SoundCloud is preparing to forge ahead into 2018, but its path is strewn with formidable hurdles. Lorena Cupcake offers an expert dissection of the company's 2017 tribulations and the measures it must take to endure.
“I’m the genuine article, not some SoundCloud wannabe. Oh, you’re really pulling numbers? Ask around about me, though.” —Princess Nokia, ‘Receipts’
If SoundCloud hopes to survive into 2018, it must evolve. One immediate challenge looming in the coming year is its waning impact on the Billboard Hot 100. Earlier this year, Billboard declared it would revise its methodology, placing greater emphasis on plays from paid subscription services (such as Apple Music and Tidal) compared to streams from the free, ad-supported tiers of hybrid platforms like Spotify and SoundCloud. This move lands like a sharp blow at the end of an already grueling year.
SoundCloud’s struggle to convert listeners into paying subscribers is causing it to lag behind rivals. Its failure to generate revenue from its user base through paid programs for both listeners and creators has not only diminished its presence on the Billboard charts but has also sparked discussions about the service potentially shutting down.
In 2014, the company was flush with investment capital, boasting a valuation of $700 million. Yet SoundCloud couldn't mobilize effectively to start delivering returns on those optimistic investments. By 2015, operations were bleeding $6 million per month after taxes. Fears of copyright takedowns drove DJs—a significant portion of its original user base—to the legally flawed but safer Mixcloud, while Spotify and Apple Music struck deals with startup Dubset to stream previously unlicensed DJ mixes and remixes.
Several thriving companies, including Twitter, Spotify, and Google, were rumored to be eyeing a potential acquisition, but no new owners emerged. By early 2017, it was an open secret that the Berlin-based company was in trouble; even Chance the Rapper expressed concern about its future. Despite raising subscription fees, whispers circulated that the company might sell for a rock-bottom price of $250 million.
Major label deals drained SoundCloud’s finances, and funds from the paid subscription model failed to replenish them as hoped. Facing the prospect of running out of operating cash, it closed offices in London and San Francisco and laid off roughly 40% of its workforce around July 2017. Enter Singapore-based investment firm Temasek and The Raine Group, a global merchant bank that has previously backed Vice Media, DraftKings, Imagine Entertainment, C3 Presents, and Matt Stone and Trey Parker’s Important Studios. A $169.5 million cash injection through Series F funding kept the service alive, but innovation has remained frozen.
If SoundCloud is to survive, new CEO Kerry Trainor and Chief Operating Officer Michael Weissman (both formerly of Vimeo) must clearly enhance the service for both users and creators, offering reasons to subscribe beyond simply skipping annoying ads. To do that, they need to build on their successes, grow their user base, retain existing users, and deepen engagement.
To gain a usability expert’s perspective, I asked Brooke Hawkins, Conversational Interface Designer at Nuance, how SoundCloud can innovate with an eye to the future. “While SoundCloud may never rival major platforms like Spotify, it could borrow a design cue from these giants,” she says. “Intelligent use of data helps Spotify stay relevant to its customers, from curated playlists to weekly discovery roundups tailored to listeners’ tastes.
“SoundCloud could focus on developing similar interactions, but make it easier to discover independent and hyper-local artists within listeners’ own communities,” she continues. “Imagine being able to see what musicians are creating in your neighborhood, today—it could bridge the gap between online and real-life engagement, meaning real money for artists.”
Since 2007, fans have valued SoundCloud for its discovery capabilities, allowing them to connect with the next breakout star while they’re still recording in their bedroom. There’s the immediacy of hearing demos and mixes as soon as the author finishes uploading. There’s the VIP feeling of receiving a private SoundCloud link to music not yet publicly released.
And there’s the platform’s democracy—a genuine potential for virality. Once a song hits the SoundCloud Hot 100, it becomes a gateway to the mainstream, with major labels knocking, press coverage, and fandom following.
In contrast, Spotify’s playlists are notorious for being the new frontier of radio payola, with placements heavily influenced by brand and label interests. Apple Music partnerships carry their own inauthenticity, with the term “industry plant” often applied to artists (like Khalid and 6lack) who suddenly become household names after their songs are 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 thrived on the platform. The low-stakes nature of uploading a track fosters collaborations and cross-promotion. Radio shows and dance clubs post exclusive mix recordings from DJs; rappers repost songs from their producers; 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 feeds of their thousands of followers) has spawned a secondary shadow market outside 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 reminiscent of early Instagram, before the beautiful tan girls with many bikinis had to start labeling their fit tea selfies as #sponsored advertisements. However, how can you blame musicians for trying to leverage their followings into real-world profit?
Currently, SoundCloud only allows select artists to earn money from ads displayed on their pages and played between their songs. Its revenue-sharing program, SoundCloud Premier, is 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 that once artists reach 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 timeline for these changes and making the profit-sharing details of SoundCloud Premier public and transparent are essential steps if the company wants to create a healthy, fertile environment for its native artists to prosper—and thereby capitalize 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 on the Billboard Hot 100, it remains vitally important to over 76 million users who appreciate 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.
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