SoundCloud costs have run away from its revenues
When SoundCloud first announced in platform ads, many fans were outraged – unconcerned with the company’s need to raise capital in order to support the massive demand of the its own exponential growth. The platform’s success has actually become its worst enemy — driving up costs without generating any revenue. It’s not cheap to store 12 hours of audio every minute and the bandwidth to transfer it is equally immense.
In a recent report published by Techcrunch based on the company’s annual filings, it is clear to see that Soundcloud’s costs are quickly outpacing its paid subscription revenue model. In 2013 alone the company lost $29M on a revenue of $14M. It was an exponential increase from 2012 for both their users and their costs but not their revenue.
Luckily the company has raised significant capital in its funding rounds, allowing it to operate in the red while it works out its media strategy and attempts to renegotiate its failed partnerships with the music industry’s three major labels.
One thing is for certain — if they don’t figure out a way to make their money back soon the “YouTube for Audio” will quickly find itself in desperate need of additional investment.