Ouch: SoundCloud losses show a broken business model in desperate need of a fix


SoundCloud’s financial position is even more perilous than its biggest detractors may have thought.

New financial filings show that the Berlin-based streaming service lost €39.14m ($44.19m) in 2014 on revenues of just €17.35m ($19.37m).

The result means that in the three years from 2012-2014, SoundCloud lost almost €75m – but only brought in €37m in income.

It doesn’t take a genius to work out that any business whose losses far exceed its revenues won’t be long for this earth unless it makes some dramatic changes.

SoundCloud 2015

That’s exactly what SoundCloud is now trying to do, of course, with a long-mooted subscription service due for launch this year and an ad-funded tier, On SoundCloud, that first arrived in 2014.

The scariest stat from SoundCloud’s 2014 financials is its administrative expenses (staff and other business basics), which grew 67.8% to €47.74m in the year.

Despite such severe losses, SoundCloud’s headcount grew by 21% to 236 people in 2014.

Its total expenditure on wages & salaries jumped 42.5% to €17.9m.

As a result, its average annual wage per employee dropped slightly from €83,830 to €79,980 – still a very high figure compared to certain prominent rightsholders in the music business.

Screenshot 2016-02-09 at 22.57.43

“Our overhead base has increased faster than our revenues,” acknowledges SoundCloud’s strategic report section of its 2014 financials.

SoundCloud has taken big investment on board in the past two years, and you can see why it was much needed.

In 2014 – the year these figures relate to – it accepted $60m in Series D funding from the likes of IVP and The Chernin Group.

It then raised a further $77m in funding in 2015.

“After making enquiries, the Directors have concluded that they have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the forseeable future,” says SoundCloud Ltd’s 2014 accounts, which were signed off last month.

“However, the Directors have concluded that there are material uncertainties facing the business.”

It adds: “The Group’s business plan shows that further capital investment will be required in the next 12 months to fund the business until it is forecast to become cash generative at an operating level.”

SoundCloud recently struck a landmark licensing deal with Universal Music Group, in which a single figure equity stake is believed to have been granted to UMG – who signed the deal on the proviso that SoundCloud will launch its subscription tier sooner rather than later.

UMG joins Warner Music Group and music publishers (via the NMP and PRS For Music) in licensing SoundCloud as it prepares for a brand new business model.

Looking at these numbers – and considering the fact that SoundCloud tried, and failed, to sell itself to Twitter for $1bn in 2014 – some may suggest that business model looks less like a carefully-planned new strategy, and more like a last roll of the dice.

Screenshot 2016-02-09 at 22.58.26Music Business Worldwide

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  • Vince Millett

    As someone who posts music to Soundcloud, I’m increasingly finding it hard to use with more and more irrelevant content being pushed my way. Universal will clearly insist on their acts being prioritised and yet another modern social media platform will go the way of MySpace and die a well deserved death as the old industry kills it to prevent any alternative to their old monopolies. Let it die.

    • dspl

      “Finding it hard to use with more and more irrelevant content being pushed my way.”
      Hard to use because there is NO option to turn off Continuous Play. Listeners rush to turn off the “suggested” next song. But Continuous Play is the lie that has gotten them more funding, so they cannot let you turn it off.

      • On the other hand, I’ve found so much new music via the suggested next song, that I’d never have heard anywhere else. That’s the main thing I love about it, vs Youtube. Much better algorithms.

        • Mihai Sorohan

          Since their “new feature” Continuous Play I haven’t found a track related to what I listened. When I listen to some jazz track, the next one is pop or dance, when I listen to some orchestral soundtrack, the “suggested” track is some country… yeah… good algorithms there…

        • Junior

          I agree, although they may not be the specifically same genre, I’ve found a lot of gems from suggested 🙂

  • adders

    I need to download my music before it goes and have lost our subscriptions?

  • Hobby Hunter

    so i got bounced for a mix of a track been there 3 years 1 infingment like the platform but they need better playlist and posting tools and then maybe a proper dj /radio /artist stream showcase feature and last played option hey the had a few dollars / pounds from me .. liking apple and spot just need to get show up to ..more platforms???

  • why not use a youtube model introduce ads and we can all start making some $

    • Jenna Cuba


  • siliconsleep

    Am I the only one that really likes Soundcloud because it has pretty high-quality content and, compared to YouTube, just seems like a better platform for artists to gather to post their content?

    Honest question though – what’s an alternative to Souncloud that people really like? HOw could Soundcloud, without pissing off a large base of its core users (artists/weird music people like me), keep it’s shit afloat? I would like to continue to support Soundcloud but I’ll go with what I think is best.