SoundCloud has reportedly been actively exploring a potential sale and implementing internal initiatives to boost the company’s valuation since the latter half of 2022, as disclosed by two former employees who spoke anonymously to Billboard. Simultaneously, Chief Operating Officer (COO) and Chief Financial Officer (CFO) Drew Wilson is set to depart the company after nearly three years, according to an internal memo obtained by Billboard.
Sky News recently reported that SoundCloud is planning to pursue a sale in 2024, a plan that has allegedly been in progress for an extended period, influencing significant decision-making within the company. A former employee noted that the motivation behind the earlier announced workforce reductions in May, aiming for profitability, was primarily geared towards preparing for a potential sale, considering the substantial investments from stakeholders.
SoundCloud, which previously secured investments from The Raine Group, Temasek, and SiriusXM, had envisioned a best-case scenario of achieving a $2.5 billion valuation, although sources indicate that the more realistic goal was around $1 billion. Tracy Chan, SoundCloud’s Senior Vice President of Creator, expressed optimism about a billion-dollar-plus opportunity, with private equity firms showing more interest than music companies in acquiring the platform.
While SoundCloud is more than just a streaming service, providing various tools for creators, its valuation goals surpass those of other platforms. For instance, when Square acquired TIDAL in 2021, the streaming service was valued at approximately $375 million. SoundCloud, in addition to streaming, offers tools for creators to distribute, market, and monetize music. Creator tools and services generated over $26 million in the first quarter of 2023, nearly as much as subscriptions ($29.9 million).
Despite grossing around $22 million in the first quarter of the year, the platform faced challenges as it spent approximately $4 million on marketing and an additional $23 million on staffing and general administrative expenses, resulting in a shortfall of around $5 million to break even, as indicated by screenshots from an all-hands meeting shared with Billboard. SoundCloud and The Raine Group have declined to comment on the matter.
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