Soundcloud Running In The Red
SoundCloud is one of the only companies to offer its users free and uninterrupted music at any time. There are no limits on listening time, quality, ads can only be seen on its website, and users can browse to and listen to any song on demand. Users can also upload music that is instantly viewable by all other members, making SoundCloud the equivalent of a giant shared Dropbox. While likely the culprit to its popularity, this is also costing SoundCloud quite a lot of money. Boasting 250 million users and valued at $700 million, the company made $14.1 million in 2013 but lost $29.2 million. This disparity in numbers can be explained by SoundCloud’s rapid growth and its efforts to become THE market-leading music platform. In order to do so, it has continually invested heavily in technology and marketing, resulting in higher overhead than its revenue can support. So rather than panicking, rejoice at the fact that the company is so confident its service will be profitable, it is using more money than it makes to build up the music infrastructure of the future.
The streaming service is in no financial danger thanks to heavy investment that will be able to sustain losses for at least several more years. The company states that it should never get to that point, however, as it has plans to buff up its subscription-based services, selling ads to brands, and entering negotiations with the world’s largest record labels to obtain licensing agreements.
By: Steve Stoychev