We reported yesterday on SoundCloud’s newly-published financial results for 2014.
The streaming service’s revenues rose 54% to €17.4m that year, but its administrative expenses grew faster by 68% to €47.7m, fuelling a net loss for the year of €39.1m.
The financials also revealed that despite raising $77m of funding in 2015 and securing a credit line of €32m in early 2016, SoundCloud needs further investment in the next 12 months to offset “material uncertainties facing the business.”
The 2014 figures don’t tell us how SoundCloud’s business developed in 2015. That year’s financials are due to be filed by 30 September this year, and should indicate how the On SoundCloud advertising initiative grew in 2015, as well as how much the company’s costs continued to increase.
But the publication of the financial results does highlight the big challenges that lie ahead for SoundCloud in 2016, beyond raising that additional capital investment.
First, SoundCloud needs to nail down its third and final major-label licensing deal with Sony Music, even if its long-planned subscription tier *could* launch with just music from the other two majors and Merlin’s roster of independents.
Second, SoundCloud needs to make that subscription tier both unique in comparison to the $9.99-a-month competition, and successful in terms of converting even a small percentage of its 175 million monthly listeners into paying subscribers.
Third, SoundCloud needs to roll its advertising program out globally.
No music-streaming service has an easy life in 2016, even (or given music rightsholders’ hardening attitudes on this area, especially) those whose free tiers are protected by safe-harbour legislation.
The challenges listed above mean SoundCloud’s costs will continue to increase, especially as its licensing costs kick in.
With streaming rivals either raising hundreds of millions of debt finance of their own (Spotify, Pandora) or backed by massive technology companies (Apple Music, YouTube), that anticipated next funding round for SoundCloud will be crucial in fulfilling its ambitions.