How Soundcloud Could Transform Deezer’s Market Narrative

deezer soundcloud

News has emerged of Deezer being a potential buyer of troubled Soundcloud. This follows on from Spotify’s prolonged but ultimately abortive courting last year. Soundcloud was once a streaming powerhouse, with 175 million Monthly Active Users reported in October 2014. Though that number is still widely cited whenever Soundcloud is mentioned in the media, in truth its user base is now much smaller. Spotify, which now has around 150 million MAUs has a Weekly Active User penetration rate of 16% while Soundcloud’s WAU rate is just 6%. With the caveat that multiple additional variables impact WAU vs MAU rates, this would imply that Soundcloud’s MAU number is now closer to 70 million. Despite this shift in its public narrative, Soundcloud remains a uniquely valuable asset in the streaming landscape, one that would give another streaming service a distinct competitive advantage. Here’s why.

A Streaming Service Unlike Any Other (Except YouTube That Is)

Soundcloud first rose to prominence as a platform for artists before it rocketed into the stratosphere as a consumer destination with its new VC-powered mission statement ‘to be the YouTube of audio’. The legacy of its unique starting point is that Soundcloud:

  • Has a catalogue unlike any other streaming service, except YouTube (and to a lesser extent, Mixcloud)
  • Gives artists a direct connection with fans unlike standard streaming services
  • Gives up and coming artists a global platform for reaching fans with no intermediary

That unique combination of assets makes Soundcloud a highly valuable commodity despite its diminished user base and similarly reduced valuation (now said to be around $250 million from a high of $1 billion). Soundcloud has two crucial attributes that will enrich any streaming service:

  • A service tailor-made for Gen Z (ie those consumers currently aged 19 or under)
  • A crowd sourced platform for artist discovery

Soundcloud Is Built For The Era Of Mass Customization

As DJ Spooky put it:

“Artists no longer work in the bub­ble of a record­ing stu­dio. The stu­dio is the net­work.” … “The 20th cen­tury was the era of mass pro­duc­tion. The 21st cen­tury is the era of mass cus­tomiza­tion…”

Artist creativity is no longer a creative full stop, we are now in a phase of Agile Music. Even though the number of people that upload music is small (7% of consumers upload music to Soundcloud or YouTube, of which half upload their own music) their impact on the broader market is multiplied many times over as they provide the music others listen to. But even more importantly, the blurring of the line between audience and creator is the fuel in the engine of Gen Z experiences such as Snapchat and Instagram. Other than lip syncing apps like Musical.ly and Dubsmash, Soundcloud and YouTube are pretty much all the music business has in this space. That, coupled with a highly shareable, highly social UI makes Soundcloud tailor-made for Gen Z. The importance to the segment is clear: among 16-19 year olds, Soundcloud penetration is higher than Apple Music, Amazon Prime Music, Tidal and Deezer, with only Spotify boasting higher penetration for audio services.

Crowd Sourced Discovery

The other key asset Soundcloud brings is the bridge it provides between fans and artists. A host of diverse services like Tunecore, BandLab, Bandcamp and Reverb Nation provide an unprecedented range of tools to up-and-coming artists. But Soundcloud (along with YouTube) is still the only place where artists can reach such a large audience directly, without an intermediary. Layer on its massively social functionality and discovery algorithms and you have an unrivalled audio platform for new artist discovery.

Soundcloud Needs An Ecosystem

Unfortunately for Soundcloud, it has found it impossible to effectively monetize these assets (and aping Spotify’s freemium model has done little to move the dial). What Soundcloud needs is an ecosystem into which it can slot, bringing all of the great functionality but relying on another part of the ecosystem to do the monetization. Slotting Soundcloud into Deezer, Spotify or even Apple Music would create an entirely new layer in each of those propositions and would massively enhance market positioning.

It would also enable the service to start behaving more like a label, identifying and testing artists before moving them up into the main service. If done by Spotify or Apple Music, this would look highly disruptive to labels as it really would be a precursor to becoming a next-gen label. But for Deezer, the story is a little different. As part of the Access Industry potfolio, Deezer sits alongside talent management agency First Access Entertainment, live discovery platform Songkick and, last but most certainly not least, Warner Music. By acquiring Soundcloud, Access Industries would be rounding out the most complete Full Stack Music Company in the business.

YouTube Is Not For Sale But Soundcloud Is

YouTube might do most of what Soundcloud does, and at much larger scale, but Soundcloud is up for sale and YouTube is not. Right now, Soundcloud represents the best opportunity in the marketplace for an audio streaming service to make up the ground in user experience innovation that the streaming market lost over the last few years in comparison to Gen Z apps. And with Deezer at the front of the queue, the French streaming service could be about to transform its market narrative in an instant.

 

MySpace is Back, And This Time They’re Serious

The new, new MySpace’s latest promo video has certainly done a good job of achieving buzz and positive buzz at that…something that hasn’t been associated with the MySpace brand for a long time.  Of course there is a big difference between a swish marketing video and the actual product, but the early signs are encouraging.  Most specifically the strong focus on music.

Back when MySpace was failing to fight off the inexorable rise of Facebook I argued that it was time for MySpace to stop pretending it was a social network anymore and instead start focusing on being a social platform for artists before it was too late.  Of course they didn’t and before long it was indeed ‘too late’.  Now they may well have another bite at the cake.

The original MySpace was the trailblazer for bringing artists and their fans closer together, with countless artist success stories.  It connected established artists with their audiences and gave aspiring singers, bands and producers the ability to reach global audiences. In the process it created an entirely new strata of semi-pro artists, too good for their garage but not good enough for a traditional record deal – the current staple of contemporary direct to fan services like TopSpin and Tunecore.

MySpace changed the artist-fan relationship for good, transforming a one-directional shouting dynamic into a two-way conversation.  ‘Bye bye’ email marketing list and static html website, ‘hello’ real time conversations with fans in a dynamic social environment.

Unfortunately MySpace’s inability to give up the doomed fight for the mainstream social network audience also resulted in MySpace failing to innovate to stay ahead of the pack in the artist space too.  An ill-fated foray into becoming streaming music service (when Spotify was but a glint in Daniel Ek’s eye) only hastened the demise.   But what did for MySpace more than anything was the fact that artists soon realized that all of their fans were over on Facebook.  It didn’t matter that Facebook lacked many of the artist-friendly features MySpace had, as those mattered little if your fans were elsewhere.

A Brave New World Faces MySpace Now

Now, many years on, MySpace faces a much more sophisticated and complex competitive marketplace.  The direct-to-fan arena which it helped create is now split across multiple categories and competitors, while Facebook is now firmly embedded in the music ecosystem.  MySpace must now compete simultaneously with Facebook, Topspin, Mobile Roadie, Pledge Music, We Are Hunted and countless others.  That’s without even considering the fight for the social networking consumer.

MySpace is not about to usurp Facebook’s near 1 billion user lead (see my earlier post for why) but it can realistically aim to become the definitive destination for artists and their fans, combining the best of Facebook and Topspin et al into one rich immersive music consumption, discovery and engagement destination.  Not necessarily instead of them, but instead a coexistence strategy, adding value to the existing value chain.

MySpace also has significant legacy assets at its disposal.  It remains one of the world’s most heavily trafficked music destination and has tens of thousands of artist accounts.  Granted the lion’s share of those are inactive, but getting artists to reactivate existing accounts is a much easier task than getting them to start from scratch.

MySpace is at risk of having had more regenerations than Doctor Who, but this latest one is simultaneously the one with the biggest set of challenges and potentially the best set of assets to compete with.  First though, MySpace needs to understand what makes it unique, what would make an artist want to invest time on it in addition to or instead of the many alternatives. Then, and only then, MySpace can start competing, again.

Why SellaBand’s Demise is the Music Industry’s Loss

[Please note that this post first appeared on the Forrester Consumer Product Strategy blog.  Over the coming month or so I will be migrating all of my activity there.  I will soon be posting new information here for you to amend your feeds and subscriptions. Thanks]

Mark Mulligan[Posted by Mark Mulligan]

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Yesterday fan funded band site Sellaband was declared bankrupt by a Dutch court.  This may be ‘just another digital music start up that burnt through its investment money with no proven business model’ but its demise is disappointing.

Semi-pro sites and services are a crucial part of the digital music ecosystem and despite this setback they will grow in importance.  Services like Sellaband, MyMajorCompany, TuneCore, Sound Cloud and MySpace, each in their own way, lower the barriers in the artist-fan relationship. They enable artists to reach out directly to their audiences and develop engaged relationships that make the fans feel a part of things.  The shift from photocopied fanclub newsletters mailed in the post, to active online fan communities is little short of a quantum leap. The advent of social music tools are the music business equivalent of the transition from the stone age to the bronze age.

Of course if you follow my analogy on, there’s still a lot of distance to go before we reach the iron age and beyond. SellaBand wasn’t the first high profile victim (anyone remember Snocap?) and it won’t be the last.

Back in December I predicted strong progress for semi-pro sites and services. And though I qualified my prediction with stating 2010 wouldn’t

“be their year” I didn’t expect SellaBand’s demise either.  I remain convinced of the potential of thesesorts of services and it is crucial for artists and the music industry more broadly that these social music tools prosper. If they don’t then so much of the Internet’s potential remains untapped.