Commentary

Sound And Fury Intensifies In Music Streaming Wars

The volume on the music-streaming wars turned up a couple of notches yesterday as SoundCloud announced a subscription service and Spotify reportedly has raised $1 billion in convertible debt en route to an initial public offering sometime in the next couple of years. All this after Pandora Media shook up its executive ranks Monday.

SoundCloud’s subscription service, called Go, is free for 30 days and then will cost $9.99 a month. “It's ad-free. It lets you listen offline, caches usefully. It's only in the U.S. for now. But most importantly, it has nearly 100 million more tracks (give or take five million... but who's counting) than Spotify,” reports Andrew Flanagan for Billboard.

SoundCloud “has amassed an enormous following while maintaining a roguish status in the growing industry for online tunes. Its 175 million users have been able to access remixes, covers and mash-ups for free — a source of friction with the music industry, writes the Los Angeles Times’ Ryan Faughnder. 

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“This is a big moment for SoundCloud,” says David Pierce in Wired. “… It’s now the third most popular music app on iOS (and fourth on Android), and one of the most popular platforms not run by Facebook or Google. It’s incredibly friendly to creators, the DJs and remixers and curators who use it…,” although it hasn’t always gotten along with execs in the music industry.

But “since 2014, SoundCloud has signed licensing deals with the major record companies, as well as independents, which give the company access to those labels’ catalogs and allow it to sell subscriptions,” reports Ben Sisario for the New York Times. The capper was a deal with Sony announced two weeks ago “after more than a year of talks and plenty of public posturing.”

The Berlin-based company’s “size may be at an advantage as it seeks new subscribers,” Sisario writes. “But its many competitors that sell paid subscriptions to streaming music include not only Spotify, Apple, Tidal and Rhapsody but also the likes of YouTube, Amazon and SiriusXM, which have variations on the streaming model and wide audiences.”

And Spotify is raising the ante.

“By raising debt instead of equity, Spotify adds to its war chest without the possibility of setting a lower price for its stock, which can sap momentum and hamper recruiting,” write Douglas MacMillan, Matt Jarzemsky and Maureen Farrell for the Wall Street Journal in breaking the story. “In return for the financing, Spotify promised its new investors strict guarantees tied to an IPO,” which they intend to do within two years, sources tell the reporters.

There are several theories about what Spotify wants to do with all that moolah in the meantime, writes Peter Kafka for Re/code, including using it to buy rival services such as Pandora or SoundCloud. 

“So here’s another theory, suggested by yours truly: Spotify is going shopping for video,” Kafka writes. It has “30 million paid subscribers worldwide, and many more listening for free — so why not give them something else to do besides listen to music? You can sell that attention to advertisers. And maybe, one day, you could even sell video as an additional subscription tier,” he suggests.

“TechCrunch claims it will be spent on ‘growth and marketing,’ writesGizmodo’s Jamie Condliffe. “Whatever its plans, it’s clear that it’s readying itself for a fight against Apple Music — which has far fewer money concerns than the plucky green streamer.”

Meanwhile, Pandora announced that Tim Westergren — its founder and public face and a former musician himself — was taking the CEO reins from Brian McAndrew, a corporate warrior who’d been there since 2013. The company’s shares have lost about a third of their value in the last year even as it has diversified with acquisitions such as Ticketfly and Rdio.

Pandora also named Mike Herring president and CFO and Sara Clemens  COO, with chief product officer Chris Phillips taking on “end-to-end product development and delivery responsibility.”

“Historically, companies with founders as CEOs have strongly outperformed the market, which is music to investors’ ears. Fixing Pandora, though, comes with unique challenges that weren’t around when the company was founded,” writes Matt Krantz for USA Today. “New entrants like Apple (AAPL) appear determined to get a bigger slice of the streaming business.” Indeed, Pandora’s shares dropped as much as 12% Monday on the news.

“While Westergren helped build the iconic Internet radio service in the early 2000s … he only held the top role from 2002-2004. For most of Pandora's history, Westergren served as chief strategy officer,” points out Seth Fiegerman for Mashable

Meanwhile, vinyl continues its resurgence while CD sales plummet. Go figure.

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