After a turbulent 2017, can SoundCloud survive the streaming wars?
SoundCloud is set to push forward into 2018, but it has no shortage of obstacles in the way of its success. Lorena Cupcake takes an expert look at what happened to them in 2017 and how they can survive in the future.
“I am the real deal
Not some SoundCloud hoe
Oh, you really doing numbers?
Ask about me, though”
-Princess Nokia, ‘Receipts’
SoundCloud needs to adapt if it’s going to survive in 2018. One of the immediate problems they will face in the next year is a shrinking influence on the Billboard Hot 100. Earlier this year, Billboard announced it will adjust calculations to weigh track play counts on paid subscription services (like Apple Music and Tidal) more heavily than streams on the non-paid tiers of hybrid paid-ad-supported services like Spotify and SoundCloud. It is a sharp dagger at the end of an already painful year.
SoundCloud’s difficulty converting users to a subscription-based model is causing it to fall behind their competitors. And its failure to monetize their user base through paid programs for listeners and creators hasn’t just resulted in the company losing ground on the Billboard charts, it’s even led to discussion of the service shutting down.
In 2014, the company was flush with investment capital, with a valuation of $700 million. However, SoundCloud struggled to to mobilize in a way that would allow them to begin returning on those optimistic investments. By 2015, operations were hemorrhaging $6 million a month after taxes. Fears of copyright takedown chased DJs, a huge percentage of their original user base, to the legal-but-flawed Mixcloud at the same time as Spotify and Apple Music cut deals with start-up Dubset that allowed them to stream previously unlicensed DJ mixes and remixes.
Various thriving companies, including Twitter, Spotify and Google, were rumored to be interested in a potential buyout, but new owners failed to materialize. It was no longer a secret the Berlin-based company was struggling by early 2017; even Chance the Rapper was worried about its future. Despite raising subscription costs, there were rumors the company might sell for a bargain-basement price of $250 million.
Major label deals drained SoundCloud’s coffers and funds raised through the paid subscription model failed to replenish them as hoped. Faced with the prospect of running out of operating costs, it closed offices in London and San Francisco and laid off about 40% of the workforce around July of 2017. Enter Singapore-based investment company Temasek and The Raine Group, a global merchant bank that’s previously invested in Vice Media, DraftKings, Imagine Entertainment, C3 Presents and Matt Stone and Trey Parker’s Important Studios. A cash infusion of $169.5m in Series F funding allowed the service to remain operating but innovation has remained stagnant.
If SoundCloud is going to survive, it’s clear new CEO Kerry Trainor and Chief Operating Officer Michael Weissman (both formerly of Vimeo) need to improve the service for both users and creators, and provide incentive to subscribe beyond the ability to opt-out of annoying ads. In order to do that, they need to build upon their successes to grow, retain and deepen their relationship with users.
To get a usability expert’s view on the issue, I ask Brooke Hawkins, Conversational Interface Designer at Nuance, how SoundCloud can innovate with an eye to the future. “While SoundCloud may never be a competitor for major platforms like Spotify, it could take a design cue from these giants,” she says. “Intelligent use of data helps Spotify continue to be ever relevant to its customers, from curated playlists to weekly discover roundups catered to listener’s taste.
“SoundCloud could focus on developing similar interactions, but make it easier to discover independent and hyper-local artists for listeners right in their community,” she continues. “Imagine being able to see what musicians are making music in your community, in your neighborhood, today – it could help bridge these connections from online to real-life engagement, meaning real money for artists.”
Since 2007, fans have prized SoundCloud for discovery capabilities that allow them to connect with the next breakout star while they’re still recording in their bedroom. There’s the immediacy of being able to hear demos and mixes as soon as the author finishes uploading. There’s the VIP feeling of being sent a private SoundCloud link to music that’s not yet publicly released.
And there’s the the democracy of the platform, a true potential for virality. Once a song hits the SoundCloud Hot 100, it serves as an entré to the mainstream, with the attendant knocks at the door from major labels, press coverage and fandom.
In comparison, the playlists on Spotify are notorious for being the new frontier of radio payola, with placements heavily dictated by the interests of brands and music labels. Apple Music partnerships have their own sheen of inauthenticity, with the name “industry plant” often bandied at artists (like Khalid and 6lack) who suddenly become household names after having their songs heavily promoted through the platform’s “Up Next” program. Both platforms require artists to sign with a distributor to connect fans with their music.
Without those barriers, genres like leftfield house, glitch hop and the drowsy, lo-fi wave of hip-hop known as “SoundCloud rap” have flourished on SoundCloud. The low-stakes nature of uploading a track allows collaborations and cross-promotion to blossom. Radio shows and dance clubs post exclusive mix recordings from DJs, rappers repost songs from their producers and musicians with close partnerships (like Lil Pump and Smokepurpp, or Thouxanbanfauni and Unotheactivist) trade verses and reposts across their accounts.
In fact, the ability of SoundCloud creators to “repost” a song (thereby pushing it into the feed of their thousands of followers) has created a secondary shadow market outside the confines of the site itself. Rappers and promoters often advertise on Twitter and Instagram: Repost sale, only $15, be Paypal ready.
This practice has created a lawless atmosphere not unlike the early Instagram, before the beautiful tan girls with the many bikinis had to start telling us their fit tea selfies #sponsored advertisements. However, how can you blame musicians for trying to leverage their followings into real world profit?
At the moment, SoundCloud only allows select artists to make money from the ads displayed on their page and played between their songs. Their revenue sharing program, SoundCloud Premier, is currently invite-only and waitlisted. Artists whose music is distributed through labels or aggregators working with SoundCloud as Premier Partners can participate, but truly independent artists are left out of the economic equation.
This means, once artists hit a certain level of popularity, they leave SoundCloud for platforms that allow them to sell music or share in ad revenue. SoundCloud has announced intentions to make monetization available to everyone. Providing a time frame for these changes, and making the profit-sharing details of SoundCloud Premier public and transparent, are essential steps for the company if they want to create a healthy, fertile environment for their native artists to prosper, thereby capitalizing on the ensuing revenue.
Despite financial struggles, SoundCloud remains as vital a tool for music discovery and promotion as ever. Tara Mahadevan, a Chicago-based writer, turned to SoundCloud when it came time to publish her podcast with poet Kevin Coval, The Cornerstore.
“For me, SoundCloud is more accessible,” she says. “The reason that SoundCloud exists is so important, because all these independent artists and emerging artists still upload their music to SoundCloud. I use it a lot for my own writing. Our WGN producer told me Spotify’s really hard to get a podcast on it because they’re picky. SoundCloud, I just set that up, it’s really easy.”
Even as SoundCloud loses influence in the Billboard Hot 100, it’s still vitally important to over 76 million users who enjoy the lack of gatekeeping, the community, and its function as a true barometer of what tastemaking youth are listening to. Without SoundCloud, where will we go to find the same rare treasures, the brilliantly obscure and beautifully outré?
Lorena Cupcake writes about every facet of culture. Find their insightful coverage on music, food and more at lorenacupcake.com.