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SoundCloud Joins Streaming Arms Race with New Subscription Service

The streaming platform offers offline syncing and access to the major's catalogs with SoundCloud Go.

Music streaming platform SoundCloud launched its hotly-anticipated user subscription service today. The $9.99 a month package, SoundCloud Go, will feature offline syncing, the removal of ads, and access to an expanded catalog that includes music from the majors, as well as independent labels.

"From the consumer perspective, it's the ultimate subscription to music," Alexander Ljung, co-founder and CEO of SoundCloud told THUMP. "Which then hopefully translates to a lot of subscriptions—which is good for the total amount of revenue, and then goes back to the artists."

The roll out of SoundCloud Go is the long-awaited attempt by the German-based company to monetize the platform's content. While ads have run on the site since 2014, the company had not previously offered a paid option for listeners.

While SoundCloud Go is being offered as a premium upgrade, the existing ad-supported service will stay as is for those who opt to remain as free users of the site. The site is also offering a 30-day free trial for users signing up for the package. The paid option is currently being rolled out in the US, with other countries to follow in the coming year.

SoundCloud Go will enable subscribers to save their playlists in an offline mode, accessible without data, and will also turn off ads on the platform to those customers. Subscribers will also have access to new content, courtesy of the deals the company has signed over the past few years with the three major labels—Sony, Universal, and Warner—as well as the digital rights agency Merlin that represents over 20,000 independent labels.

These deals will mean that SoundCloud is now able to put content from the labels' catalogs on the platform. However the rights' holders (who can be artists, managers or labels) still need to agree to having their content on the platform; something Taylor Swift, Adele and Gwen Stefani have all refused to do with their album releases on rival platform Spotify.

So users of the paid-for tier will be able to listen to, say, the new Eric Prydz album directly in the service, as well as all the existing user-generated content. SoundCloud currently offers over 125 million tracks on the site, which will continue to grow significantly after the addition of material generated from the deals with the majors. Both Spotify and Apple Music's libraries are in the region of 30 million tracks.

The deals with the labels will go some way in resolving an ongoing licensing issue the platform has been battling against, which has resulted in some users having their tracks or content removed from the site. The electronic music community, dependent on the ability to sample and remix, has been particularly stung by SoundCloud's takedown policies.

"The deals we've been doing with the industry are really important for getting to a place where we have less takedowns and more creative freedom for people," Ljung said.

The threat of takedowns, however, will not completely disappear. The service will provide a means to deliver revenue from user-generated remixes and sampling of content to the original rights' holder, which should in theory lessen the likelihood of automatic takedowns. However, users still need permission from the rights' holders to repurpose their content, and it remains to be seen what effect having the majors on board will have on the pressure to serve takedown notices.

But Ljung is confident things are going in the right direction, as introducing a paid-for service presents a potential revenue stream for the artist behind the original version on a piece of remixed content. "Remixes and derivative content is massively important for culture, but the industry hasn't recognized it," he said. "But now suddenly it represents a brand new, large revenue stream."

In February of this year, SoundCloud's most recent publicly available financial statements emerged, revealing the company had made a loss of $44 million (€39 million) in 2014. This prompted speculation that the company was in trouble because the company's auditors said in the documents that the company was facing "material uncertainties." The auditors noted that it needed to secure more funding, set up a successful subscription service and negotiate licensing deals with music labels. A three-point checklist the company appears to have worked its way through in the two years from when these documents pertain to.

Ljung said that the company has come along way since 2014, emphasizing those statements are not its most up-to-date finances. He also said the company's strategy to operate with a loss was intentional. "Building a high growth company of our scale, it's not an unusual path to take on a lot investment, grow the service and then ramp up monetization," he said.

SoundCloud's subscription option comes as the streaming war has turned into an arms race, with Spotify and Apple Music making aggressive strides forward. Spotify recently announced it hit the 30 million subscription mark. Apple Music also reportedly secured 10 million paid users in its first six months on the market.

Ljung did not comment on the specifics of how many of SoundCloud's 175 million monthly unique listeners would need to convert to paid up members, instead saying that the entire streaming industry presents an opportunity for growth for the company.

"It's still less than 10% of the world's music listening is streaming, so there's huge upside ahead of the whole industry," Ljung said. "There's an enormous amount of subscriptions that could exist in the future and the opportunity is really significant."