According to a new report by the Financial Times, Spotify is in the process of trying to acquire competing streaming music service SoundCloud. The idea of the services being in competition is only through their presence in the same market though as Spotify is the largest such company with over 40 million customers while SoundCloud’s customer base for their paid subscription service is probably less than 1 million. The one thing SoundCloud does have is the largest library out there, which likely makes it a nice target for Spotify.
In addition to a catalog that is estimated at 125 million tracks, SoundCloud does have an immense base of non-paying users. That number is estimated at 175 million active users on a monthly basis. Clearly, if Spotify got access to those users and could convert even a fraction of them to paid subscribers, the impact could be huge.
The challenge for Spotify, if an acquisition does occur, will be with that conversion process. SoundCloud launched their paid subscription model called SoundCloud Go this past March and by all accounts, it barely moved the needle.
No information regarding potential terms of a deal are available yet nor is any information on expected timing for an acquisition. The last estimate of the value of SoundCloud was around $700 million as reported, though never confirmed, when Twitter agreed to provide a $70 million investment. Earlier this summer word came out that SoundCloud was hoping to find a buyer willing to invest $1 billion to snap up the company. Do you think it is possible Spotify is ready to drop that much money on the service?
source: Financial Times