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Music Business News, January 13th, 2017

SoundCloud was warned it will go out of business by the end of 2017. And Nielsen’s end-of-year report showed streaming became the #1 mode of music consumption in the U.S. Also, major labels and several streaming services voiced support for new hi-res audio.

 

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SoundCloud Facing Possible End without Additional Funding

 

Music streaming site SoundCloud was warned about running out of cash by the end of 2017 without new investors, said the Financial Times.

 

The company launched SoundCloud Go, its premium music service, in March of 2016 in order to compete with Spotify, Pandora and Apple Music. While revenue grew as a result, its losses stood at a whopping $52 million in 2015, reported The Verge.

 

Earlier last week, rumors circulated that Google was looking at acquiring the company for $500 million, half the price SoundCloud was asking for. This came after Spotify was in talks to acquire it, but then backed off because it was getting ready for an initial public offering (IPO) this year.

 

SoundCloud CEO Alex Ljung said he is still hoping the service’s new premium service will help save it and that the company is prepping itself for a new round of investors.

 

The streaming market is cut-throat, with Spotify and Pandora still struggling to earn a profit. Additional investment might be the only thing that can keep SoundCloud afloat. An article in Fast Company stated, “not even a massive influx of paying subscribers would necessarily save SoundCloud.”

 

Still, SoundCloud has a user base of 175 million active listeners, making it one of the largest streaming platforms. It is also the top music discovery platform, giving new and unknown artists a large potential audience for their tracks. It has attracted mega artists like Chance The Rapper and Kanye West.

 

On January 9, a SoundCloud spokesperson released a statement in order to justify its losses:  “SoundCloud filed its 2015 accounts with Companies House in December, and they are now publicly available on their site as of Friday. The accounts show that, in 2015, we were heavily focused on putting the necessary measures in place to build our monetization model, including our consumer subscription service, SoundCloud Go, and rollout of advertising on the platforms. This meant investing in technology, people and marketing, as well as securing complex licensing agreements with key music industry partners.”

 

The statement went on to say, “In 2016, we saw solid growth not only for the industry but for SoundCloud too. And we see this trend continuing throughout 2017. To date, we have successfully launched SoundCloud Go, our subscription service, and our ads business in eight markets, including the U.S., UK and Ireland, France, Australia, New Zealand, Canada and Germany. We are on a very positive path to achieving our aim of enabling all creators to be paid for their work, while also building a financially sustainable platform where our connected community of creators, listeners and curators can continue to thrive.”

 

Nielsen’s 2016 Report: Streaming Winning

 

Streaming consumption beat digital sales for the first time, according to the 2016 end-of-year report released by Nielsen.

 

Pitchfork reported that during 2016, streaming became the U.S. main source of music consumption. Overall on-demand audio streams reached over 251 billion last year, representing a 76-percent increase that makes up 38 percent of the whole music consumption market. Also, “the on-demand audio streaming share [of total music consumption] has now surpassed total digital sales (digital albums + digital track equivalents) for the first time in history.”

 

Previous reports stated there were more streams on the average day last year than song downloads for the entire year. There were, on average, 1.2 billion streams per day and just 732 million downloads for all of 2016.

 

Nielsen concluded that streaming’s continued success is that it is the main method of music consumption for hip-hop and R&B fans. These genres represent 22 percent of all audio consumption and 28 percent of on-demand streams. Rock is the most popular genre in general and has 29 percent of consumption, with just 20 percent of the streaming market.

 

Albums by Drake, Rihanna, Kanye West, the Weeknd, J. Cole and more drove the success of hip-hop and R&B in 2016. Drake was Nielsen’s top artist of 2016, with more than 5.4 billion on-demand audio streams.

 

Streaming growth is attracting new competitors to the marketplace, Billboard pointed out. Giants like Pandora, iHeartRadio and Amazon all debuted their own on-demand streaming services in 2016, and Spotify, Apple Music, Google Play and YouTube led the field of almost a dozen on-demand streaming services in the U.S. alone.

 

But which of these services will survive the competition?

 

Chris Carey, CEO of Media Insight Consulting explained, “I think ‘consolodation’ is a great word for what’s coming next … Smaller companies won’t go away, but you might see acquisitions from them in order to catch up.”

 

Spotify and Apple Music have together dominated streaming, which means time could be running out for standalone companies like SoundCloud and TIDAL. These smaller companies have both faced acquisition rumors in recent months. In order to survive, they will have to offer more or at least different value than the leading services.

 

Major Labels and the RIAA Supporting Studio-Quality Music Streaming

 

Universal Music Group, Sony Music and Warner Music Group are standing with the Recording Industry Association of America (RIAA) and audio streaming services Pandora, Rhapsody/Napster and HD Tracks to support studio-quality music streaming.

 

Hi Fi reported that the Digital Entertainment Group (DEG) is also backing the initiative for new hi-res audio across streaming services with a “Stream the Studio” marketing campaign.

 

Amazon and Google Play are members of the DEG, but at present, there are no specific details about how or when these platforms will roll out a plan to offer better quality music.

 

This news comes on the heels of TIDAL’s recent update to its streaming service. TIDAL now offers MQA audio technology as part of its HiFi package.

 

The boost in vinyl during the past several years shows that many listeners are gravitating towards higher-quality audio. Streaming services may follow TIDAL’s lead and offer premium subscription tiers that include hi-res audio.

 

In 2016, Neil Young announced his music player Pomo is turning into a music streaming service.

 

Spotify and Apple Music have yet to enter the conversation, although there are already ways to play hi-res audio on iPhones with third-party software like VLC player.