Based on an initial report from the Financial Times, there’s a reasonable chance that streaming-music giant Spotify could buy SoundCloud. We’ve heard many times before that SoundCloud was on the market, including famous talks with Twitter. It turned out that Twitter was only investing – but it seems like Spotify buying SoundCloud could be a reality.
Why Spotify Buying SoundCloud Makes Sense
SoundCloud was one of the first streaming music sites to really carve out a unique niche for themselves – but unlike the more successful streaming businesses, the business plan has always been in question. Only last year did SoundCloud really start monetizing plays – via advertisements and a membership that allowed listeners to skip them.
So why would Spotify buy Soundcloud? There’s three solid reasons that we can think of:
- Library: Sure, Spotify has a massive library of released music. But adding on SoundCloud’s repository of over 125 million songs would be huge, particularly because a lot of that content will be unreleased and original work that otherwise wouldn’t make it onto Spotify. Especially if they solve licensing for remixes – read on.
- Solving Licensing On SoundCloud Content: We reported earlier this year that Spotify started working with MixBank to legally stream DJ mixes, mashups, unofficial remixes, bootlegs, etc. While this hasn’t really started to appear in content yet, we could very easily see Spotify running the entire SoundCloud library through MixBank’s licensing process and then getting the rights to stream everything (even content that was previously taken down) on their service. This would be huge for DJs and producers who have felt the squish from recent copyright takedowns on SoundCloud.
- Active Users: Spotify has way more users that SoundCloud, but as TechCrunch reported earlier this year, SoundCloud has way more monthly active listeners: “Spotify has only 75 million active users compared to SoundCloud’s more than 175 million monthly listeners.” Adding a whole bunch of active users to Spotify will be a major boon for their monetization (ads or membership) strategy.
A Good Investment?
This is more up for debate, but let’s just say that in terms of valuations, SoundCloud is a tiny drop in the bucket compared to Spotify. This means that putting together the capital to buy SoundCloud at their recent $700 million valuation would be pretty easy. Spotify was valued at $8.5 billion in June of 2015 – so not too extreme of an investment for them.
Would it be worth it? That’s the question at hand – let us know your thoughts in the comments below.