The past year has been good to streaming music services. Spotify recently reached 50 million paying subscribers; Apple Music, while growing more slowly, has more than 20 million. And together, the two platforms have contributed to an unusually robust 2017 for hip-hop albums. Migos' album *Culture *became the Atlanta group's first album to debut at #1—with 59 percent of its sales equivalent coming from streaming. More recently, Drake and Kendrick Lamar set streaming records with their latest albums: According to Billboard, Drake's More Life and Lamar's DAMN. each sold more than a quarter-million "streaming equivalent albums." All of which makes you feel kinda bad for SoundCloud.
The Berlin-based company is still searching for a buyer to help its financial woes. A few months ago, two of its top executives left. And hip-hop's biggest artists, all of whom once shared their music readily on SoundCloud, no longer use the platform like they once did. But while it might be a bit too early to start printing obituaries, SoundCloud—and the 175 million people who use it every month—still stands at a crossroads. The question is, where does it go from here?
From Backpacks to Bitmoji
From its earliest days, SoundCloud was a boon to independent artists, especially rappers. When it launched in 2007, the #1 song in the country was Soulja Boy's "Crank That"—itself a product of YouTube and MySpace, which at the time were the biggest online discovery engines in music. However, both those platforms had critical pain points. First, it was difficult to get YouTube plays if you didn't have a video to accompany the song; second, with the arrival of Facebook, MySpace had become dangerously passé. SoundCloud solved those problems: it made audio-only music sharing both frictionless and cool (or at least not entirely uncool).
Moreover, the independent nature of SoundCloud aligned perfectly with the culture of hip-hop—an artform that has historically challenged the status quo and fought for more self-control. "SoundCloud addresses the tension that artists once felt in navigating gatekeepers and other barriers to entry. Label ownership and radio were once the only outlets to get heard," says Casey Rae, a music and media professor at Georgetown University. Before long, "SoundCloud rapper" had become a term of its own. (Granted, it was often pejorative, much like "internet rapper" in the '00s and "backpack rapper" in the '90s, but its very existence speaks to a thriving ecosystem of bootstrapping artists.)
And over time, the platform became home not just to DIY artists, but successful DIY artists. Chance The Rapper released his first two mixtapes,10 Days and Acid Rap, on SoundCloud. His Grammy award-winning album Coloring Book was SoundCloud's most streamed album in 2016. D.R.A.M.'s "Cha Cha" became a viral hit; Post Malone's "White Iverson" got the artist a record deal—and ultimately a platinum album. In 2016 Lil Uzi Vert leveraged SoundCoud to gain more new followers than any other artist; now the Atlanta upstart earns upwards of $45,000 per show.
Yet, the company's onetime $700 million valuation has declined precipitously. "SoundCloud is facing three primary pressures," Rae says. "It has to grow past a certain threshold even though growth will naturally plateau; manage high expectations from investors; and rely on a business model that requires them to pay at least 70% of available revenue to content license holders." That's a lot of boxes to check off—and while Apple and Spotify are bringing in users by the millions, SoundCloud Go, the company's premium paid subscription option, has yet to disclose its subscription numbers since it launched in 2016. Even if those numbers turn out to be astronomical, though, they might not save the company.
The silver lining for SoundCloud is that the entire music streaming industry is still finding its way. None of its pure-play competitors—Pandora, Spotify, or TIDAL—are profitable. Streaming exclusives, once seen as a market differentiator for companies willing to pony up, are falling out of vogue: Both Kendrick Lamar's *DAMN. *and Drake's More Life were multiplatform releases. In fact, More Life sold and streamed better than Drake's 2016 Apple Music-exclusive Views, which could could influence how other artists will prospect exclusive opportunities. What SoundCloud needs is a way to turn that silver lining into sunshine.
Leveraging Loyalty
One possibility would be for more "alumni" promote the service. A few weeks ago, Chance The Rapper hosted Magnificent Coloring World 2, a private event for fans where he only invited the top .001% of his listeners on SoundCloud. When Chance advocates for SoundCloud above all platforms—despite selling and streaming his music everywhere—it generates goodwill for the company and could lead to additional revenue opportunities.
With more cash, SoundCloud could follow the lead of other streaming services and produce its own content. Apple Music's Beats 1, which also hosts celebrity DJs and releases artist exclusives, landed the first interview with Kendrick Lamar after DAMN. dropped. Spotify answered Beats 1 by supercharging its popular RapCaviar playlist: Last week, the playlist celebrated 4/20 by inviting Wale to discuss hip-hop culture while eating gourmet cannabis edibles. Neither is an exclusive album, but it's valuable original content that can draw users.
SoundCloud is like a startup incubator: it gives artists basic tools and exposure for early-stage growth. Unlike an incubator, it lacks equity stake or monthly rental fees to generate revenue directly from artists. It's a challenging position, but with the intriguing opportunities for SoundCloud and the ever-changing music streaming sector, it's too early to declare defeat. "If SoundCloud went away, there's a piece that would be lost in the culture," Rae says. "Where do [the artists] go if SoundCloud can't maintain operations?" Besides, "Bandcamp rapper" doesn't have the same ring to it.