UPDATED: As long-percolating rumors of SoundCloud’s financial demise gained steam this week amid a report that the company will run out of cash in 50 days, Chance the Rapper took to Twitter on Thursday and wrote, “I’m working on the SoundCloud thing.” The internet quickly erupted with speculation that he was going to buy the company or “save” it in some fashion — after all, this is the man who donated $1 million to Chicago’s public schools and funds and books his own recordings and tours.
Then on Friday morning, he issued a pair of Tweets reading, “@ an artist who you wouldn’t know if not for SoundCloud,” quickly followed by “Now link me to a song on @SoundCloud that you swear you’re responsible for like atleast a thousand plays.”
And at around 2 p.m. E.T., he tweeted: “Just had a very fruitful call with [SoundCloud cofounder] Alex Ljung. @SoundCloud is here to stay.”
Chance’s manager had not responded to Variety’s requests for comment at press time, and a rep for SoundCloud told Variety that the rapper is essentially spreading good vibes about the company during a challenging time and that if he is making a more material commitment to the service, she is unaware of it. A blog post appeared on SoundCloud’s website not long after Chance’s latest tweet that at the very least echoes his wording. In it, Ljung writes in part:
“Hey everyone, There’s an insane amount of noise about SoundCloud in the world right now. And it’s just that, noise. The music you love on SoundCloud isn’t going away, the music you shared or uploaded isn’t going away, because SoundCloud is not going away. Not in 50 days, not in 80 days or anytime in the foreseeable future. Your music is safe. … Last week we had to make some tough decisions to let go of some of our staff, but we did this to ensure SoundCloud remains a strong, independent company. Thank you for the outpouring of love and support. Some of you have asked how you can help–spread the word that we’re not going anywhere and keep doing what you’re doing–creating, listening, uploading, sharing, liking, and discovering what’s new, now and next in music. SoundCloud is here to stay.”
But whether Chance’s contribution is morale-building or financial, it’s going to take a lot to transform SoundCloud’s popular and easy-to-use platform — which is beloved by musicians for its quality, reliability and simple interface — into a workable business model.
Founded in 2008 by Ljung and partner Eric Wahlforss, the platform was originally established as a site for DJs to upload their mixes and quickly became a favorite destination for all kinds of musicians as well as labels seeking a fast and easy way to circulate music quickly. Yet licensing and royalty challenges forced the company to become a more traditional streaming service and it has struggled in its efforts to encourage users to opt for its paid premium model — a crowded field that even Apple Music has found daunting.
According to a report published Wednesday on TechCrunch, a video conference was held Monday by Ljung and Wahlforss to explain last week’s layoffs to the staff — and during the course of the meeting, the staff was told the company has only enough cash to last “until Q4,” which begins in 50 days. SoundCloud contested that information in a statement and said it is “fully funded into the fourth quarter.”
And while in March the company confirmed the latest in a series of financial infusions, $70 million in debt funding from Ares Capital, Kreos Capital and Davidson Technology, it incurred a 51 million Euro loss in 2015 on revenue of 21.1 million Euros. In January Ljung expressed concern that “risks and uncertainties may cause the company to run out of cash . . . and would require [SoundCloud] to raise additional funds which are not currently planned” — concerns that were partially, although certainly not completely, allayed by the March debt-funding infusion. The company has also been hobbled by a long series of executive departures.
The new funding arrived after earlier reports that SoundCloud was considering a fire-sale exit because it hadn’t been able to raise the necessary money to continue its operations. It acknowledged the need for new capital, but denied that it was getting ready to sell for pennies on the dollar. “We are actively speaking with a variety of potential investors and other strategic partners,” SoundCloud told Variety at the time.
SoundCloud had raised $70 million from Twitter in June 2016, after raising $35 million more of debt financing in January 2016.