SoundCloud moves closer to sell stakes to private equity

Bloomberg

SoundCloud Ltd. is close to a deal to sell stakes in the company to a pair of private equity firms, according to people familiar with the matter, an investment that will help the beleaguered music-streaming service keep operating for the foreseeable future.
The two firms would be acquiring stakes via separate deals, said the people, who asked not to be identified discussing private transactions. The names of the interested parties or the sizes of the transactions couldn’t immediately be obtained.
Combined, the two private
equity firms would own a majority of SoundCloud, the people said. While the talks are at an
advanced stage, they could still fall apart.
A darling of the independent music scene, SoundCloud operates one of the most popular music services in the world, attracting 175 million users with rough cuts from famous artists and mixes from unknown DJs. Yet SoundCloud, founded in Stockholm and now based in Berlin, has failed to generate much money from those users or build a business that can sustain itself.
The company has been scrambling to secure additional funding before it runs out of money. SoundCloud laid off 40 percent of its staff earlier this month, and shuttered offices in San Francisco and London. The company lost 45.6 million euros ($53.5 million) in 2015 on sales of 21.1 million euros, according to a regulatory filing earlier this year.
Spotify, another Swedish music service, generated more than $2 billion in revenue in 2015 and $3 billion in 2016 thanks to its growing base of paid subscribers.

Little Advertising
Unlike rivals YouTube, Apple Music and Amazon Music, SoundCloud doesn’t have a parent company that can depend on sources of profit outside the music industry. And unlike Pandora, the online radio service, SoundCloud has never built much of an advertising business.
SoundCloud introduced a subscription service in 2016 to convince some of its most ardent users to pay a monthly free. The service also mollified many music rights holders upset at how little money SoundCloud returned to artists.
Some musicians have taken up SoundCloud as a cause celebre. Chance the Rapper, the Grammy-winning Chicago musician, just used SoundCloud to release the song “Big B’s,” his recent collaboration with fellow rapper Young Thug. Earlier this month, the chart-topping artist tweeted that he was “working on the SoundCloud thing.”
SoundCloud has previously spoken with rival music services Spotify and Deezer about a potential sale, Bloomberg has reported, but couldn’t agree on a price. Chief Executive Officer Alex Ljung has rejected the prospect of selling the company, and would prefer to remain independent, the people said.