Audio self-publishing service SoundCloud is at the centre of a rumour frenzy after reports surfaced that it has been struggling to raise the $100 million it needs to survive.
According to sources close to ReCode, SoundCloud execs have been on the search for the additional investment since last summer, and are now facing a much more drastic option; ceasing to exist as an independent brand. The same rumours have seen the SoundCloud team in discussion with potential acquirers in a cut-price deal.
Investors value the brand in the region of $700 million – a $70 million cash injection from Twitter last year pegs it at the same amount – however the team will apparently listen to offers which exceed the total amount investment raised to date; a mere $250 million.
Although the economics of the business are murky for the moment, the brand does offer potential for organizations which want to play in the content arena. The team state SoundCloud has 175 million monthly unique users, though this number hasn’t been updated since 2014.
One would assume this number has increased in the last four years, but even if it hasn’t, it’s still pretty respectable. For those trying to muscle into the content game, it could prove to be a useful springboard, at a relatively modest price.
One question remains; who are the potential suitors?
The erosion of profit margins in the telco industry has been a long-running story, with many telcos fearing the race to the bottom and potential commoditization. One means of creating value to customers has been to enter the content game.
AT&T bought Time Warner, Verizon bought Yahoo, BT spent big on rights to the UEFA Champions League and Telstra has backed NRL and AFL in Australia. All of these are examples of telcos trying to use exclusive content to lure in and hold onto customers.
SoundCloud certainly offers an opportunity to create value for the customer, entering into the services market and away from the ARPU driven-product arena, which the telcos currently play in. That said, it almost entirely depends on the content strategy which is in place.
AT&T and Verizon, for example, are seemingly driven by owning the content, whereas BT and Telstra are leasing the rights, but owning the gateway through which they are delivered. SoundCloud is a platform, it does not own the content itself. As a service, it would appear to be more suited to telcos such as BT or Telstra, as opposed to the Americans.
If the telcos are declining, the web players are heading the opposite direction. They are masters of the content game and creative when it comes to monetizing access to the consumer. In particular, there are two organizations who might have an interest in such an organization.
Firstly, there’s Facebook. Is there anyone else who is as effective in creating the walled garden? Is there another organization who is as good at nurturing and monetizing its community? What other brand deserves the title of Content Curator more?
Facebook is an organization which has made millions off content without owning any. In this light, the SoundCloud platform fits in very well here.
Secondly, there’s Google. Similar to the telcos, Google has been making an effort to diversify its business, looking into such areas as connectivity, autonomous vehicles, artificial intelligence and the MVNO market. The success of these ventures has been quite varied, though the venture into content is an area which would mostly be deemed a success.
YouTube was bought by Google back in 2006 for $1.65 billion, a monstrous amount of cash at the time, but small change today. YouTube has been growing consistently over the last few years and is the go-to video channel in the majority of countries around the world. Although not a direct like-for-like business model, SoundCloud could be seen as the YouTube of the audio world. Should Google show some interest here, there certainly would be stranger tie ups.
Amazon is another one which might be worth considering here as it is continuing to expand its role in the content game. However, Kindle already acts as a marketplace and content platform for audio; competition authorities may not allow the combination of two such brands.
Recent smartphone launches have shown one thing above all else; differentiating devices is becoming almost impossible.
Almost every smartphone has a swish camera, similar battery life, same screen size, standard speakers and a host of non-differentiating features. Creating a level of individuality in the devices space has become a very difficult task from a hardware perspective, therefore many manufacturers are looking towards the software space to provide USPs.
SoundCloud could provide a bit of a unique proposition for customers, as a preinstalled, free service to access content on devices. Such ideas have been tried before, and while they weren’t exactly a screaming success, there’s no reason why it shouldn’t be tried again. The audio content market has matured in recent times, and does have a much more loyal audience nowadays.
Should Apple be interested, there might be complications on the competition side of things again, however Samsung is looking to repair a tarnished (and singed) reputation, while Huawei is trying to capitalize on some solid momentum over the last couple of months. You never know, maybe HMD will fancy a go; they certainly seem happy to take a risk.
A rogue one
The three areas mentioned above certainly have potential, but what about a rogue one from left-field like Tencent?
Tencent has a number of Chinese brands which are slowing beginning to spread their influence into the global space, WeChat for instance, but the company has also been acquiring international businesses. A majority stake in mobile games developer Supercell was completed in June for $8.6 billion, pushing Tencent into the international arena and offering a foundation for the team to push other brands into new markets. Another international platform such as SoundCloud might be a useful addition to a business with global ambitions.
What do you think? Who might be in the market for SoundCloud?