News - 30/10/2014

Universal Music sees SoundCloud’s potential but is waiting for a business plan

Universal Music sees SoundCloud’s potential but is waiting for a business plan


Universal Music’s CEO Lucian Grange has opened up about his outlook on SoundCloud during an interview at the WSJD Live Global Technology Conference.

The executive stated that according to him there is an opportunity for SoundCloud to generate incredible revenue, but only with the right business model. He also went on to say that the two companies would need to work together to reach a deal on that front.

The implication here is that SoundCloud has not yet presented Universal Music with a model that they see as being viable.

Just a few weeks ago we reported on the rumours that SoundCloud’s negotiations with majors had come to a halt. Grange’s statement shows that whilst there is a roadblock it is not an insurmountable one.

A key issue for SoundCloud is that majors have historically tended to drag their feet when licensing digital music services that started out without a commercial license. SoundCloud is not seen as a “villain”, there are no charges of copyright infringement here, but its large user base means that majors are going to be just as careful in regards to the terms of the deal and potential for monetisation. A speculative example: why settle for less than what Spotify is paying? Another: SoundCloud may be able to offer better terms than YouTube in terms of advertising revenues, but can its advertising infrastructure compete in inventory and volume with the Google-owned giant?

These are just some of the questions that will be thrown around in labels’ boardrooms. There’s no doubt that SoundCloud is in a tight spot as its starts to build its ad-based monetisation infrastructure: this is something that won’t happen in a quarter, or two quarters, and for a company with such a high burn that could be problematic. Hopefully though majors will realise the importance of the service and won’t play on SoundCloud’s need for licenses in order to strong-arm the company into unsustainable terms or business models.


(Andrea Leonelli)

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