Spotify eyes SoundCloud purchase as Apple challenge intensifies

29 Sep 2016

Spotify is rumoured to be sizing up the purchase of SoundCloud. Image: Shutterstock

The perennial loss-making Swedish company, Spotify, is in advanced talks to buy SoundCloud.

Spotify, valued at over $8bn, wants to buy the audio platform as it battles with Apple, YouTube and more for streaming superiority.

Despite revenues in excess of €2bn in 2015, Spotify lost €173m. At the time, it seemed profitability was going to be forever out of reach for the music streaming industry.

30m paid subscribers (around 30pc of its total customer base) was just not enough. However, a stunning surge in paid subscribers in the first half of 2016 painted a prettier picture for the company that was under pressure to keep its own show on the road.

Now, bolstered by its newfound strength, acquisitions are the order of the day.

Spotify SoundCloud

According to reports in the US, the Berlin-based SoundCloud is in Spotify’s crosshairs, the latter in “advanced talks” to buy out the former.

The Financial Times does not reveal a price. But, citing people familiar with the deal, it says SoundCloud’s growing threat to Spotify’s empire was one of the reasons behind the move.

SoundCloud was viewed as a threat “as long as it was considering offering a cheaper, mid-tier subscription service”, but the company’s shift into standard price competition with Spotify, Apple Music and more, marked its own death notice.

“They’ve been absolutely dobbed by all the pressure from the labels to go in for a cookie-cutter subscription service which doesn’t fit their user base, content or catalogue. It’s an artefact, ultimately,” said analyst Mark Mulligan, founder of Midia Research.

Although, it’s far from a done deal, with Recode suggesting the talks between SoundCloud and Spotify are “more talk and less action”.

The move for SoundCloud comes at a highly competitive time for the streaming industry, which already looks to be spitting out the already chewed up Tidal.

Tidal has around 4.2m paid subscribers, though mounting losses make its future bleak. Apple Music has about 17m paid subscribers and Pandora recently launched two new streaming products. But the elephant in the room is YouTube.

YouTube Red offers up a potentially industry-consuming option should it fully catch on. YouTube’s video streaming subscriptions are about to skyrocket, too.

Casting its gaze around the room makes sense from Spotify’s perspective and, for SoundCloud, being bought up sounds better than potentially fading away like Tidal.

Gordon Hunt was a journalist with Silicon Republic