Music streaming service SoundCloud is reportedly on the selling block, with the company valuing itself at $1 billion.
The streamer, although extremely popular among users, has been struggling to compete financially with other more commercial streamers like Spotify, Apple Music and Pandora.
Company insiders have told Bloomberg that the founders and investors in SoundCloud, including investment company Doughty Hanson & Co., have been talking about the prospects of a sale of the company for a while now, and although the move is still in the preliminary stage of consideration and may be reversed, partners in the site are looking at receiving a valuation of $1 billion.
The question at hand, however, is who would be willing to purchase SoundCloud, especially at what appears to be an inflated price tag. In a recent round of investment funding, Twitter reportedly purchased a 10 percent stake in the company for $70 million, with the total value pegged at $700 million.
Considering that was only a month ago, it's hard to see what would cause a buyer to accept a valuation of an additional $300 million, especially given the trouble SoundCloud has been experiencing in monetizing its success.
Although the company now has 175 million active users per month, almost all of them are using the free version of the service. SoundCloud was never designed as a paid streaming service, instead offering artists the ability to upload their music for free or for a nominal fee depending on the level of company support they desired.
That led to an explosion in the use of the streamer by underground artists and DJ's. EDM artists used it as the go to spot to post their remixes of other artist's songs along with full length DJ mixes, and helped spur the exponential growth of the streamer.
That growth led to interference from the three major labels, Sony Music Group, Warner Music Group and Universal Music Group, along with other smaller labels and publishing rights organizations who objected to the lack of licensing and copyright permissions for their content being hosted on SoundCloud.
The company had to negotiate with those entities, leading to a promise to monetize the service further by introducing a paid tier of service known as SoundCloud Go. Although no official numbers have been released, SoundCloud Go is widely considered to be a failure, as there is no real incentive for users to pay for the content offered, most of which can already be accessed for free on SoundCloud.
It's hard to imagine what company would be willing to fork over a billion dollars for a music streaming service that has thus far failed to earn money and has no clear and realistic plan yet on how to do so, which is likely the same reason its founders and investors are reportedly considering throwing in the towel and putting SoundCloud up for sale.