HITS Daily Double


Spotify is in advanced talks to acquire SoundCloud, as the dominant streaming service seeks to add value ahead of an IPO, while also hoping to increase its lead over rivals Apple Music, Pandora and Amazon. FT.com broke the story, citing inside sources.

Those briefed about the talks said it was unclear how much Spotify would pay for the Berlin-based SoundCloud, which was recently valued at about $700m.

Spotify had “reasonably detailed” talks with SoundCloud last spring about a possible acquisition, but balked at its asking price. Spotify is getting its ducks in a row for an IPO in the next year, by boosting its paid subscriber base and diversifying content through video and podcasts.

SoundCloud’s biggest strength is the community of creators who built it, with an extensive catalogue of music, such as mixes, hip hop, EDM and DJ sets.

Independent digital music companies are flailing, despite music revenues growing for the first time in nearly two decades, boosted by a 45.2 per cent rise in streaming revenues.

“The big question for the streaming market is whether you can be a standalone company in a category when you have companies like Amazon and Apple looking at music as a loss leader, just to sell more iPhones or Echo speakers,” Niklas Zennstrom, co-founder of Skype and Rdio, points out in the FT story. “With SoundCloud’s subscription service, the two services are becoming more similar than they have been before, so a reason [to buy] would be a consolidation of subscriber bases and to combine talent pool.”