Relax – Soundcloud Is Still Kickin’

Bedroom DJ’s, aspiring mixtape rappers and modern-vintage spoken word poets looking for an outlet to release content – fear not. Despite pedantic reporting from a few online outlets, Soundcloud is not going bankrupt anytime soon and we should all be learning to read between the lines when reading the news.

In the face of a recently released financial report which showed the streaming service spending more than they were receiving in revenue, Soundcloud is doing just fine. The $44M they spent in 2014 is aligned to a tech company in the scaling stage and despite bringing in just $17M, poses no threat to the streaming giant in the near future. The mention from KPMG, a normally upstanding and reliable consulting and audit agency, that Soundcloud’s material uncertainty posed risks for long-term viability, we need to take a step back and look at the picture for what it is.

Firstly, in the tech world, material uncertainty is almost a given until you have become the Q-Tip of your vertical. Uber would have notified investors of their material uncertainty as they scaled into the largest facilitator of logistics in the world and investors would still be clawing at their door to invest because until consumer behaviour can adapt, in aggregate, to an evolution in how we operate, there is no guarantee of a return on investment. Soundcloud isn’t selling ores of gold and the same way an album from Kanye West could sell 100K instead of going diamond, the streaming service would be disrupted by some next level s**t tomorrow. That is the playground they currently sit at the top of.

Secondly, with operating costs increasing 68% during that same 2014 period, we’re seeing a company go from the bullpen, open-floor concept of a small startup into a full out business with offices all over the world and the hierarchy of intelligent brains to grow it. The numbers may seem scary to a blue chip firm or a brand that has hit maturity but for any company scaling as quickly as these tech guys do, these numbers aren’t worth ironing any white flags.

For evidence of the streaming giant and their investors betting on their own horse, peep some select statements from their press release.

In 2015, we secured $77m of incremental capital, some of which came from our existing investors, demonstrating their belief in the future of the company, and the rest of which is a flexible credit line from Tennenbaum Capital Partners, an attractive option for companies like SoundCloud, who have a solid credit rating and are on a clear path to global success.

Translation: The same people who bet on them in the first place saw these financial numbers before they went public, said “Yup, this is aligned with the other 200 tech companies we invest in that are growing at this rate,” and dumped almost another $100M into it.

Over 18 million creators are using the platform, sharing well over 110 million tracks, and reaching 175 million monthly active listeners. Additionally, comScore recently listed SoundCloud as being the 8th most popular app among millennials based on usage in the US.

Translation: Millennials are the biggest target for app usage and being the 8th most popular brand is worth a f**kton more than this supposed $17M figure. If the bottom fell out of the company, they could still sell ads to clear that number in less than a quarter of operation as they have the eyes and ears of the most coveted demographic.

Over the past year, we’ve signed deals with PRS and UMG/UMPG, to add to the nearly 200 deals we’ve already signed, including those with Warner Music, Merlin and NMPA, as well as MCNs and independent creators.

Translation: Your favourite artist is signed to a label that is putting money into us and trying to figure out what we figured out when we launched seven years ago. Meanwhile, we’re figuring out the future so we can license it to them.

All told, if the company didn’t suffer any bumps and bruises on their way to 175M active monthly listeners, investors would be positive they were cooking the numbers and this would be an entirely different story. Before we sharpen our pitchforks and jump on the bandwagon to #RIPSoundcloud, let’s all take a moment to remember that these exaggerations are just truths who have lost their temper. Now press play and enjoy some vibes….

This entry was posted on Friday, February 12th, 2016 at 6:40 am and is filed under News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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