The U.S. music industry is swelling for the second straight year – the first time since the CD sales peaked in 1998 and 1999 – because of paid streaming services like Spotify and Apple Music.
Although this is good news for the industry, it does not necessarily mean good news for streaming services.
In a director’s report, SoundCloud co-founder Alexander Ljung said SoundCloud may run out of cash earlier than Dec. 31, 2017, giving rise to a material uncertainty about the group’s ability to continue.
SoundCloud, the beloved Berlin startup, was originally made for music artists to upload their content for free.
The streaming site has about 175 million users with 135 million tracks of easily shareable original content, remixes and podcasts. Users can network, post comments on tracks, save and repost songs they enjoy.
If the company does not come up with a plan fast, it will have to find a way to raise additional funds throughout the year.
Philosophy and film and media arts senior, Brandon Harris, also known as Brandon Pari$, used SoundCloud daily to promote his music and credits much of his notoriety to the site before he signed paperwork to be an independent artist.
University student and computer science major, Alex Paul Mensen-Johnson also known as IDKY, started producing music after taking MUS 2745, an introduction to computer music course, and says his first song was dropped on SoundCloud.
He says he prefers SoundCloud over other services because YouTube requires a video attached to songs, while Spotify and iTunes require official paperwork to publish music.
“I love that I can give users free content and in return they can listen to me because it’s all about the music in the end,” Menson-Johnson said.
Ljung posted a report that said the company accrued a net loss of $52 million in 2015, but a spokesperson said the loss was due to an investment in technology, people and marketing and securing complex licensing agreements with key music industry partners.
Spotify has even absorbed huge losses due to paying 70 percent of its revenue to record labels and publishers. Pandora is trying out a pricier subscription service because of its consistent losses, while iHeartRadio is trying to avoid bankruptcy.
According to Bloomberg, SoundCloud’s user growth has not increased substantially and ad sales haven’t taken off, and its recently implemented $9.99-per-month subscription service, SoundCloud Go, hasn’t made enough of a profit.
After Spotify backed out of buying SoundCloud last year over a price disagreement, rumors are circulating that Google may buy SoundCloud for a reported $500 million.
This may come as a concern for artists who are currently on SoundCloud or for artists who cannot afford to put their music on other services, as well as for music lovers who scour the service for up-and-coming artists.