Soundcloud is an audio streaming platform that reaches over 175 million users per month across the globe. “Creators” use Soundcloud to upload, share and track the reach of their audio content. “Listeners” use it to discover, curate and provide feedback on tracks. Together, both sides have formed a vibrant community of artists, tastemakers and consumers of music and spoken word. While the catalogues of most well-known music streaming services such as Spotify and Apple Music consist primarily of tracks licensed from major music labels and publishers, Soundcloud offers an unmatched “long tail” of user-generated audio content.
Universal Music, Sony Music and Warner Music – aka “the Big Three” – comprise almost 70% of the world’s recorded music market and have long controlled the production and promotion of popular music, “pushing” their artists onto consumers. Soundcloud has taken a significant step towards democratizing music distribution, enabling anyone with internet access to post their audio content and letting the crowd decide on quality. This has worked particularly well in genres that lend themselves to individual music production (e.g. electronic, hip hop), and helped artists such as Kygo and Lorde break into the mainstream.
Value creation on Soundcloud is fundamentally linked to the power of crowds. The platform provides the basic building blocks – profiles, hosting services, analytics tools, social engagement features – but the community does the rest. Creators are encouraged to share even unfinished work and benefit from feedback on posted content through messages and track comments. They can tap into a global pool of peers to find potential collaborators, which is how Flume and Chet Faker came together. They can also build their fan bases far more quickly by increasing their reach to Soundcloud’s broad listener base.
For listeners, the wisdom of the crowd is crucial to help them identify the content most suited to their tastes. With over 12 hours of content posted every minute, it would be impossible to review everything and pick your favorites. Instead, listeners rely on the behavior of artists and friends they follow. Your “home stream” on Soundcloud is a reverse-chronological feed of all the tracks that the people you follow have posted or reposted, so your shortcut to discovering music you like is to curate your curators. My favorite way to do this is to pick an artist I like and see what new artists or tracks they have liked. More common features like “charts” or cumulative “likes” and “reposts” also show what is currently popular in the broader community.
The incentives to participate differ for creators and listeners, although many users count themselves in both categories. Creators post content to reach large audiences and receive feedback, while listeners use Soundcloud to access the long tail of unique content curated by people they choose to follow. Listeners help curate content because “liking” is their way of storing tracks for future use and “reposting” enables them to engage with their own followers. Track comments are also a unique opportunity for listeners to interact with artists, who often respond directly. The community is managed through Soundcloud’s efforts to monitor for scams, harassment, and content right infringement.
Given its success in building a global user base, Soundcloud’s biggest challenge relates to capturing value. In its initial phases, the company focused on building tools for creators to share content and on growing the audiences that this content can reach. The next phase in the company’s journey is about enabling creators to monetize their reach and Soundcloud to improve its bottom line. The company has itself partnered with major and independent music labels and publishers to enable the introduction of audio and native advertising, as well as subscription services for listeners (subscriptions for creators have existed for several years). Monetization is a delicate balancing act, as Soundcloud’s unique value is its long tail of user-generated content. To maintain this edge, it needs to be preserved alongside partnerships with larger content providers.
Disclaimer: I am an audiophile and worked on the New Markets Team at Soundcloud in Berlin. I use Soundcloud for discovery.