It seems SoundCloud could be in more need of an acquisition than previously thought.
The company released its financial results this past week, and ominously revealed that it could run out of money this year, shortly after picking up its search for an acquisition.
SoundCloud’s financial reports revealed that while revenues grew strongly last year, by 21 percent to $22 million USD, its losses grew even more, by 30 percent to $52 million.
SoundCloud’s CEO Alexander Ljung said in a statement that a failure of the company’s newly introduced subscription service to raise sufficient funds, could steer SoundCloud towards running out of money before the end of the year. However, he remains optimistic about the company’s ability to raise capital in the coming year and beyond.
The music industry is currently in the midst of a rapid shift towards subscription-based streaming services, however revenue models have yet to catch up with this trend.
In addition, SoundCloud has found itself competing against wealthier adversaries in the space, such as Apple, Google and Spotify. In response to this competition, SoundCloud introduced a monthly subscription service, SoundCloud Go, at $9.99 per month that offers users an ad-free experience.
SoundCloud reportedly closed out the year with approximately $13 million in the bank, reports Fortune. Furthermore, multiple record labels currently have a stake in the company. Music Business Worldwide, Sony Music, Warner Music, and Universal Music each own between one and fur percent of the company’s shares.
Fortune reports that these record labels have a stake in helping SoundCloud devise an exit, should it be necessary. SoundCloud has been batting around the idea of an acquisition for quite some time, and briefly discussed the possibility with Spotify before it’s believed the streaming giant’s IPO intentions prompted them to pull out of the talks.
Rumours are currently swirling regarding Google potentially acquiring SoundCloud for $500 million — a large drop from SoundCloud’s initial self-valuation.