We’ve all seen the news, we’ve all had our collective panic, but don’t worry – Soundcloud isn’t going anywhere. I know that Fact Magazine report was concerning and I know that they are indeed losing money. But here’s the thing – music industry folks are – as usual – being needlessly alarmist. There is no apocalypse for streaming, at least none that we haven’t already known about for a good long while. Streaming has always been a bit of a weird business model and guess what – even the giant itself – Spotify – has lost $200 million since its inception. The point being – these are young companies with massive user bases, and in most cases, young companies with massive userbases LOSE MONEY. There is limitless marketing potential here – it’s just a matter of capitalizing on it.
Now it might be weird to call Soundcloud a young company since it has become such an industry mainstay. After all they have been around since 2007 – firmly the middle of the Web 2.0 era. They have managed to attract some massive financial interests though because they seem to be hinting at a brighter future for the music industry. Of course – to make this work any streaming service is going to need a lot of potential users to make any money. For someone like Spotify they pay out 70% of their incoming revenue to artists meaning that they don’t have a lot of money to keep the company running. Of course as THIS Cracked article points out – a lot of the main investors in these services are labels anyway – so their biggest expense is essentially paying their own salaries.
At the end of the day – streaming really isn’t a sustainable model while people are transitioning, and we honestly can’t say whether or not it will be sustainable in the long term. What we can say though is that as more money comes in then streaming services will be able to eventually post a profit. Now yes – these services do lose a lot of money, some of the bigger companies have especially lavish offices, a far cry from their vaguely anarchistic punk rock roots. I’m not saying that Soundcloud and Spotify are doing everything right – but I am saying that they are early movers in a movement that we still don’t know will work. I mean – personally I think it might be the only way forward to make money off of recorded music (If it’s still possible) – but who knows.
Part of the issue is, as I have written about in the past, it seems more and more like in the twenty first century that nobody will really be making money off of recorded music. Which is unfortunate to say the least, but necessity is the mother of invention. There are other ways of making money, things that we’ve talked about and which it is not the place of this particular article to get in to. What I will say though is that we need to embrace options for revenue in the music industry. Licensing and unique merchandise options are the future career builders for musicians – not streaming.
So yes – in the long run Spotify and Soundcloud might actually end up becoming profitable companies but I doubt they will be the future of the business. The way ASCAP and the FCC run makes internet radio oriented services basically unfeasible beyond a certain size. That’s one of those brutal realities I doubt we will ever to fully circumvent. Streaming is a necessity in a world where music has no physical form but it is not a path to freedom – rather one that will only guide us to a slightly slower, annihilation. So if you have all your eggs in that particular basket… I’m sorry.
We’re not in a world where recorded music can really do have any merit beyond essentially advertising anymore. The streaming structure is kind of doomed – as brutal as it may sound. That doesn’t mean Soundcloud is going under their. Gain – when you have hundreds of millions of users you can adapt. There are a ton of exciting opportunities for these streaming services to expand – the question is just whether or not they will be willing to go beyond the music. Maybe these services will end up profiting – but more likely they will end up propped up by labels kind of like they are now.
There is a way forward, and new companies lose money all the the time – especially ones that require massive amounts of employees as Spotify and Soundcloud often do. That doesn’t mean these services are disappearing anytime soon. They will still attract investors as long as they have a massive userbase. The main streaming services are all immense, they have tons of followers and thousands of users – companies like that don’t just go underwater. Look at MySpace for example and all the rebrandings that site has had. Unlike MySpace though, streaming has yet to be replaced by something better and until then these sites are going to reign.