Quick Take: Soundcloud Goes Premium


SoundCloud_logo.svgFollowing weeks of licensing announcements, Soundcloud has finally launched its premium subscription service, a $9.99 tier ($12.99 on iOS), currently only in the US. The move is both encouraging and disappointing. Soundcloud has a truly unique market footprint and has the potential to be a platform for an entirely new approach to monetizing streaming music. But it is also a poor fit for a cookie cutter $9.99 freemium model.

Soundcloud has a whole set of unique challenges and characteristics that make it so different than the rest of the pack:

  • Artist-first experiences: Unlike its now-direct streaming competitors Spotify and co, Soundcloud is an artist-to-fan platform. Most streaming services are effectively a music-store-meets-HBO hybrid. A place you go to get music. Music as a service, or even a utility. Soundcloud is that as well of course, but it is first and foremost it is a place where artists connect directly with their fans. A $9.99 All You Can Eat (AYCE) is not the right model for a place where fans go to engage with artists rather than looking to turn on the water tap.
  • This is a pivot for Soundcloud: Unlike Spotify and Deezer, whose free tiers have long been geared towards driving subscriptions, for Soundcloud this is not a funnel tweak, it is a pivot. It is a complete change in strategy.
  • Competing against free: The problem with giving something away for free for years is that its really difficult to convince people to start paying for it. It is the same challenge YouTube faces with YouTube Red Which is why instead of simply whacking a pay wall around previously free content, YouTube is investing so much in creating new original content only available on Red. In short, Soundcloud needs to explore how it can deliver new, unique value to paid users rather than simply charging them for what they already get (plus a few convenience features).
  • Non-traditional content: Soundcloud’s strength lies in the music that you just don’t find elsewhere, much of which also happens to be dance music. All of the mash ups, bootlegs, un-authorized remixes, 2 hour long mixes are what make Soundcloud such a valuable component of the music landscape. The only problem is that most of them are not covered in standard major label licenses. In fact, many of them aren’t covered at all. Even Dubset, which is trying to build a business around this type of non-traditional content, hasn’t yet been able to get a full suite of licenses in place. For now, it appears that the majors are willing to turn a blind eye to that content. Which raises an interesting question: who gets paid for the revenue generated by unlicensed tracks?
  • Major labels are shaping an indie platform: Major label content is a massive part of Soundcloud but not the majority. In fact, in dance mixes majors typically account for only 30% of the tracks. Yet it is the major labels that are shaping the future of Soundcloud, forcing it down a road that works well for majors on the AYCE services but could skew Soundcloud against its indie community.

No doubt, Soundcloud had to get licenses in place. It had traded on label good will for long enough. But the current model will not maximise Soundcloud’s vast potential. Instead of Spotify-like 15-20% conversion rates instead expect King and Supercell-like 1.5-5% rates. Let’s hope this is simply a hygiene release, preparing the way for a set of products that fit Soundcloud like a glove rather than odd boots. What could a next iteration look like? Well for a start it could be artist focused and secondly it could be cheaper. Imagine a $4 a month, 5 artist subscription that gives you everything by your favourite artists, including premium-only exclusives. Every month you can swap any number of those artists for different ones for the next month. That is the sort of thinking that needs to be applied to Soundcloud’s subscription business if it is going to live up to its capabilities. The alternative is being condemned to being a freemium also-ran.

11 thoughts on “Quick Take: Soundcloud Goes Premium

  1. All inclusive subscription streaming KILLS any and all logical methods of music monetization.
    Global income limit for this activity is at the most $20B dollars per annum. Streamers, if they work hard, might get there in 2025. At that point $20B will equal 25% of inflation adjusted 1999 CDs!

    Time to change the game board and start harvest of $200B of music goodwill obvious to an idiot.
    Conversion of 100,000+ Radio stations to primitive $100B music store would be a good start.

  2. Thanks for the good takeaway, as always Mark.

    “Major labels are shaping an indie platform” – well, they’re just shaping any service that wants to offer music, to conform to their ‘basic’ age-old non-sustainable streaming model it seems.. (stripping most unique services any chance to be different eventually.. modus operandi).

    Services need to climb out of that basic-but-very-expensive big boot before they can even try new gloves. Want it in new material? Sure.. With cool embellishments?.. No problem… It’ll cost you each time and keep adding up (“recoup” anyone?). Give it two years.. I love Soundcloud and will continue to support it but I am a sceptic to wily old methods.

    p/s. It’s a real shame.. short service lifespans will fill label pockets and meet short-term goals but does not help the industry at all in the long term. Additionally now services will have to deal with a new label pocket-filler favorite – “windowing”.. gonna be a “fun” ride fragmenting everyone’s experience)

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  5. Goodbye Soundcloud. It was great knowing you and we had fun together while it lasted. This isn’t a pivot that’s going to work – it runs too contrary to everything that’s been best about you to date.

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