Berlin-based music-streaming service SoundCloud is exploring strategic options that could lead to a sale, Bloomberg reported.
SoundCloud has been dogged by financial difficulties lately and has been looking for ways to boost growth and revenue off of its 175 million-strong user base.
A $1 billion exit would be a great result for SoundCloud’s owners and investors. The company has an estimated value of $700 million, based on the $70 million Series E funding round led by Twitter Ventures that closed in June. This valuation is unchanged from its Series D round in January 2014. In fact, SoundCloud had tried to sell itself to Twitter for $1 billion in 2014 too.
There a few reasons why SoundCloud could be looking to sell now:
- Inability to compete head-to-head against rival players. Music streaming is currently dominated by Spotify and Apple Music, with former titan Pandora receding to the sidelines. Aside from these companies, YouTube, despite being primarily a video platform, also commands a respectable share of the audio-streaming market.
- Inability to drive meaningful ad revenues. Despite its best efforts, being an audio-first platform hampers SoundCloud’s ability to tap into more lucrative video ads. At the same time, social ad budgets are being increasingly concentrated into a few select platforms, like Facebook, Instagram, and Snapchat. On a broader level, 85 cents of every dollar spent in online advertising in Q1 2016 was estimated to go either Google or Facebook, according to Morgan Stanley analyst Brian Nowak cited in the New York Times.
- The company may lack a viable business model. This is a problem plagues the digital music industry at large, with businesses, record labels and artists struggling to find a suitable business model that works for all parties involved. The best solution so far has been to charge monthly subscriptions in exchange for unlimited streams, like Apple Music and Tidal do. Yet SoundCloud was late to the premium-subscription game, only launchinga paid tier to its service at the end of March.
- Financial woes persist. In February, financial filings from 2014 revealed SoundCloud’s precarious financial health. Overhead costs had been increasingly much more rapidly than revenue – with administrative expenses growing 67.8% in the year – leaving the company in a state of material uncertainty. These documents concluded that SoundCloud could only continue to operate if it was able to secure more funding
so all these rubbish reasons/excuses for changing things,this is why,time to jump ship!