SoundCloud had a 40% markup in revenue from 2012 to 2013, but their operating loss in that same period of time more than doubled. To provide you the numbers, the company earned $14.1 million in 2013, but had to go through $29.2 million.
In the 2013 filing, the company states, “We are in a phase of growing SoundCloud into the market-leading platform for listening to, creating and sharing sound. This has necessitated investment in technology, headcount and marketing. Our overhead base has increased faster than our revenues.”
Fortunately, SoundCloud has received a healthy amount of funding from investors who believe their business will be the premiere platform in their field. They disclosed a total of $123.3 million in funding, although they have worked out other deals unseen by the public eye.
The company’s primary goal is to figure out how to monetize their platform without having their users flee to another service; they’ve restructured their premium services and have started to dabble in advertising as well. While these are dictate positive signs of financial growth, they are currently at a standstill with the major labels as neither parties have agreed on a deal that properly benefits them. To put it simply, Universal, Sony and Warner are all holding out for a better deal.
SoundCloud is by no means in hot water just yet, but it is clear that this music and audio giant needs to think fast and figure out how to satisfy everyone, while maintaining a profitable business strategy.