Earlier this year in September rumours circulated that Spotify might buy up SoundCloud’s open digital music platform, but discussions have now reportedly been closed.
In September reports suggested that Spotify were in talks with SoundCloud for a purchase, a deal that would have put Spotify in a giant position within the industry. Sources have now revealed to TechCrunch that those talks have died in the past week.
The sources say that Spotify felt an acquisition of SoundCloud’s scope could negatively impact upon their IPO (initial public offering) which Spotify reportedly plan to go ahead with next year. Whilst Spotify haven’t confirmed that they will have an IPO the source speaking to TechCrunch said that Spotify “doesn’t need an additional licensing headache in a potential IPO year.”
Assuming Spotify are planning an IPO for next year a $700 million purchase (SoundCloud was last valued at) would have a big impact on the music streamer that has yet to become profitable. Despite being the leading music streamer with 40 million subscribers and over 100 million users Spotify have yet to make a yearly profit in their 8 years of existence thanks to the nature of startups and the expensive licensing costs that come with dealing with record labels. Purchasing SoundCloud would just add more licensing costs for Spotify.
As music streaming becomes more and more competitive a purchase of SoundCloud’s massive platform could have secured Spotify’s position at the top, especially with major rival Apple Music having recently reached 20 million subscribers. Regardless as a streaming trailblazer and arguably the most established music streaming brand Spotify don’t look to be fading away anytime soon.