SoundCloud, the global online audio distribution platform based in Berlin, Germany, recently announced that it had struck a long-awaited licensing deal with Universal Music, whose roster includes the likes of Kanye West, Adele and Taylor Swift.
The site, which enables users to upload, record, promote, and share their originally-created sounds, now allows its users to have access to music from two of the top four music distributors. It had earlier signed a deal with Warner Brothers; the two still holding out are Sony BMG and Sony/ATV.
Clinching the deal with Universal is a strong indicator that the music-content platform is become a serious competitive threat to Spotify. Though Spotify has so far managed to garner most of the media buzz, SoundCloud has a much larger user base — 175 million monthly listeners against Spotify’s 75 million subscribers.
One reason for the difference in user numbers is that the two sites have radically different business models. While Spotify is more of a paid service for streaming music, SoundCloud is focused on providing free content. Moreover, those who upload their content on SoundCloud are more interested in building up their fan base than on monetizing their music, while 80 percent of the revenue earned by Spotify goes to pay out its content license holders.
Additionally, finding new songs and podcasts is an important part of the listening experience. But on Spotify, most of the music is content you can find elsewhere. The majority of Spotify’s content comes from major record labels and is freely available on other streaming services, like Apple Music or Pandora. But if you want to find the latest hot tracks outside of the mainstream, you will only find them on SoundCloud.
SoundCloud is increasingly becoming a place where users can discover unique content, such as new music and new artists. Users can follow each other, which allow you to find music based on another user’s musical taste and preferences. The platform provides a simple like-and-repost feature, which exposes troves and troves of activity that enables discovery by other users. Once you find an artist you like on SoundCloud, you can then see which songs that artist likes and get lost in a rabbit hole of music awesomeness.
While the music inventory on Spotify is finite and expensive, SoundCloud has the potential for YouTube-like hyper growth. As long as the platform continues to attract talented new artists and content producers, its future is very bright.