Popularity has not been enough for Soundcloud, with the company being forced on a $70m round of debt funding to support its efforts towards financial sustainability. The deal comes after reports that the company was struggling either to find a buyer or to raise $100m in necessary funding.
The latest round of debt funding comes from investors Ares Capital, Kreos Capital and Davidson Technology. As reported by TechCrunch, a spokesperson for Soundcloud said the latest round of funding would allow the company to invest in the technology and personnel resources needed to achieve its predicted goal of 2.5 times year-on-year growth in 2017. The latest round brings to total amount raised by the company to $320m. In 2014, investors put the value of the company at $700m.
Spotify has never turned a profit despite having 50m paid subscribers
Differing from competitors such as Spotify and Apple Music, Soundcloud has a focus on user-generated content. Users upload tracks or podcasts to the service, much like YouTube, with fellow users able to listen to content on both mobile and desktop devices. The company touts its selection of tracks by up-and-coming artists, most of which can’t be found anywhere else, as its strongest asset.
Like Spotify and Apple music, Soundcloud has a number of paid options for ad-free and offline listening. It debuted a $9.99 per month tier last year, but in February it began offering a $4.99 subscription level as well. The lower tier subscription offers offline listening, no ads, and is half the price of its competitors, but restricts access to premium tracks hosted on the service.
Despite the popularity and increasing ubiquity of music streaming services, the business model they operate under is yet to truly prove itself. Spotify has never turned a profit despite having 50m paid subscribers, with the vast majority of its income going to paying record label royalties.