According to the Financial Times, music streaming service SoundCloud could be in trouble unless it raises additional capital in the next 12 months. At the end of 2014, SoundCloud reported a gain of $17.35 million in revenue for the year, yet experienced a loss two-and-a-half times its growth of $44.19 million.
In the 2014 report, KPMG, SoundClouds auditor, said the streaming services need for additional funding indicated a material uncertainty which may cast significant doubt on the companys ability to continue as a going concern.
According to Music Business Worldwide, from 2012 to 2014, the Berlin-based streaming service lost nearly $85 million and only gained $42 million. In addition, SoundClouds administrative expenses increased 67.8 percent to $54 million, with the total expenditure on wages and salaries raising 42.5 percent to $20 million.
The Financial Times wrote that while SoundCloud was valued at $700 million in a funding round in 2014, the company has only recently made strides to generate revenue, and expects to continue to lose money for the next three years.
Shane Morris, formerly with Sony Music, told the Daily Dot that SoundCloud could make money if its hosting strategy changed to benefit artists. (Disclosure: Morris is a one-time contributor to the Dot.)
The service requires artists pay tiered-rate subscriptions to host music, a business model that Morris said doesnt represent how relationships between artists and fans actually function.
If SoundCloud was wise, they would allow artists to set the price of streaming costs, Morris told the Daily Dot. Either theyll make it through to the next year or theyre going to because they dont have a good monetary platform.
Morris said restructuring policies on the use of sampled music on tracks uploaded to the site, and on bot user accounts that produce counterfeit plays, could also help the services future. But fundamentally, he said, artists don’t have enough incentive to pay for the premium service.
SoundCloud allows those accounts to exist for a very long time because if youre an artist you want to see your chart go up, Morris said. If the artists are paying for the platform, they have to believe that theyre becoming more successful The only way is to show them theyre getting more plays and allow those bots to exist.
When reached for comment, a SoundCloud spokesperson sent the Daily Dot a statement, noting the service secured $77 million of incremental capital, basically additional capital to generate additional output, in 2015 from existing investors and from a credit line with Tennenbaum Capital Partners.
SoundCloud users can discover more creators, at all stages of their careers, than anywhere else, and more music and audio: over 18 million creators are using the platform, sharing well over 110 million tracks, and reaching 175 million monthly active listeners, the statement said. Were 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.
Update 9:35pm CT, Feb. 12: SoundCloud statement attributed to SoundCloud spokesperson.
Photoviamrhayata/Flickr(CC BY SA 2.0) | Remix by Jason Reed