July 31, 2017:SoundCloud survival may involve new private-equity investors

Having laid off 40% of its staff and closed several offices in an effort to “take more control” over its future, SoundCloud is now tackling the challenge of securing funding to ensure its survival beyond the final quarter of 2017.

According to Bloomberg, that control will involve selling stakes amounting to a majority shareholding in SoundCloud to a pair of private-equity firms, whose names have not yet been disclosed.

“While the talks are at an advanced stage, they could still fall apart,” noted Bloomberg, with one eye on past acquisition talks with Twitter and Spotify.

Talking of those, BuzzFeed is the latest site to publish its take on What Went Wrong At SoundCloud, with a well-sourced filleting of some of the company’s problems in recent years.

The tale of the mistaken takedowns of tracks by a Justin Bieber impersonator called Sir Bizzle who turned out to be the actual Justin Bieber makes for a fun introduction, but there is more serious criticism of former chief business officer Jeff Toig; CEO Alexander Ljung; and the launch of the SoundCloud Go subscription tier.

The piece also claims that SoundCloud Go was still sub-1m subscribers in September 2016, and floats the prospect of Ljung being replaced as CEO by the company’s board.

New private-equity investors can’t solve these problems at a stroke, but they will at least re-lengthen SoundCloud’s runway to figure out an approach to survival.

That said, any such investment will knock another idea that’s been floated by a few people in the blockchain space recently: that SoundCloud could double down on its independence by turning to that technology.

Such as a blog post by Mat Dryhurst, an advisor to blockchain startup Resonate, who suggested that “tokenising” SoundCloud might be a good idea.

“Tokenising Soundcloud could happen in a number of ways. Soundcloud themselves could decide to tokenize, perhaps rewarding investors, artists and fans in accordance with their participation and investment with the platform thus far, and unlocking features that will allow for those tokens to grow in value and be spent throughout the platform,” he wrote.

“Tokenising Soundcloud could also mean that we, as artists, fans and organisations invested in independent music, collectively invest to buy out Soundcloud, and distribute ownership to everyone involved through token allocation, commensurate with each entity’s investment. In both possible models, tokens would work both as shares to be traded or used to participate in governance decisions, and also as cryptocurrency to be spent on the platform.”

A SoundCloud initial coin offering (ICO) would be super-bold but also super-risky. It seems the company is more likely now to go down the private-equity route instead.

But Dryhurst’s post is worth a read in full, if not for SoundCloud’s next step, to think about the potential for a tokenised, listener-owned music service more generally, as a new alternative strand to the major streaming services.

Stuart Dredge
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