Yesterday Brandon Meeks (add his site he’s dope) shared an article from TechCrunch. The article was stating why SoundCloud will be worth more than Spotify. Basically what the article was saying is that SoundCloud currently has an extensive amount of MU. More important, those MUs are creating a community which gives SoundCloud the ability to become “Facebook for music/Youtube for Music”. My immediate reaction was, “No, Facebook is Facebook for music and YouTube is music for music.” I say this because I just witnessed an emcee go from 1000 likes to 25,000 likes in one month’s time without Facebook Ads. (See this emcee Ohene Savant on Facebook, Buy his music on Amazon.) And while YouTube is known as a video platform the casual listener discovers more music via YouTube than you can imagine, so much so that my own music company is seeing stream revenue from both YouTube Key and YouTube Red. When Brandon posted this question on Facebook there was a great debate. Because I know that debate will be lost to the sands of social media in a day, I decided to cut and paste my thoughts here. Write me and let me know if you understand where I’m coming from or if you disagree with me.
First response from Facebook in response to the article on Tech Crunch:
This is propaganda. Soundcloud is a free service. Everyone can upload and share content from there. The moment they have to monetize Soundcloud it will fall just as Napster did. I’m always amazed at the valuations these companies get without making a freaking dime. It’s incredible. The investments create fake bubbles and without any real commodity to sell you can almost see how we had a collapse of the economy. Do you realize Soundcloud doesn’t even have ads up right now? All they have is a big database that they can sell to info centers so that you can be marketed to through e-mail. Spotify has paying customers NOW. Soundcloud will have to eventually decide who they are going to charge. As far as people being discovered… that’s BS. People are discovered because they get a solid cosign from someone else in the industry. I have yet to hear the story of the guy that made it on their own.
Second Response to a comment on Facebook:
Facebook person, I’m from the show me state. How much did you earn through the monetization of your music on SoundCloud? If you don’t mind me asking.
To your point about monetizing, the amount of money generated from ads depends on the type and if you notice most platforms have a mixture of visual and auditory ads. As a casual listener, as most people are, we discover music primarily through Facebook and via YouTube. This is why distribution through CD Baby and Tunecore allow artists to actually monetize their music with a royalty system for both Facebook and YouTube.
Both Bandcamp and SoundCloud are destination music locations. This means that although a ton of people are using Soundcloud discovery of music by casual listeners doesn’t happen. While Spotify has the ability to actually introduce more music with ease.
With 60% of music sold through iTunes and 30% through Amazon, and the rest sold in random locations like SoundCloud or Bandcamp, when the artists becomes more educated about business opportunities and monetizing their own platforms (utilizing their own websites, adding affiliates and ads, building their own email lists, using YouTube to both convert customers and earn ad revenue) SoundCloud won’t really be as viable an option especially if they go public and really have to fight Tunecore and CD Baby as well as a streaming service like Spotify, SoundCloud doesn’t look to me to be an investment.
Your last statement about YouTube is not well thought out. YouTube is a part of Google. This means that it gains the benefit of giving the artist the chance to sign up for AdSense which earns them money, they can sign up for YouTube recognition which pays them royalties and they can also earn streaming fees from YouTube Red. When you really take a close look at it the artist should really be in any place they are comfortable and hope for the best, but I don’t see SoundCloud making as much as Spotify.
Final Comments on Facebook:
“On SoundCloud, a program roughly comparable to YouTube’s splitting ad revenue with its creator community.” <<<< This could make or break Soundcloud. This article is a better indicator of whether SoundCloud will grow than the newer article. This article is more straighforward: http://www.bloomberg.com/news/features/2015-07-10/can-soundcloud-be-the-facebook-of-music-
Facebook Response: Nothing will be free anymore…
My response: That’s my point exactly with SoundCloud and the idea that they think it can beat out Spotify. Right now artist are given an option to pay for more services through Soundcloud. That really is the only form of revenue for SoundCloud other than selling information. There isn’t one visible ad on Soundcloud right now which means when they begin to monetize they will be selling to investors their database and the fact that they have X amount of monthly users. For the casual music lover (which is the person that a musician has to reach along with their core fans) we simply aren’t going to SoundCloud to discover music unless we are directed to go to SoundCloud. What I’m trying to explain to Sean is that SoundCloud is like a restaurant in an obscure location. That restaurant is called a destination restaurant. You have to have your mind set to go there. Restaurants that tend to be grouped together in locations where they have foot traffic tend to perform better. Spotify is a pay service that is already monetized with visual and auditory ads. They are already adding revenue. SoundCloud is basically still a pre-revenue company. I just don’t see how it will earn the same amount. Don’t get me wrong I’m not arguing with Sean, I’m simply analyzing the idea that SoundCloud can generate as much as Spotify. I may be wrong though.