Anyone who has followed audio hosting and streaming platform SoundCloud over the past year or so knows that they have had major financial issues. There have been layoffs and office closures, amid rumors that they might not survive 2017. The company offers free or nearly-free hosting of audio files for musicians and, to a lesser extent podcasts. The popular differentiator for the company is their player, which many people seem to like. As it turns out, though, offering a very expensive and popular service like media hosting for little to no money is not a sustainable business plan.
Someone I worked with several years ago used to say, "You can sell dollar bills for 90 cents and you will have a lot of customers, but eventually the dollar bills run out." That expression was used at the time to describe the business model, or lack thereof, of MetroPCS. For them, when the dollars bills ran out, the company sold itself to T-Mobile. Unfortunately for SoundCloud, there has not been any interest in helping them out.
This week, co-founder Alex Ljun announced internal that 40% of the staff were being laid off, and newly hired employees' contract offers were being revoked without notice, despite clauses requiring 4 weeks notice. According to information from inside the company, during a conference call with the remaining employees, the co-founders announced that, even with the layoffs, there was only enough money to survive another 80 days.
This news created turmoil within the company, including employees jumping from the sinking ship. One customer, however, took action. Chance the Rapper, who shouted out SoundCloud in his Grammy acceptance speech in February, tweeted that he was working on it. Unfortunately, there is no information on what exactly this means, but it is unlikely that he would be investing in the company, or buying it outright. After confirming a conversation with SoundCloud, he tweeted SoundCloud is here to stay, with the company posting a similar message on their blog.
The problem here is that, even if they had a MASSIVE influx of cash, there is no way that their "business model" will be able to keep the lights on. The company is going to have to completely change the way they do business, starting with removing their free hosting, and increasing their existing plans significantly. Once that happens, smaller podcasters, who have tried to use the service to keep costs low, are going to switch to companies like Blubrry, or close entirely, rather than stay with SoundCloud - something that has already started. Musicians are going to leave, and the relevance of SoundCloud is going to drop, meaning that new musicians will likely switch to another platform, like Groove or Spotify.
At this point, there is no real way for SoundCloud to save themselves. The company leadership dug a hole that is too deep from which to escape. If you're using the service now, you should definitely look for alternatives before it is too late.
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