NUGEN Audio has launched version 1.4 of its MasterCheck Pro plugin for optimizing your mixes for today’s music delivery services. The update adds FLAC (Free Lossless Audio Codec) and Opus encoding to the indispensable, award-winning loudness, dynamics, and codec toolset. The term codec is an acronym for coder/decoder. Music streaming services such as Apple Music® […]
SoundCloud’s CEO published a post saying SoundCloud is here to stay and uploads are safe. But it isn’t just SoundCloud’s business that’s troubled.
Okay, first – the one thing you shouldn’t worry about is music you’ve uploaded to SoundCloud. As I wrote at the end of last week, you should worry if you have media that’s important to you that’s located in any one place without backups, SoundCloud or otherwise. But while there have been plenty of signs SoundCloud’s business is seriously troubled, that doesn’t necessarily translate to any indication you’ll lose access to the service.
SoundCloud co-founder and CEO Alex Ljung was left scrambling in the wake of deep layoffs to assuage user fears. He took to the phones with at least one celebrity user, Chance the Rapper, who reported a “fruitful” call with the exec on Twitter Friday.
Also on Friday, Ljung posted a plea on the company’s blog:
The music you love on SoundCloud isn’t going away, the music you shared or uploaded isn’t going away, because SoundCloud is not going away. Not in 50 days, not in 80 days or anytime in the foreseeable future. Your music is safe.
SoundCloud is here to stay. [SoundCloud blog]
Alex also refers dismissively to “an insane amount of noise” about the company.
But let’s back up. SoundCloud’s CEO can’t just shrug off fear and uncertainty when the company’s own messaging, actions, and even financial filings are largely responsible. Whatever’s going on with SoundCloud’s business, the company has lost control of its image. It’s hard not to view this “noise” as partly SoundCloud’s fault.
Co-founders Alex and Eric are each articulate and passionate advocates of music sharing. But the company has for years failed to articulate its business model. It’s talked about subscription services like SoundCloud Go, without being clear about how it can compete with entrenched competitors, and talked about advertising without being clear about how it will attract advertisers or how those ads will be effectively delivered. It’s been evasive about details of revenue and profit. It’s allowed bad press to accumulate, like allowing lavish office photos to spread just as financial filings were adding to concerns about its future. It has often failed to go on the record with press outlets (not mine, major press), while small rumor blogs flooded the narrative with leaked (and often inaccurate) information.
To see how badly SoundCloud’s media relations are going, look to recent reports by the likes of Forbes or even TechCrunch. That’s TechCrunch, who just last year were so bullish on SoundCloud that they said the company should be worth more than Spotify
Flash-forward to last week, and TechCrunch are reporting leaked accounts from inside the company’s headquarters and
questioning whether the company will survive.
The best SoundCloud could do by way of correction or response in this place was to say that the fourth quarter begins in 80 days, not 50, and that they meant they had money through the end of that quarter (that is, the end of the year) – but that means we’re not any further along than when Ljung initially made that same statement in a financial statement in January. You can watch the messy back and forth here:
SoundCloud Responds to ‘Extensive Inaccuracies’ in Article Claiming It’s Almost Out of Money
[Indeed, TechCrunch has reason to complain here – SoundCloud doesn’t specify what it means by “extensive inaccuracies,” and actually appears to confirm some of the main gist of the article.]
Presumably these layoffs were planned for some time, so why did SoundCloud appear to be improvising its message to the press and its own staff?
And this problem isn’t a new one in summer. Way back in January, the apparent failure of revenue plans to keep pace with growing costs were fueling acquisition predictions. Now we have vague platitudes from the CEO that the company intends to remain independent, without any material on how they will do that. (That is, even after 40% staffing cuts, they’re still not talking about having money after the fourth quarter, unless by “foreseeable future” Ljung only means he can forsee 2017!) Here’s Fortune back at the end of the year; we actually know very little new information since then:
Here’s Why SoundCloud Will Likely Look to Be Acquired Soon [Fortune]
I know SoundCloud can do better, having covered the company since its 2008 founding. I know its founders can do a better job of messaging than this, too, having known them almost as long. Rather than simply imploring its users to help, they need to provide a better picture as soon as possible as to how revenue growth will work versus costs – particularly now, having cut some of the staff who were responsible for making that revenue growth happen.
Not only SoundCloud
That said, I think SoundCloud are unfairly bearing the brunt of bad press and angry musicians.
Let’s not mince words: right now, the whole model of streaming appears economically broken, and surely all the major players deserve some share of the blame.
Talk about a rock and a hard place – maybe “buried under a pile of rubble” is more apt.
Content creators and owners believe they should get paid for music being streamed. So you’ve got the industry that represents them asking for higher royalty rates.
The problem is where the revenue to pay those royalties is coming from. Listeners don’t appear to want to pay much for subscription fees. That’s at least partly why Spotify and SoundCloud and others aren’t showing profitable results. Even if you don’t buy their arguments (lavish offices and huge headcount being evidence), there’s still a fundamental problem here. If users pay a flat fee for a subscription, then the company loses money the more they listen to the service – because royalty costs accrue. SoundCloud here actually has an edge, in that not all of the music uploaded requires a license – think spoken word and unreleased music. But SoundCloud hasn’t yet proven that they can make this work, either. (We’ll see if those staff cuts or other budget trimming helps.)
Advertising is the one thing that will grow with increased listening, at least in theory – more listening means more revenue for ads. But listeners and even content creators have been resistant to advertising. And selling ads in sufficient volume and with significant value means you need to have a talented staff able to liaise with big agencies and advertisers. Google is the one tech company who seem to have built a significant competency in the ad business, but they claim they’re not making money on ads, either.
And it gets worse. Largely missed in all the coverage of SoundCloud last week (but observed by some CDM readers), it’s really YouTube that dominates streaming. The Washington Post has just painted a bleak picture of the value of those YouTube plays to music.
In a pot-calls-kettle-black argument, YouTube weirdly warns of the dangers of consolidation in big players:
“The industry should be really, really careful because they could close their eyes and wake up with their revenue really concentrated in two, three sources,” said Lyor Cohen, YouTube’s global head of music, referring to Spotify, Apple Music and Amazon Prime Music.
Right, so it’s better if it’s concentrated in four, and the fourth is Google? Huh?
The real danger here seems to be a race to the bottom. Apple, Amazon, and Google can all afford to lose money on streaming, turning it into loss-leader business for other revenue streams. SoundCloud, Spotify, and other tech companies can afford to lose money by repeatedly turning to outside investment. (It’s absurd that we’re still calling this “runway” with those companies, as the business is now around a decade old at least. The runway metaphor only works if you take off at some point. A “hole in the ground into which you throw money” metaphor is what we seem to have here.)
I wouldn’t normally compliment the record industry, but to the credit of groups like the RIAA, at least they’re exerting some pressure up. The problem is, even a $7 royalty per 1000 streams may prove negligible to smaller artists and labels – and if the business that pays that royalty can’t survive, it’s a moot point anyway.
So, uh, how’s everyone feeling? Super… happy? No?
Of course, the buzzword that everyone seems to be running to at the moment is the blockchain – offering decentralized content and paying creators more directly. But describing one part of a larger solution isn’t the same as describing the whole solution. Will listeners embrace micropayments for music, or will they find it a hassle? What will make them migrate from services they’re already accustomed to using – and in which they’ve already assembled playlists and preferences? What about the fact that services like Apple’s are already integrated with the listening devices they own? How do you convince listeners to change their mind about what music should cost, when they’ve already grown accustomed to $10 monthly fees – or, very often, no fee whatsoever?
It isn’t all bad news. People are listening to more music. Streaming isn’t a nonexistent business – it’s US$7.7 billion in the United States alone. Someone, somewhere is actually earning money.
Also, because of the cost of PR and building fanbases, and the potential revenue earned from paying live (or selling physical goods), a lot of musicians I’ve talked to really do appreciate the promotional value of online streams. There are plenty of cases where giving away streaming music is viable – because you might then sell people vinyl, for instance.
And, look, while all of this shakes out, musicians and labels continue to pursue a strategy that caters to building relations on all these services. Some of them have great success stories with YouTube, with SoundCloud, with Spotify.
But maybe that’s the point. It seems to be the businesses in between that are non-functioning – or (in the case of futuristic blockchain propositions) just not ready for primetime.
Musicians and labels keep doing the hard work of making the music and fighting to get it heard. Yet investment and attention pours into the middleware between us and listeners – and that middleware really isn’t working terribly well.
At the very least, it seems totally valid to me that people who make music have reason to be frustrated. I think we should continue talking about our own solutions. And I’d like to see the captains of industry – music industry and tech industry alike – take some greater responsibility for what’s gone wrong and how it might go better. Well… one can dream, anyway.
So, uh… vinyl? Cassette tapes? Eight tracks?
Erm… happy Monday?
The post SoundCloud tries to allay fears, but streaming needs a business model appeared first on CDM Create Digital Music.
There seems to be an extraordinary amount of resentment, in my social media feed, at least, directed at SoundCloud. That may be because the service as originally launched was aimed mainly at small-scale file sharing, and bears little resemblance to the much larger, more public-facing service that evolved after round upon round of investment.
Or maybe it came from the confusion generated by takedown notices. There, the motivation is easy to understand, if misplaced. It’s the same logic that causes people to yell angrily at an airline desk clerk, even if what’s to blame is a complex logistical structure that’s outside that individual’s control. So, yeah, you can try to tell people that SoundCloud is obligated to a complex structure of rights owners and legal obligations. But they’d rather just turn to Twitter to gripe that their DJ mix was taken down.
And certainly I know that SoundCloud, juggling expanding listening audience with serving a dedicated base of users, hasn’t always treated its loyal customers in such a way that makes them feel good about that relationship.
But leaving that aside, I think there’s a fundamental misunderstanding of what SoundCloud, right now, presents to the community of music producers, artists, labels, and DJs.
SoundCloud gives us control, data, and above all, an audience.
Control and data matter – and here’s why I can’t fathom why many people will gripe loudly about SoundCloud but ignore Spotify, Apple, Amazon, and the like. SoundCloud is the only major unlimited streaming service that gives individual artists real-time control over the audio that appears. (The closest equivalent is, indeed, Bandcamp, but it’s a stretch to view Bandcamp as a streaming site, so much as a store that lets you optionally stream your collection.)
On top of that control, SoundCloud is also the least expensive service that allows collecting widespread data on listeners. I can right now look back at my data back to 2008, and see not only who listened, but where – essential if I want to think about promotion and touring. Mere mortals don’t have anything like this data on Spotify or Apple Music.
Now, to either of those points, you could certainly run your own server, and have all the control and data you want. And indeed, in the midst of this conversation, we should absolutely be talking about that course – especially as the readers of CDM tend to be more technically adept at such things than average musicians. (Running servers and making websites is the day job for a whole lot of people here.)
But that brings us to audience.
The very things people criticize about SoundCloud’s growth trajectory – that it invested huge amounts of money to expand – are exactly what makes it so useful to a lot of us.
I can watch this in my own statistics. While a popular embedded player does indeed generate enormous amount of plays, a lot more do come from SoundCloud itself.
That’s fairly easy to understand. What SoundCloud has done since 2008 is to build a set of tools that increase engagement on its site. That engagement turns out to be good for musicians, because unlike on sites like Facebook, more engagement leads people to listen to more music – our music. So whereas engagement on social media would otherwise stocking up on fake news, posting pictures of cats and babies, and getting into endless arguments with trolls (or arguing about the value of SoundCloud), people heavily using SoundCloud are listening to music.
And a lot of that music – an enormous part – comes from independent artists. Even with major artists, it often includes material outside record releases. People listening to those major artists are also exposed to independent artists.
SoundCloud have been making this argument for some time, but of course, they’re biased. The thing is, you can actually see all of these tools when you use the site.
SoundCloud exposes you to new music in the feed you see when you log in – allowing friends’ tastes to propagate. And it has uncommonly clever algorithms for finding and playing related music when you’re listening, now on both mobile and desktop.
I’ve found an extraordinary number of DJs, for instance, who say they find new music they wouldn’t have found otherwise by listening to those related tracks.
Anecdotally, I can say this is what continues to draw so many users to SoundCloud. People upload music there because otherwise it doesn’t get heard.
Now, does this mean all this consolidation is a good thing? No, not necessarily. But if you’re going to talk about alternatives, those alternatives have got to serve some of the same functions.
But there seems to be two fundamentally different questions to ask. One goes something like this:
1. “Artists deserve to get paid. How do we pay them?”
2. “How do I get people to find and listen to my music?”
The problem is, question 1 makes an enormous leap. It assumes that because artists ethically, theoretically, ought to be paid, then the question is simply how to disperse money. That’s absurdly simplistic and, frankly, naive. Poets also might ethically deserve to be paid, but almost no one who sits down and starts writing poetry finds money suddenly flooding in their door. And if they don’t, it isn’t necessarily because some greedy capitalists stole the money before it arrived. If they didn’t have an audience of people paying for their work, there was no money to begin with.
Always-on subscriptions have indeed depleted the value of music, but it’s hard to imagine SoundCloud, with its catalog of mostly independent music, as the source of the problem. The low perceived value of a monthly subscription is clearly the work of services like Spotify, in their ad-supported and cut-rate subscription fees. (Spotify wasn’t first, but most successful – and Apple effectively dismantled their download store in order to compete.)
So people are fond of saying the “blockchain” is a solution. It’s not. Using blockchain technology to decentralize payment collection could be the basis of new solutions for music, but the technology itself only solves the problem of how artists get paid for plays in a decentralized context. The question of how to then make music available around the Web and on mobile, and how people can then share that music, and how listeners can discover music, are all important questions that aren’t answered simply by talking about how to track plays and collect money.
The reality is, a lot more of an artist’s life is spent solving question #2, to the point that invariably it involves investing money, not collecting it. Artists will spend upwards of hundreds of bucks at a fairly low level just to pay for a PR agency, potentially spend thousands of dollars pressing vinyl at a loss, spend money on press photos and, these days, buy ads on Facebook just to get attention.
SoundCloud, meanwhile, gives you some tools to significantly increase audience for free, adding additional features for a few bucks a month. And you retain control of your music and data all the while. SoundCloud even promises that soon you will see some share of their revenue earned on subscriptions and advertising, though we’ve yet to see that in reality.
The loss of SoundCloud could cost a great deal more than that in lost attention. Now, indeed, that itself might be the best possible argument for decentralization. Our dependence on SoundCloud is also its worst liability.
But whatever some trolls online say, let’s be honest with ourselves about what it is we’re dependent on. SoundCloud created an enormous centralized place for people to listen to music. They build a large scale audience for us. And at this point, the one thing independent music can’t lose afford to lose is more audience. Talking about how artists get paid is important. But if no one’s listening to our music, that discussion is purely academic.
And my concern remains: if costs of running a centralized services outpace revenue, we could lose this relatively recent audience – one that has produced a lot of value for artists. That revenue and cost expectation wasn’t set by SoundCloud in the first place: it’s a combination of rates the industry has set and the amount people want to pay for monthly listener subscriptions. Advertising could offset that, but listeners and producers have indicated they don’t like obvious advertising.
For their part, SoundCloud continue to say they can solve all this. In absence of an alternative of significant scale that serves musicians, I continue to hope they’re right.
The post SoundCloud matters because artists and labels depend on discovery appeared first on CDM Create Digital Music.
There’s a famous line in business by Tom Peters, in his book The Circle of Innovation: “you can’t shrink your way to greatness.”
But shrinking is exactly what SoundCloud now has to do, with its survival – let alone any ongoing greatness – at stake. As founder Alex Ljung puts it in a blog post for the company today, massive headcount reduction and the closure of two offices is necessary to put the company “on our path to profitability and in control of SoundCloud’s independent future.” The implication is, without a buyer, the company may not last without cutting staff.
Asked for comment, SoundCloud pointed CDM to that post:
SoundCloud will lose a lot of the people who made the service valuable. 173 out of 420 employees – 41% of staff – are being made redundant. San Francisco and London offices are closing, leaving New York and the headquarters here in Berlin. (That may have implications for Berlin’s reputation as a European Internet capital, as well, as SoundCloud has been its best known poster child.)
I know some of these people personally. I’ve seen what they bring to the service and our music community in general. I’ve also seen how significant SoundCloud has been in helping musicians share music and people to discover that music, its impact on record labels, on artists getting bookings … on daily life.
I think artists and ex-employees alike could feel legitimately betrayed by the course music streaming has taken. SoundCloud at least is increasing revenue. Ljung says the company has “more than doubled” revenue in the past 12 months, without citing specific breakdown of producer subscriptions, listener subscriptions, and advertising. But the issue is how revenue compares to costs.
Now, ironically, the writing has been on the wall for a decade. Ten years ago – and one year before SoundCloud was founded – Pandora co-founder and ex-CEO told CDM he thought streaming rates would shutter companies. The weird part of this is, he may have been right – it’s just that an ongoing influx of investment has prolonged that failure over the years.
If it seems greedy that he’d suggest such a thing, one reason is that there aren’t such royalties collected on radio broadcasts.
Whether you want to blame the services, tech giants like Apple and Amazon, or the music industry for setting rates, the business model just doesn’t seem to add up anywhere. And 2017 could be the “s*** hits the fan” moment as it becomes ever clearer that no one is able to turn that business model into a win.
Just last week, co-founder and returning CEO Tim Westergren left Pandora. That company has never made a profit, and it seems new investors Sirius XM (satellite radio company) have other plans.
Then there’s Spotify. As its revenues and number of users grow rapidly, its losses are actually growing even more rapidly. That should mean that Ljung’s comment about growing revenue is as much a red flag as it is encouragement.
Noticing a trend here? Pretty much anyone in the streaming business is losing money. That overall picture also will rule out some acquisitions, or reduce the price. And it’s not surprising that this combination might frighten away some investors.
CDM readers and associates frequently compare Bandcamp to SoundCloud. But perhaps if any comparison is apt, it’s because of the contrast in business models, growth rate, and intended audience. Bandcamp remains a niche site for people to consume music, not only as free streams, but as downloads, physical media, and in the form of merchandise. It’s the always-on, “tap water”-style streaming that is having trouble.
To state the painfully obvious, it’s also troubling to look at the streaming players who are thriving. Facebook has stayed out of music (unlike Russian social media network VKontakte). But three other big tech giants – Amazon, Apple, and Google – are able to offer streaming services as “loss-leader” offerings, directing sales elsewhere. Apple may lag Spotify, with 27 million users to Spotify’s 50 million. But then Cupertino doesn’t need Apple Music to turn a profit, since the company can instead sell iPhones, iPads, and Macs.
It’s just as easy to find music on YouTube – which also spells further pain for artists and labels.
Music press have been quick to jump on SoundCloud, often without much to back them up. But now, I believe it’s reasonable to sound some alarms. Staff cuts this significant could slow growth and curb the efforts that would expand revenue. They suggest serious financial obstacles. And there’s still not a clear picture of how streaming will be sustainable as a business model – not for SoundCloud, and not for the entire industry.
And the implications there go far beyond SoundCloud’s offices. They should raise serious questions about what a record label is, how it collects revenue in the digital age, and how much control artists and publishers will have on their music being shared and discovered.
Of course, that absolutely means now is the time to talk about alternatives, including innovative solutions like Blockchain-powered sharing and the like. But the popularity of SoundCloud and Spotify for finding and playing music is going to be a tough benchmark to match.
Whatever happens next, it’s going to involve some major changes. And if these companies do start to contract, a lot of the talent that was working on the problem is going to wind up elsewhere.
The post SoundCloud cuts 41% of staff as streaming music business melts down appeared first on CDM Create Digital Music.
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SoundCloud’s ambitious goals for being the place where people share and discover music has always left it with a challenge. On one hand, it has to keep encouraging you to upload music – your tunes, your remixes, your DJ sets. It can’t just be a site for major label content, because then it loses to Apple and Spotify by default. On the other, it has to satisfy the needs of right holders – including when you upload music that they own. That’s an issue with your DJ set, of course, but it could eve be an issue with your own music, if you’re signed to a label.
Musicians and DJs have often assumed that these two interests conflict, but that’s not necessarily so.
First, the more SoundCloud attracts popular, major label content, the more likely it is that people listening to that content will find your music, too. That’s true in theory, anyway – and SoundCloud’s discovery algorithms are specifically tuned to introduce other music. SoundCloud has popularized a breakthrough track here or there, and there’s even word via Chance the Rapper that streamed music (including SoudCloud) could be up for Grammy awards. So this is really a thing.
Second, SoundCloud’s legal battles have actually made it easier for DJs and producers to upload their music without annoying takedowns.
But the ultimate prize is, SoundCloud will pay you for streams. That on its own might not be relevant, but SoundCloud gives individual artists far more control than Apple and Spotify. Only SoundCloud lets you upload content directly, at will, and the statistics and social controls available far exceed anything else. So combined with the ability to get paid, even a little, this is a big deal.
Obviously, the way this works is for SoundCloud to use its paid options (and presumably advertising revenue, though we’ve not seen a lot of that) in order to direct funds to the artists.
The details are a bit sketchy, and the rollout isn’t instantaneous. (That’s unfortunately been a pattern with SoundCloud, though I don’t know to what extent to blame the Berlin company and to what extent to fault the byzantine entities of the record industry.)
Basically, what SoundCloud are announcing is that the Premiere offering will soon be available to DJs and producers. For now, you can sign up; there’s no word yet on who will get included when.
Maybe the most interesting detail here is actually that SoundCloud specifically calls out DJ mixes (that’s the first time they’ve done that on the record, officially), and remixes. The sets are a big deal, because licensing them has been a hurdle in the past. And while Mixcloud ostensibly offers better tools and more solid licensing, I’ve never once talked to a DJ who was as happy with the plays and engagement they got on Mixcloud as they were with SoundCloud.
Here’s the signup:
The news comes at an interesting time. It seems increasingly likely that SoundCloud could soon face heated-up competition, especially as DJ mixes spread. Apple took some (small) steps into that space as far as licensing, and more recently, Spotify purchased technology that lets it better identify songs and stems.
The acquisition alone is bad news for SoundCloud – even if Spotify doesn’t use the tech, they just blocked SoundCloud from getting to it. (And in acquisition-happy tech, sometimes even that’s the goal.) But it could also be the basis of Spotify adding features that compete with SoundCloud. I doubt seriously that you’d get a Spotify/SoundCloud mash-up, but it could cover something like DJ tech.
I’m surprised, though, that no one has speculated that a Spotify acquisition of SoundCloud could go hand in hand with buying Sonalytics, since the latter would shore up the legal basis of the former.
Meanhwile, there are the usual swirling discussions about SoundCloud running out of money, which we’ve heard now for years on a regular basis. Since the company was founded, it has routinely had to go ask investors for more cash to extend runway – to the point of maybe “runway” isn’t really the word for it any more.
In other words, running out of money isn’t news. It’s a question of whether investors want to keep investing. But I wouldn’t trust anonymous sources for reliable information there, which is what some more speculative sites of relied upon.
Getting bought would be another route, and all of this could simply have to do with negotiations and asking price. Some of this uncertainty I think isn’t just a reflection of SoundCloud and their business model, but the uncertainties of streaming music in general. Because performing rights organizations and publishers and labels effectively set their share of money, and consumers have set their expectations of what they want to pay so low, businesses get badly squeezed in the middle.
Anyway, it’s a good thing we’re musicians. We have none of that uncertainty – we know most of what we do won’t make any money.
But I’m totally biased. I’m rooting for SoundCloud because they provide tools for musicians that no one else does, for the moment. And this move makes the stuff they make for us more useful. And for all SoundCloud’s flaws, right now, we need all the tools and control we can find.
I will see if we can get SoundCloud management to go on record about any of this; stay tuned.
The post Producers and DJs can now sign up to get paid for SoundCloud plays appeared first on CDM Create Digital Music.