According to a recent report in the Financial Times it is understood that the market leading streaming service ‘Spotify’ is in advanced talks to purchase it’s German based rival Soundcloud and its 150 million active users. Like all such previously similar acquisitions, Google purchasing YouTube, Facebook purchasing Instagram, the purpose of such an acquisition is to both remove competition whilst also further bolstering its own competitive edge relative to its main market rivals.
It was recently reported that in 2016 Spotify’s growth had dwarfed that of it’s main rival ‘Apple’, with Spotify adding a further 10million subscribers in the first 6 months of the year in comparison to an additional 6 million for Apple music (source: Mac World). The net result being that Spotify now has 40 million subscribers to Apple’s 17 million. However, as commanding a position that may seem as the streaming market leader, this is Apple they’re up against, the largest tech company in the world – annual revenue $233 billion, annual profit of $53 billion, where as Spotify is yet to turn a profit since its launch in 2008 with accumulative losses reported to be close to $700 million. Furthermore you have to consider that Apple have racked up its 17 million users in just 12 short months, and to muddy the waters further Amazon have just gatecrashed the party with their own streaming service ‘Amazon Prime Music‘ with a reported database of 304 million active customers at its mercy. And this all before we mention the likes of Pandora, Tidal – who incidentally have Apple as a potential suitor, Deezer and YouTube.
According to Bloomberg Soundcloud’s market value is $1bn and in 2015 Bloomberg also reported that Soundcloud has 150 million registered users. If you take Spotify’s present model of 100 millions users of which 40 million or 40% are subscribers, then it is reasonable to calculate that the purchase of Soundcloud could add an additional 60 million subscribers. Admittedly that figure may be reduced slightly as some Soundcloud users may already be Spotify customers, but still if you take 60 million and multiply it by the US subscription fee of $9.99, then thats a huge amount of zero’s added to your annual turnover.
They say money can’t buy happiness but it may buy you global streaming domination…