SoundCloud has officially announced its new business model.

From promotional tool to music streaming service, German music distribution platform SoundCloud has officially confirmed its plan to launch a subscription service for consumers later this year as an additional way of generating revenue, said co-founder and Chief Technology Officer Eric Wahlforss. This news followed the announcement that the company is “running dangerously low” on funds, which doesn’t come up as a big surprise after rumours around legal issues with major record labels.

Last year, SoundCoud managed to close deals with Warner and Merlin, an agency representing more than 20,000 smaller recording labels. Since then, remaining majors Universal Music Group and Sony Music Entertainment have yet to finalise their terms and conditions, and are reportedly demanding a larger upfront payments.

The music service, sometimes described as a YouTube for music, provides users not only with original tracks but also lots of remixes and DJ sets. Therefore, SoundCloud offers more than 100 million tracks compared to streaming service Spotify, with its focus on more than 30 million original songs. The broad variety has made SoundCloud one of the most popular music services with about 175 million unique visitors per month, and it’s especially famous for rich selection of electronic music.

Currently, listening to the music on SoundCloud is free of charge, where a revenue is generated from uploading artists. However, in the USA the company has also tried a model of operation with ads. Pepsi, Jaguar and Axe are just to name a few among the advertisers.

That means the subscriptions will move SoundCloud’s business model in the direction of Spotify and Apple Music. It hasn’t been officially confirmed yet, but I do believe the music service will offer subscription plans for a standard nowadays plan with about $10 per month or option with a free service where advertising will be played between tracks. And so far it feels like the platform itself might lose its unique niche for simple and free music discovery.

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Author: Elena Tsarkova

MSc Digital Marketing at The University of Southampton. Fascinated by influence of digital media on human beings.

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