Spotify is said to be in “advanced talks” to buy SoundCloud, a rival music streaming service that’s mostly known for independent musicians. SoundCloud was last valued at $700 million, but it remains uncertain how much the service will be bought for.
Spotify is undoubtedly one of the most successful music streaming services worldwide with 40 million paying subscribers as of this month. However, the Stockholm-based company is facing a lot of competition as giants like Apple and Amazon have also entered the music streaming market. If Spotify is truly planning on buying SoundCloud, this could be part of the company’s strategy to better compete with its biggest rivals, according to the Financial Times.
SoundCloud has always been a place for new artists to get better exposure. It currently boasts of a community made up of 200 million artists with about 125 million tracks. SoundCloud has the largest catalog out of any other music streaming service because it allows users to upload tracks themselves.
The problem with the service is that it has never made huge profit. In 2014, the company lost $44.19 million on revenues of $19.37 million, as pointed out by Business Insider. The Berlin-based company launched its own subscription service called SoundCloud Go earlier this year charging users $9.99 a month. Instead of offering a cheaper service meant for independent music, it tried to compete with the likes of Apple Music and Spotify by charging the same amount for a monthly subscription.
SoundCloud Go is believed to only have a few hundred thousand subscribers. The reason why the subscription service is failed is because the SoundCloud has always been known to offer millions of tracks available to stream for free.
The Financial Times’ sources said that Spotify first entered negotiations to buy SoundCloud last spring, but SoundCloud balked its asking price. Spotify considered to buy the service again sometime after investing in Twitter, but negotiations fell through.
If Spotify does end up buying SoundCloud, it would put itself above its rivals by having a much larger catalog while also providing up and coming musicians a platform to get their music distribution, according to Variety. Although Spotify has 40 million paying users, it also has 100 million free users as of June 2016. By having a large catalog of independent music, the company can finally justify its ad-supported free service and it would no longer be pressured to become a paid-only service like Apple Music.
The Financial Times’ report indicates that negotiations between Spotify and SoundCloud is nearing its end, but neither have commented on the matter. At this point, there’s still a huge possibility that the deal might not even push through.