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The long-awaited SoundCloud subscription service, SoundCloud Go, launched early last week to modest fanfare. For those who missed it, here are the details: $9.99 per month gets you offline and adless streaming of every track on Soundcloud plus newly uploaded libraries from labels with which Soundcloud has licensing deals. Seeing as how SoundCloud finally inked a deal with Sony Music last month, this means all three major labels plus 20,000 more under the Merlin umbrella. A representative I talked to from SoundCloud refused to break down exactly how many new tracks would be added to their library, but the recent amount of 30-second previews I’ve run into while browsing around indicates it will be a substantial. But SoundCloud is brand new to the subscription streaming market. It’s naive to think The Beatles will appear on the SoundCloud charts anytime soon, and the fragmented market of streaming right now means SoundCloud is unlikely to consolidate market share by just offering major label content. Every one of its competitors offers something more, from high audio quality to premium content, to entice users. So SoundCloud is destined to be playing catch up to rivals like Spotify, who has better relationships with major labels, and Apple Music, who has better relationships with artists and can out-compete for exclusive content from popular artists. What sets SoundCloud apart is their user base that continuously puts out quality exclusive content, and yet Soundcloud has no plan to monetize their biggest asset other than offering Go users offline streaming of it for $9.99 per month. Soundcloud is contorting itself to fit the mold of a streaming platform, when in reality it’s an entirely different service.
And it’s unclear who SoundCloud is hoping will jump aboard SoundCloud Go. Competitors’ users? The relatively high price point and lack of premium content suggest this won’t be the case. Existing users? The preponderance of 30-second previews seems to be designed to entice Soundclouders to fork over $9.99 per month for access, except for the fact that many of them already have accounts with their competitors who are offering more or less the same content. The average Soundcloud user doesn’t use the service to browse mainstream content they can get elsewhere, just as the average Youtube user doesn’t use the service to watch full-length movies and T.V. shows. The target market for SoundCloud Go thus seems to be only those who want offline access to the SoundCloud Library.
When I asked the rep from SoundCloud if the company had plans to start premiering exclusive content in a similar fashion to Tidal or Apple, she pointed me towards the vast library of user-produced content on the platform that was “already exclusive.” I was reminded of a similar media streaming platform that also recently launched a $9.99 subscription service: YouTube. YouTube began running ads on videos hosted on its site in 2007. It launched a partner program similar to SoundCloud’s On SoundCloud program in which selected users could earn a share of the ad revenue their videos earned. The YouTube Partner program started small and exclusive but grew over the years to the point where it’s relatively easy for the average user to start earning money from ads run on their videos. It is only nine years later, with subscription-based video streaming revenue set to outpace ad-based revenue by 2020, that Youtube is making a foray into the subscription service territory occupied by Hulu, Netflix, and Amazon; albeit with mixed results.
The similarity between the YouTube and SoundCloud platforms – majority of content produced by independent creators, exclusive host of a large library of media, infrastructure that creates a sense of community among users – make the differences in how each goes about generating revenue all the more surprising. Soundcloud expects its users to sign up for Go to get the same content they already have with their Spotify/Tidal/Apple accounts. The fact that they are seeking to change their service to make them more similar to their competition, while failing to innovate a way to earn revenue on what makes them unique, makes Go bound to fail. What SoundCloud has never realized is that by playing by other people’s rules (in this case rules set by the major labels and their competition), they’ll never outcompete the dominant streaming platforms. SoundCloud should focus on expanding On SoundCloud to generate a revenue stream from their millions of users. In a fragmented streaming market in which it no longer makes sense to subscribe to just one platform, each platform needs a way to distinguish itself. Yet SoundCloud seems intent on modeling itself after its competitors while neglecting the user base that made it what it is today.
SoundCloud’s attempt to stay afloat thus boils down to offering a product that a) it has no prior experience offering and b) is virtually indistinguishable from what its competitors have been offering for years. At the same time, SoundCloud is neglecting what makes its service unique: the millions of user-generated tracks that it hosts almost exclusively. Failing to expand its efforts to monetize this library of tracks and instead choosing to fit itself into the streaming service box defined by its competitors displays a galling lack of innovation, and is one of the reasons the service has yet to break even. It will only be so long before someone else figures out how to create a platform in which user generated audio content and ad revenue can live symbiotically the way Youtube has done for video.