Two unidentified private equity firms are in advanced talks to acquire large stakes in the deeply troubled music streaming service SoundCloud. Though the deals are separate – and not final – the stakes would add up to a majority of SoundCloud’s equity, according to Bloomberg.
Germany-based SoundCloud is beloved by grassroots musicians, who use it to host demos, remixes, and rare tracks for devoted fans. It’s also, at least as it stands now, a very shaky business whose losses have grown in recent years. Early this year it announced it was short on cash, and in early July laid off 40% of its staff and closed two offices. That led to anxiety about the service closing down altogether, and potentially taking a vast trove of uploaded music with it. CEO Alex Ljung responded with assurances that SoundCloud wasn’t going anywhere.
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If the new investments come through, they’ll keep the servers on, and would almost certainly come at a huge discount from valuations that had reached as high as $700 million.
But even if investors get a deal, returns are uncertain at best. SoundCloud has introduced several paid subscription tiers for listeners and artists, and while the company has reportedly more than doubled revenue in the last 12 months, it hasn’t released subscriber numbers, suggesting disappointing results so far.
And even the most successful companies in music streaming are hardly cash cows, saddled as they are with royalty payments to artists and labels. Spotify, recently valued at $13 billion and apparently nearing an IPO, nearly doubled operating losses to $389 million in 2016.