In 2014, KPMG suggested that SoundCloud’s immediate requirement for investment represented “a material uncertainty which may cast significant doubt on the company’s ability to continue as a going concern”.
That investment did arrive, to the tune of more than $100m – made up of $77m financing secured in 2015 and a further $37m (€32m) from a debt facility at the start of this year.
In addition to keeping SoundCloud afloat, this cash is being stretched to launch new subscription service Go, which arrives in the UK today.
SoundCloud is certainly not alone in its grow-first, profit later mentality.
Yet the myriad music biz startups which echo Ljung’s strategy simply can’t keep burning money forever.
According to its Chapter 11 filing, the company was bringing in around $1.6m a month from subscribers and advertising – but was losing $2m a month overall.
Remember that figure: $2m a month. You’ll see why.
Now, let’s take a look at how much the following services are losing – and have lost – in comparison…
According to its latest annual financial filing, Rhapsody/Napster posted $201.9 million in revenue in 2015 – but annual losses widened considerably to $35.5m.
That’s a average monthly loss of $2.96m.More than Rdio.
Cumulatively, in the three years from 2013 to the end of of 2015, Rhapsody/Napster posted $71.5m (€87m) in net losses.
Unlike SoundCloud, Spotify’s annual revenue is much greater than its losses – and it’s already paying out around 70% of all income to music rights-holders.
That’s a figure which may have to be re-negotiated if the company ever needs to dive back into the black.
Still, its balance sheet contains some scary stuff.
The last financial results we have for Daniel Ek‘s company are for 2014 (although 2015’s figures are due soon).
In that year, Spotify posted revenues of $1.25bn (€1.08bn) but an annual net loss of $188m (€162m).
That’s an average monthly net loss of $13.5m. Around seven times more than Rdio.
It’s going to get worse before it gets better.
From 2013 to 2014, Spotify’s operating loss (a better reflection of performance trends than net loss) widened from €91.2m to €165.1m – an increase of 81%.
If that trend applies to its overall fiscal performance in 2015, Spotify’s annual net losses will grow to around $340m – or $28.3m a month.
Much more than Rdio.
Cumulatively, over the three years from 2012 to end of 2014, Spotify posted a net loss of $355.2m.
So what have we learned?
Well, the biggest independent streaming services in the US and Europe are losing millions of dollars every month (caveat: that’s a bit of an assumption when it comes to TIDAL).
Therefore, they all require gigantic levels of future investment to deal with their cash burn.
Not a huge problem for the likes of Spotify ($1bn recently secured) or Deezer ($110m recently secured).
But when you look at platforms such as Rhapsody/Napster, and its 3.5m subscribers, things look a little more fragile.
(The company took on a $10m loan from Real Networks and an unnamed co-owner last March – money which, according to our net loss analysis, would have lasted it just over three months.)
The headline stat from all of the above though: across three (and a bit) fiscal year periods, these streaming services cumulatively lost…
$1.06 billion.
That’s not even counting smaller players like Qobuz, Milk Music, MixRadio, Saavn and 8Tracks. (Or Rdio, for that matter).
