On the verge of closure: what's happening to the SoundCloud music service? What's happening with SoundCloud.
The blocking of the social network VKontakte in May of this year forced Ukrainians to pay attention to Western audio streaming services. It is no secret that many users used the Russian social network specifically to listen to music. But even here, domestic music lovers were out of luck - one of the popular music services, SoundCloud, just this year faced financial difficulties. In July, the company carried out a massive downsizing, laying off 40% of its employees (173 people) and closing offices in San Francisco and London. Foreign media tried to clarify the situation that developed in SoundCloud this summer.
Where it all began
SoundClound was created as a niche, specialized product, like many others, including Facebook. Swedish audio engineer Alexander Ljung, together with a fellow student at the Royal Institute of Technology in Stockholm, created a tool for exchanging excerpts of compositions between musicians, writes BuzzFeed. The developers quickly realized that their product could become popular, and purchased the SoundCloud.com domain for $400.
The official release of the service took place in October 2008. By this time, SoundCloud already had 20 thousand users. Everything was going well. In 2009, the founders attracted $3 million in investment from the Doughty Hanson Technology Ventures fund. By May 2010, more than a million users had registered on the service, and in 2013 their number reached 40 million. There were no problems with popularity, they were with monetization of the service. SoundCloud initially chose the wrong model - instead of selling professional accounts that allow you to upload more songs, the company began selling advertising. Because of this, in 2013 the company suffered losses of $29.2 million.
Then the copyright holders of the songs drew attention to the service. More than half of the unlicensed content was pulled, two former company employees told BuzzFeed, and labels also demanded that some remixed songs be removed.
In 2013, the process of purchasing the service by the labels Universal Music Group, Sony Music and Warner Music Group began, which lasted two years due to SoundCloud’s miscalculations. During it, Twitter decided to buy the company, but in the end it was scared off by the high price - about $2 billion, problems with copyright holders and an unclear number of users (many used the service without registration). Internal turmoil also added to the problems. For example, the development director Jeff Toig hired by Leung behaved inappropriately with employees, played favorites and expressed dissatisfaction if his favorite font was not used in presentations.
According to the stories of employees, the founders at this time also did not bother themselves with extra work. Ljung spent time in Ibiza and the Bahamas and posted photos from there on Instagram, which irritated many.
The only bright spot for SoundCloud is that in early 2016, the company managed to escape bankruptcy by raising $35 million in borrowed funds. A little later, contracts were signed with Universal Music Group and Sony. SoundCloud even managed to launch a new product in March 2016 - the paid service SoundCloud Go, the month of use of which cost $4.99.
Wrong way
The success apparently turned the heads of the founders, and they decided that SoundCloud could no longer remain free. The solution was a mystery to both employees and musicians. Why do you need a paid subscription to SoundCloud if you already have paid services like Spotify? SoundCloud changed the vector of development - the company's programmers began developing tools for tracking licensing rights, the platform abandoned the practice of communities where users could discuss the work of musicians. As one of the company's investors commented:
“Nobody goes to SoundCloud to listen to the collection The Beatles. SoundCloud did exactly what its users didn't want."
According to Kiev musician Yaroslav Martsinkovsky, SoundCloud had a convenient interface and a powerful community, but over time this became the norm for such resources:
“SoundCloud is one of the most popular services among those who write or play electronic music. At one time, it was a breakthrough service that allowed us to move from uploading mixes to terrible file hosting services to a service that would be convenient to use. To some extent, it even replaced the then popular but outdated MySpace. Convenience was the main ace up SoundCloud's sleeve. You could provide a link to your track or mix, allow or disable its downloading, or attach it to your blog. Besides everything, SoundCloud had a powerful community. No one famous artist could gain a lot of plays in a day only due to the people who monitored the tape and passed on his track further. But ten years have passed, and all the incredible features of SoundCloud have become the norm for any other similar service. All less people are willing to pay for premium profiles that provide dubious opportunities for young musicians. Website and mobile app also outdated, people use them more out of habit than out of delight.”
This policy led to the fact that SoundCloud ceased to be a place where they listen to the underground. As Jake Udell, founder of TH3RD BRAIN, which represents Gallant and Grace Vanderwall, puts it:
“I once tried, first of all, to put my music on SoundCloud and fought with the labels. Now this is out of the question."
According to Martsinkovsky, SoundCloud took the wrong path in another issue:
“SoundCloud made a terrible mistake by not developing the social component of the platform. Profiles have turned into separate islands, more reminiscent of an artist’s personal website with the ability to listen to music, rather than a social network that allows you to receive powerful feedback from other members. If they had chosen a different distribution model, followed the example of Behance (a service for designers and illustrators, where every user’s like is displayed in the feed of his friends and thus popular works quickly spread across the feed of all participants), everything could have been different.”
On this moment two unnamed companies are in talks to acquire shares of SoundCloud. However, it is unknown whether a successful outcome of these negotiations will save the company. Despite the fact that SoundCloud's revenue has doubled over the past year, they are silent about the number of subscribers, which leads to bad conclusions. The fate of the company is still unknown. SoundCloud is now looking to close a $100 million investment round and may have a new CEO on board, according to sources.
Why is SoundCloud shutting down bad?
Since its inception in 2008, SoundCloud has been a shared space for people from all walks of life. musical subcultures, writes The New York Times. For lesser-known artists, it was a place where they could reach audiences and labels without appearing on music TV channels. The list of musicians who have become famous thanks to SoundCloud is extensive. Mainly famous artists abroad are R.&B singers. Kehlani, electronic artist Ta-Ha, pop musician Dylan Brady, rapper Lil Yachty and many others.
SoundCloud allowed musicians to avoid many of the procedures required when collaborating with labels. This has led to the fact that artists who are an integral part of the world musical culture, are presented only on the Internet. Moreover, the Times recently wrote about the growing popularity of SoundCloud rap, a subgenre of rap that owes its appearance to SoundCloud.
Thus, the disappearance of SoundCloud is more than just another music service shutting down. This event could wipe out an entire decade of online music culture, says Jace Clayton, a musician and author of Uproot: A Journey through 21st Century Music and Digital Culture. Clayton recalls MySpace's attempt to buy music platform imeem in 2009. The takeover process of 16 million imeem users ended with all the tracks they uploaded being lost, including great amount compositions of amateur “black” music from Chicago.
However, Ukrainian musician Martsinkovsky believes that SoundCloud is no longer so important for the music community:
“If SoundCloud is closed tomorrow, it will quickly appear good alternative or everyone will switch to services like Bandcamp, which is already popular in the indie scene. IN ideal world It would be great if one of the streaming leaders, such as Spotify, bought it, integrating the ability to distribute your music and mixes by simply uploading them to the server.”
What can be said for sure is that Internet culture turned out to be quite fragile thing, tied to the platforms that make it exist. This concerns not so much communities that can migrate from platform to platform, but human works that can disappear in an instant.
Lev Shevchenko
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The German company SoundCloud has been around for about nine years. All this time, the project team has been actively expanding the functionality of its service and attracting new users. Actually, SoundCloud representatives succeeded in almost everything they planned. The service began to be used not only ordinary people, but also major organizations like NASA. But unfortunately, despite its popularity, SoundCloud failed to achieve financial success. Now the service is close to closing due to a chronic shortage of hard cash.
In order to avoid the threat of shutdown, the company's management decided to cut 40% of its staff and close its offices in London and San Francisco. But this may not help either, since SoundCloud is running out of money. This problem has been discussed repeatedly by a variety of media outlets, including The Financial Times and TechCrunch. And although representatives of the service claim that everything is not as scary as it seems from the outside, everything does not look too good. But SoundCloud is not just any service; the company’s servers store 135 million audio recordings, including the most valuable materials.
SoundCloud has a user base of tens of millions of people. The resource is visited monthly by 175 million people. Having heard about the problems of the service, some users decided to form a “rescue team” that would save files. All records from servers SoundCloud volunteers called the “digital heritage” of humanity. Of course, not all files correspond to this beautiful term, but it would be ridiculous to lose such a huge database.
Unfortunately, all 135 million sound recordings volunteers are unable to save. And not because they are lazy or they consider some audio recordings less valuable. But because storing such a volume of data will be very expensive. Dozens, if not hundreds of servers are needed, and their operation requires money, and a lot of it. Volunteers don’t have this money, so they are going to save only files that were on the service earlier than others (and which, most likely, are not available anywhere else), as well as files that are most popular.
The initiators of the project to save the service’s database of sound recordings claim that more than 1 petabyte of data is stored on SoundCloud servers. At the same time, according to AWS, the volume of all recordings related to SoundCloud is much higher.
Be that as it may, if for starting point to accept 1 petabyte of data, then storing it will require from $1.5 to $2 million. Well, if the volume of data reaches 2.5 petabytes, then maintaining all this data will cost the company $3.75 million. In any case, money will have to be spent, but nevertheless, the final amount will be much less if we take the “rescuers” plan as a basis.
The project team is currently studying the service’s database of sound recordings. Representatives of the project say that in most cases they have to deal with gigabytes of data (volunteers back up data from other sites), but in this case they came across a real “whale”, which will not be easy to cope with.
In order to find money to store the files that will be decided to be preserved, the project team launched a crowdfunding campaign. The money collected will be used not only to preserve the recordings, but also to ensure that anyone can listen to them. You can now listen to any file on the service, and volunteer archivists plan to achieve the same.
The management of the service has already announced that the company will not close, but is actively planning: “Last week we had to accept several difficult decisions, but we did it to keep SoundCloud as an independent, strong company." Its representatives have repeatedly talked about the fact that the service will work both now and in the near future on various resources. The only thing they forgot to mention is how exactly the company plans to survive.
In principle, to continue work, management may even go so far as to sell the service. But its price has dropped significantly in a few recent years. For example, in 2014, the value of SoundCloud was estimated at $700 million. Now the order of the numbers is completely different. Previously, Twitter, Spotify and several other companies expressed a desire to buy out SoundCloud, but none of these possible deals were closed. In the latter case, the Spotify service refused the purchase because its management considered it not a very good idea to spend a lot of money before going public.
Well, all we can do is wait and hope that the optimism of SoundCloud management is justified, and the service will actually continue to operate.
A major music platform is laying off employees en masse and closing offices. Volunteers and rapper Chance are trying to help her.
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SoundCloud co-founder Alexander Jung. Photo by Reuters
In early July, SoundCloud laid off 40% of its workforce and closed its offices in San Francisco and London. Heading for independence, the authors did not sell to large players in the market and stayed afloat thanks to investments. Unlike other similar services like Spotify, SoundCloud has built a large community of aspiring musicians who create their own content and post it freely.
About 170 million people use the service, but despite repeated attempts, the authors have not been able to properly monetize it. Now the company is nearing closure, and it could be a tragedy for the music industry.
Why they love SoundCloud
The authors of the service, sound engineer Alexander Jung and musician Eric Wahlfors, conceived the project in 2006. They paid attention to interesting detail: photographers share and discuss their work in a photo service, authors of music videos and short films use it, but musicians do not have their own platform.
Of course, many artists used . However, it was not niche, did not focus exclusively on music community, aiming to grow its audience. In addition, by 2006, when Facebook was rapidly growing, MySpace was finding it increasingly difficult to resist change.
The difference between the service and large players like Spotify or Apple Music is that they are convenient apps for listening to music, but SoundCloud stores thousands of gigabytes of free user recordings. If the service closes, their fate will be in question.
What's his problem
Although the service has gained a huge audience that actively downloads songs and discusses them, it has never made any money. In 2014, its revenue was $19.4 million with a net loss of $44 million. In 2015, the loss was $51 million and revenue was $24 million.
In 2016, the authors reported revenue of $28 million, but for the first time did not disclose losses. Even if this is not an attempt to hide a critical financial situation, the situation is obvious - the SoundCloud team has not come up with a profitable way to monetize.
For nine years the company survived due to large investments. It was supported by various funds; in July 2016, Twitter invested $70 million in the service, receiving a share of SoundCloud shares. At the end of 2016 and the beginning of 2017, the purchase of SoundCloud by the Spotify service was discussed, and there were rumors of interest in the Apple service. However, none of the transactions were completed.
SoundCloud staff. Photo by Thomas Bonte, Flickr
Attempts by SoundCloud creators to find new sources of income have also largely failed. In 2016, the service introduced an updated (the service had a subscription before) monthly subscription costing $10. For it, the user gets the opportunity to block ads and listen to music offline, including 30 million tracks with limited access. In addition, subscribers can upload tracks longer than 3 hours.
Management argued that the subscription would help SoundCloud compete with others music apps, however, the difference between an independent platform and the largest services is too significant. Only 250 thousand people have signed up for a paid SoundCloud subscription. Spotify, by comparison, has 50 million subscribers (a subscription costs $10), and Apple has 27 million.
The problem is that the paid SoundCloud subscription does not offer any unique features, including for beginner musicians who are satisfied with the free version. In addition, the subscription is only available to residents of the US, UK and Germany. The paid streaming service Soundcloud Go can also be considered unsuccessful in most European countries.
Over the past five years, SoundCloud's audience has hovered around 175 million people. Competitors' apps attract millions of new users every year.
What will happen next
Back in January 2017, SoundCloud creators warned that they might soon run out of money, but the situation only became critical by the summer. The strangest thing about the situation with the dismissal of 173 employees is that a week before the company, the authors of the service, explained that the company expects to maintain independence and find new investors. Amid the layoffs, a fan of the site, rapper Chance The Rapper, promised to help the service and soon released a song exclusively available on SoundCloud.
The digital library Archive.org has taken up the task of rescuing music that could disappear if SoundCloud does cease to exist. Archiving all the service data will require at least one and a half million dollars, so for now the authors are saving the most popular tracks. Almost a dozen volunteers are working on the initiative. They are calling on the Internet community to help the project with money.
Veronica Elkina
SoundCloud was once the favorite platform of musicians and listeners, and its creators dreamed of revolutionizing the music industry. But multiple management errors and fierce competition did not allow this dream to come true. BuzzFeed learned from former SoundCloud employees how this music platform developed and why it had such problems.
Where it all began
SoundCloud was originally a project of Swedish sound engineer Alexander Ljung and his friend Erik Wahlfors, with whom he studied at the Royal Institute of Technology in Stockholm. Aspiring musicians made an instrument with which they could exchange pieces of music. Then they realized that they had created a unique product. They bought the domain SoundCloud.com for $400, then moved to Berlin and met the local music scene.
Alexander Leung. Photo: Anna Webber/Getty Images
In October 2008, the official release of SoundCloud took place. At the time, the platform had 20 thousand users and two inexperienced but active founders who tried their best to keep the site running smoothly. On next year the project attracted $3 million in investment from Doughty Hanson Technology Ventures. In May 2010, the number of registered users on the platform exceeded 1 million. Musicians were attracted by the coolness and simplicity of SoundCloud. Their fans flocked to the platform behind them - and every time they shared songs of their favorite artists on social networks or left a comment on the composition, they unwittingly spread the word about SoundCloud.
Problems with monetization
SoundCloud has never had problems attracting users - by July 2013, 40 million people were registered on the site. But there was a problem in monetizing this traffic.
The company made $14.1 million in revenue in 2013, much of it from the sale of professional accounts that allowed users to upload more tracks. Despite this, SoundCloud's founders decided to focus their business model on advertising sales. The idea was a failure from the start—the platform suffered losses of $29.2 million that same year.
On early stages Since its inception, the company has turned a blind eye to what content users download. Everything changed when copyright holders paid attention to SoundCloud. According to two former employees of the company, more than half of the unlicensed content was removed from the site. Then there was the issue of remixes that used excerpts from songs owned by major labels - some of which also needed to be removed.
SoundCloud office in San Francisco. Photo: SoundCloud
The situation was very difficult, so the company asked its employees not to add music to their profile favorites (for saving) and not to share it in corporate correspondence. Some workers had to use fake accounts to be able to use the platform freely.
In 2013, SoundCloud decided to partner with three major music labels: Universal Music Group, Sony Music and Warner Music Group. But the company seriously miscalculated the time frame and was able to sign agreements only two years after it had brought its service into a more or less digestible form.
While SoundCloud management was negotiating with labels, in the spring of 2014, Twitter announced that it wanted to acquire the platform. Having missed the opportunity to buy Instagram, social network drew attention to SoundCloud, or rather to its audience - musicians and their fans.
On May 19, Alex Leung announced that he was ready to sign the sale documents, but the deal fell through. Twitter was scared off by the high cost of the company (almost $2 billion), legal problems music industry and the difference in the number of monthly and registered SoundCloud users (many used the platform without registering).
Irresponsible management
By that time, Ljung and Wahlfors had been running SoundCloud for seven years, and the company employed more than 220 people. Leung then hired Jeff Toig, former vice president of mobile operator Cricket Wireless and founder of music service Muve, as director of business development.
According to employees, it was a terrible choice - Toig played favorites in the company, was familiar with women, and once even yelled at an employee for not using his favorite font in a presentation.
Jeff Toig. Photo: Jake Naughton/The New York Times
Toig's behavior sometimes went beyond all acceptable limits. Once, during a photo shoot for a major news publication, he was asked to suck in his stomach and stick out his chest. “So I need to get my breasts out like the women on Madison Avenue?” Toig asked.
Ljung and Wahlfors were in Berlin, so Toig was responsible for the American branch of the company. Former SoundCloud employees claim that Leung often had to cancel important business meetings because he thought Toig couldn’t handle them. And the founder of the platform himself behaved strangely in such a difficult time for the company: he went to the presentation Grammy Awards, diving with sharks in the Bahamas and hanging out with DJ Steve Aoki in Ibiza. He posted all this on Instagram, which caused indignation among employees.
“One day I saw a photo of Leung boarding a private plane, and I thought: it would be better if he gave me a salary,” admitted one of the former employees.
This behavior also puzzled investors. “He filled his head with this nonsense and lost attention to the project,” they said.
Rights issue and Bieber selfie
At the end of April 2014, a user under the name "Sir Bizzle" (one of Justin Bieber's pseudonyms) posted the song We Were Born for This on SoundCloud. It was so reminiscent of Bieber’s work, so listeners decided that this was truly a new composition by the pop singer. The track quickly gained several thousand plays, and it began to be actively discussed on social networks. SoundCloud then suspended Sir Bizzle's account because it thought he was trying to pretend to be the real Bieber.
Using an online form, a user asked if his track could be restored. The company refused to do this, noting that his profile included an email address that could not possibly be Bieber's real address. In response, Sir Bizzle sent a selfie - the photo was of Justin Bieber, where he said hi to the SoundCloud staff.
“OH MY GOD I JUST SAVED BIEBER!” - one of the platform workers wrote to his colleagues after he restored the song.
Screenshot of that same correspondence.
In three label of the day Bieber's Island Def Jam Music Group asked SoundCloud to remove the song, but upon learning that the singer published it himself, he withdrew the request.
Former SoundCloud employees believe that this case clearly showed that the platform had missed all the opportunities to effectively work with music industry. Three years after Bieber's selfie, SoundCloud has lost its status as the go-to audio platform and has failed to build a successful business.
Worse and worse
In November, the company finally entered into a partnership with Warner Music Group - according to the contact, the label was entitled to a certain advertising income and a 3-5% share of the company. As 2014 drew to a close, SoundCloud was still unable to sign licensing agreements with Sony and Universal, a delay that proved costly. In December, the Wall Street Journal reported that the company was looking to raise $150 million in funding at a valuation of $1.2 billion. According to sources close to the matter, the deal was almost a success, but fell through due to the fact that Leung and Toig were unable to sign a contract with two major labels.
Meanwhile, labels began to put more pressure on the platform. In May 2015 Sony tracks from such major artists as Adele, Miguel and Passion Pit. In August, UK licensing company Performing Rights Society For Music filed a lawsuit against SoundCloud for non-payment of royalties. According to platform employees, this was the first major trial that frightened management.
SoundCloud founders rock the festival. Photo: Facebook: RobotHeart
All this affected internal work companies. An engineering team that was looking to hire new talent was told the budget wouldn't allow it. Some SoundCloud products have been delayed and, in some cases, cancelled. The lack of direction from Wahlfors led some engineers to rewrite their colleagues' work in their favorite programming language.
Ljung continued to travel around the world all this time. He attended festivals and even starred in
Music platform Soundcloud is not making money and may close. And enthusiasts intend to save the most significant tracks
Start
SoundCloud was registered back in 2007 in Berlin, and the site was launched in 2008 and quickly began to compete with the then popular MySpace service. The platform is designed to publish music tracks, podcasts and direct interaction between artists and their fans, although it was originally intended to share tracks between musicians.
What's happened
In early July, the music service announced it would cut 40% of its workforce and close offices in San Francisco and London. The service has more than 170 million registered users, but it has never become profitable.
The company has paid services, but they are quite unobtrusive. The free account allows you to download up to three hours of audio, and for an unlimited account you only need to pay 9 euros per month. For many musicians, three hours is enough; not all of them use paid accounts.
The creators of Soundcloud still hope to cut costs and still start making money. At the same time, according to unofficial data, the company has money to survive for another three months...
Why is Soundcloud valuable?
SoundCloud is not just any service; the company’s servers store more than 135 million audio recordings (that’s about one petabyte of music), including valuable materials that are not found anywhere else.
Will activists help?
Internet activists rushed to save the service. First of all, the work of saving the vast music library The service started the Archive.org project, which preserves Internet pages for history.
Now the project team is studying the database of sound recordings of the service, because in this case they came across a real “whale”, which will not be easy to deal with.
In order to find money to store the files that will be decided to be preserved, the project team began collecting donations. The money collected will be used not only to preserve the recordings, but also to ensure that anyone can listen to them. You can now listen to any file on Soundcloud, and volunteer archivists plan to achieve the same.
What about the service manual?
The service’s management has already stated that the company will not close, but plans to continue to work actively: “Last week we had to make several difficult decisions, but we did it in order to leave SoundCloud as an independent, strong company.” The guys talk about this on various resources. Only they don’t talk about exactly how the company plans to survive...
