SoundCloud is launching its SoundCloud Go subscription tier in the UK and Ireland today.
They are the second and third countries to get the new premium tier, which launched in the US in March. SoundCloud is also introducing advertising on its free service in the UK and Ireland today.
Chief executive Alexander Ljung is confident that SoundCloud will offer a real alternative to rival subscription streaming services like Spotify and Apple Music – and fittingly given the nature of his company, he’s remixing some of the rhetoric of Apple Music’s Jimmy Iovine when explaining how.
“We tend to have a younger audience. It’s less of a spreadsheet and more of a Snapchat in terms of how you actually interact with it,” he said ahead of the launch. “It’s not so stale, it’s not just a utility. It’s actually something that’s alive.”
Iovine famously spent the early months of Apple Music’s existence writing Spotify and other rivals off as mere “utilities”. He was also critical of advertising-supported free streaming, but that’s where he and Ljung differ.
SoundCloud’s CEO has regularly defended his service’s controversial (if you’re a safe-harbour sceptic) free tier over the last year, at a time when freemium streaming has become a heated debate within the music industry.
“It’s always easier to take the position that it’s all about one thing, and the other thing is bad. It’s an easier narrative, but we’ve been quite consistent in saying that it’s about both ads and subs, and it’s the interplay between them,” Ljung told Music Ally.
“Billions and billions of people are interested in music, and it’s incredibly social. When you’re lucky enough to have a product that has that wide of an appeal, I would say that it’s very rare that you have one revenue model that works for billions of people.”
Ljung’s view is that segmentation and different business models are a logical approach for music, but he stressed that he sees a bright future for subscriptions both generally, and specifically for SoundCloud.
“I’m super-bullish on subs and being able to get a large percent of the billions of people into subscriptions, which is great because they’re high-ARPU, and you get a lot of revenue to the industry,” he said.
“But I also know there’s a lot of other people that won’t be in a subscription, and they’re really valuable as well. They love music, and through many different forms of advertising we can generate huge amounts of revenue from them as well.”
SoundCloud isn’t generating huge amounts of revenue from its advertising yet, but it’s only been available in the US so far: the UK and Ireland are the first two countries to get ads on SoundCloud elsewhere in the world.
Ljung talked up SoundCloud’s experiments with native advertising beyond traditional audio ads and companion banners, pointing to formats where brands can promote individual tracks and work with artists on projects.
“Being able to present a brand new track from an emerging artist, and then the brand can pay for promoting that track around the network: that becomes this really interesting model where the artist gets both paid and promoted through the brand, and the brand gets to much more natively and organically fit within the context of where that track is,” said Ljung.
“Here’s the truth: we’re going to have, like, a billion listeners. So what is the best way to generate the maximum amount of revenue from them for our creators? You can’t land on any logical answer other than that it’s a mix of subscription and advertising.”
SoundCloud is certainly working hard to ensure that those free, ad-supported users realise there is now a premium tier to the service. There are regular nudges to upgrade within the company’s app – premium content is shown to all users but only played as 30-second clips for free users with a prompt to try Go.
“I could be a Go user, I share a track with you, and you’re a free user. You can still interact with it and like it, but at some point 30 seconds is probably not going to be enough,” said Ljung. Free users will also see the offline-sync button in SoundCloud’s app, but if they tap it they’ll be prompted to upgrade.
“Our design thinking is to integrate the upsells natively in the core flow of the user experience,” said Sylvain Grande, SVP of subscriptions revenue and monetisation products. “It’s not just doing what others might do, and put in a lot of low-quality ads to annoy users and make them convert.”
SoundCloud is making much of its massive 125m-track catalogue on SoundCloud Go, with its newly-licensed major and independent tracks added to its existing collection of remixes, rarities and mash-ups.
How best to navigate that huge catalogue though? SoundCloud’s social stream, driven by the posts and reposts of the artists you follow and your friends, is one way. The recently-introduced radio-style “stations” another. However, Ljung backs up recent comments by his co-founder Eric Wahlforss that SoundCloud isn’t rushing to hire a big editorial team to curate playlists, as rivals have done.
“On SoundCloud, all the artists are there, and all the people that are really into music are there. So most of the great curators in the world are heavy SoundCloud users, and they’re making these great playlists,” he said.
“There’s an incredible treasure trove of playlists there, but we don’t really surface them very well. You have to do a little bit of digging and searching for them, but just like with the music, there’s incredible gold there to be found if you search.”
It seems that when it comes to discovery, SoundCloud is more likely to focus on building product features to make it easier to find other users’ playlists, rather than hiring a bunch of curators to make new collections.
Can all this turn into a profitable business for SoundCloud? Or, indeed, for anybody, given the heavy losses that are common to every standalone, on-demand streaming company?
SoundCloud included: its annual net losses have accelerated from €1.55m in 2010 to €3.74m in 2011, €12.43m in 2012 and €23.11m in 2013, and €39.1m in 2014 – all before it struck its licensing deals for SoundCloud Go.
With the company looking for more funding this year to cover its losses, is there a risk that those deals, far from heralding a bright future for SoundCloud, could hasten its demise? Ljung disagrees, as you might expect.
“It’s funny that people would think that. I’m not sure any business would go into deals that would leave it in that situation,” he said – students of modern music-industry history may wish to have a good cough at the thought of such a prospect.
“I don’t think there’s really any reason to think that would be the case. It’s well known that the subscription market in general is growing extremely rapidly, and it’s also well known that it’s in its very early stages,” he said.
“There’s really a good business to be made around the streaming piece. And we are bringing a whole new revenue stream to the entire industry by thinking about how we monetise derivative content… we actually end up with more monetisation opportunities than any service out there.”
Or, indeed, more opportunities to pay out royalties that will need to be funded by a rapid increase in advertising revenues, and a speedy uptake of SoundCloud Go. In any case, as both roll out around the world, we’ll get a better idea of how good a business there is to be built here – and how it compares with rivals.
“This is a very exciting year,” said Ljung. “We’re releasing very big revenue products, but we’re also finally bringing a lot of this [licensed] content into the product, and at the same time releasing a lot of listener features, and putting out more creator features too. There’s a really good momentum of things coming out now, and we’re bringing that to more territories.”
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