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The Fumbles That Led SoundCloud Into Deep Trouble

July 23, 2017, 8:43 PM UTC

Music streaming is an extremely tough business that is dominated by big companies willing to treat it as a loss leader. But one of the most troubled smaller services—SoundCloud—made its fragile position worse through a long series of technical flubs and tactical missteps, according to a comprehensive analysis by The Verge.

SoundCloud, which debuted in 2008, built itself by making online music hosting easy for independent musicians. But it has been losing huge amounts of money in recent years, missed multiple acquisition opportunities, and recently closed two offices and laid off 173 staffers. The company has insisted that it’s not in danger of shutting down anytime soon, and CEO Alex Ljung recently reported that revenue has doubled over the last 12 months. But its challenges are clearly substantial.

According to musicians and labels interviewed by The Verge, SoundCloud’s troubles began as early as 2012. That’s when the service introduced a reposting feature that, thanks to a design flaw, opened the floodgates for promoters to manipulate listeners’ feeds with music they didn’t actually like. The company didn’t try to correct the problem until 2015, while also doing little to rein in music publishers paying third parties to inflate listens and likes. SoundCloud reportedly still has few tools for curbing such abuse.

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SoundCloud was also slower than its competitors to work out deals with major labels that would have attracted more listeners. Spotify, which expanded to the U.S. in 2011, offered a full catalog and now has 50 million paid subscribers. SoundCloud didn’t launch a paid service for listeners until 2016, and its catalog was relatively skimpy. The company hasn’t disclosed its subscriber numbers, but the premiere of a budget-tier service earlier this year doesn’t imply much success.

And the major label deals came with strings attached. According to the Verge’s sources, SoundCloud was pressured to aggressively clamp down on musicians using music copyrighted by others—a common practice in the site’s early days, when remixes helped fuel its popularity. SoundCloud’s copyright monitoring system also reportedly issued frequent false warnings and takedowns.

On top of those headaches, artists increasingly found that SoundCloud’s competitors let them earn more money from their music, leading many to focus their efforts elsewhere. To take just one example, the up-and-coming rapper 21 Savage offers his newest album for free streaming in its entirety on Spotify, but only excerpts on SoundCloud.

SoundCloud may still appeal to basement musicians just looking for some exposure, and diehard fans looking for the next big thing. But if it can’t correct course and keep more serious creators engaged, it will be left with less and less to attract the broader listener base it desperately needs.