $6.85 billion in 2014. And the number of paying subscribers climbed to 41 million in 2014. In fact, according to IFPI's data, the recording industry "now derives 32 percent of its digital revenues from subscription and ad-supported streaming services, up from 27 percent in 2013."

"The market for music is incredibly dynamic. Things look totally different today from a year ago," Ljung told Tech Crunch last month. "We know we are at the beginning of the boom," he said. "Streaming is still a tiny part of overall music listeners."