Streaming music service Spotify is reportedly in talks to acquire SoundCloud, a fellow streaming music service that was rumored to be up for sale in August, reports Digital Trends. The scoop originally comes from The Financial Times, quoting anonymous sources. The deal would expand Spotify’s library to include SoundCloud’s catalog of more than 135 million songs, while saving SoundCloud from an uncertain financial future.
In August, Bloomberg reported that the Berlin-based SoundCloud was looking for a buyer and the presumed price tag was $1 billion, though the company was only valued at $700 million in its most recent funding round. As a privately-held company, SoundCloud is not required to disclosed financials, but in 2014, it reported a loss of $41.8 million, according to Billboard, and it was expecting to incur losses over the next three years as it signs more licensing agreements and invests in its listener and artist-friendly platform.
So why would Spotify consider acquiring SoundCloud? Aside from massively growing its catalog, Spotify needs to grow its paid listener base. In May, the company reported that it had 30 million paid subscribers and 70 million ad-supported listeners, so while it has the largest streaming music audience to date, it is still losing money, says Motley Fool.
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In fact, in 2015, Spotify reported revenue growth of 80 percent, but it had a net loss of 173.1 million Euros, or $190.9 at today’s exchange rate. Its biggest cost? Royalty and licensing payments which have exceeded 80 percent of revenue for the last three years, according to Motley Fool.
Acquiring a company with a built-in listener base might help the company bring in much-needed revenue while also positioning Spotify for a possible IPO. SoundCloud’s catalog includes more original content from independent artists than Spotify or other streaming music services offer. Also, Mathew Ingram of Fortune points out that SoundCloud’s costs are significantly lower than Spotify’s which would help Spotify reduce its cost base, making it more attractive to potential investors.
As this deal is contemplated by both parties, Pandora and Amazon are upping the ante with new streaming music services of their own. In mid-September, Pandora announced the pending launch of Pandora Plus for $4.99 a month. With this new ‘one-of-a-kind’ experience, Pandora Plus subscribers can skip an unlimited number of songs, replay their favorite songs and listen to their favorite stations offline, all ad-free.
Those same features are available in the free version of Pandora Plus too, but there’s a catch. After listeners run out of skips or want to replay a song, they have to watch a video ad first. Pandora anticipates rolling out the new Pandora Plus to iOS and Android users in the ‘coming months.’ Oh, and to add a little confusion to the mix, Pandora is also rebranding itself with a new, 80s style logo and branding strategy, says Wired.
Not to be outdone, on Wednesday, Amazon announced the launch of Amazon Music Unlimited, its new, on-demand, ad-free streaming music service priced at:
- $7.99 per month, or $79.99 a year, for Amazon Prime members
- $9.99 per month for non-Prime members
- $3.99 per month for an Echo-only subscription
The Amazon song catalog includes tens of millions of songs including new releases, thousands of hand-curated playlists and personalized stations. In addition, Amazon Music Unlimited is available for streaming listening as well as offline listening. Coming soon: a family plan for $14.99 a month or $149 a year for up to six family members.
“Amazon Music Unlimited brings real value to the millions of people who are already Prime members, with a choice of subscribing for only $7.99 a month or even $79 per year. Plus, customers are going to love Amazon Music’s all-new app for iOS, Android and desktop,” said Jeff Bezos, Amazon Founder and CEO in a press release. “And if you want a sense of the future of voice-controlled music, go ahead and ask Alexa for a free Music Unlimited trial, and play around on your Echo. If you don’t know the name of a song but know a few lyrics, if you want to hear songs from a specific decade, or even if you’re looking for music to match your mood, just ask.”
This new service is in addition to Amazon Music, a free streaming music service available to Prime members. This song catalog includes more than two million songs and more than 1,000 hand-curated playlists and personalized stations. Amazon Music Unlimited, however, gives music lovers even more options and will help Amazon compete head-to-head with Spotify, Pandora, Tidal, Apple Music and other streaming music subscription services.
Competition is certainly heating up in the streaming music world, yet the business model remains flawed and even the biggest players – Spotify and Pandora – are struggling to figure out how to make it profitable. Heavy competition, while great for consumers, makes the struggle for subscription services even tougher as they figure out how to balance product offerings, income and expenses. 2017 should prove interesting as each of these major subscription brands hones its offerings while trying to right their balance sheets and less worthy players are absorbed, acquired or simply disappear.