Spotify is reportedly in advanced talks to acquire rival music streaming service SoundCloud, according to a new report.
SoundCloud received high praise for its role in helping new bands and musicians become famous, as well as for promoting an artist community model that proved quite successful.
The Financial Times now reports (subscription required) that Spotify is in the advanced stages of negotiations to buy SoundCloud. As Recode pointed out in an earlier report, Twitter wanted to acquire SoundCloud roughly two years ago, but ultimately ended up investing about $70 million in the service, raising SoundCloud's valuation to a worthy $700 million.
Though Twitter did not buy SoundCloud in the end, it now seems that Spotify may swoop in and close the deal. SoundCloud may have a loyal user base among both fans and artists using the service, but it's been struggling to make headway from a financial point of view.
Music Business Worldwide revealed earlier this year that SoundCloud lost as much as $44.19 million on revenues of $19.37 million back in 2014, and the service has since been struggling to put its financials in order.
SoundCloud even launched a premium streaming service dubbed SoundCloud GO back in March, aiming to better compete against the likes of Apple Music, Spotify and others. The premium SoundCloud Go requires a $9.99 monthly subscription, for which it offers offline playback, an ad-free experience, and access to a larger music library.
Spotify, meanwhile, had its own battles to fight toward becoming more profitable, but has managed to soar to the top and become the largest service in the music streaming market. With roughly 40 million subscribers and more than 100 million monthly active users, Spotify leads the race. Nevertheless, the company still took a $194 million hit in 2015 and is reportedly considering an IPO in the second half of next year.
Competition is heating up, however, and the music streaming market may soon become more crowded. More big players such as Amazon, iHeartMedia, Pandora and others are expected to launch their own music streaming services, putting more pressure on existing ones.
In this context, Spotify could secure its top position with the acquisition of SoundCloud, turning both services to profitability and appealing to a wider pool of customers. A SoundCloud acquisition could even enable Spotify to eliminate music labels from the equation, getting the goods straight from artists on the rise.