SoundCloud's New Leader Is Focused On The Fundamentals
Earlier this year, SoundCloud was said to be in imminent danger of collapsing under the weight of its high overhead, low revenues and poor leadership. SoundCloud first launched in 2008 out of Berlin with a concept so simple — make audio easy to share — that it had to be brilliant. And it was, particularly in the elegance of its execution; clean, easily postable widgets that could be placed anywhere on the web and easy uploads with clever software integrations for artists. With each successive year, the company's ambitions and scope slowly increased, in tandem with both the rapidly growing number of people using it and the funding it was receiving.
The company began reconciling its grassroots position with its ever-increasing scale around 2014, signing licensing deals with major labels and publishers, debuting a paid streaming service and implementing a content identification system for removing unwelcome material (similar to that used on YouTube). The "path to a much higher degree of monetization" that co-founder and CEO Alexander Ljung (pronounced "yoong") predicted didn't arrive, however.
This past July, Ljung announced that his company was laying off 178 people and closing the company's San Francisco and London offices in order to cut down on expenses. Reports afterward said the company was in dire straits regardless, with only enough cash in hand to make it to, and not through, the year's final quarter.
A few weeks later, however, an enormous infusion of funding — $170 million — was secured. The string attached was that Ljung would step aside as CEO and his role at the head of SoundCloud's day-to-day operations, but remain chairman.
Kerry Trainor was Vimeo's CEO before he was chosen to replace Ljung and become SoundCloud's chief. He's now had several months on the job to step into the breach and survey the company he's now charged with making profitable, or at least break-even.
The deal that brought Trainor to SoundCloud, he tells NPR, "was one that I, with the investors, brought — I said we wouldn't go forward unless this is something that the founders chose," adding that Ljung and his co-founder Eric Wahlforss, who remains the company's chief product officer, "had to make some hard choices." With the deal in place, Trainor says that the company is "in the best position it's ever been."
Throughout the conversation, Trainor repeated one word more than most; "improvement of core services for creators" and "making sure that the creator tools are always the best that they can be" and "we'll always be focused on the creator-driven core" and "discover new music directly from creators." At Vimeo, Trainor presided over a similarly creator-driven approach to the business, and generated growth against an incumbent YouTube. SoundCloud is essentially the audio equivalent. He says hundreds of thousands of artists pay for premium access to the platform.
When the threat of closure became a real concern earlier this year, many — including artists and fans — began to worry about losing the massive archive of recorded material, much less the community behind its creation, that SoundCloud maintains. Volunteer archive projects were begun. Asked if there was a contingency plan in place for its database of material, Trainor expressed confidence that the company wouldn't need to worry about it anytime soon. "Unequivocally, no one's material is at risk. SoundCloud was not ever going away." But digital music's road is rife with failed startups, though few have ever achieved the size and ubiquity of SoundCloud. Devil's advocate: The same could be said of MySpace.
Trainor declined to discuss in detail any advances in the platform's lackluster advertising business, saying only that "we're doing a lot of work here in terms of improving and setting up our systems for brands to be able to buy us more effectively" — and, notably, that he sees "very little audience overlap" between SoundCloud and Spotify. Ditto the company's often frustrating and opaque takedown system for removing copyright-infringing material, necessary to avoid crushing legal claims by the major labels. "There will be steps that we can take to make that more clear for creators," he says.
Trainor's first visible action in his role as CEO, announced on Dec. 14, is indicative of a return to roots — and to the reasons for SoundCloud's popularity in the first place. The company is pulling the sheet off of a refocused homepage, landing first on its mobile app, which front-loads two of the most vibrant communities within SoundCloud: hip-hop ("SoundCloud rap" has become a loosely defined genre in and of itself) and electronic music (producers' and DJs' adoption of SoundCloud helped create its early growth).
The company is also featuring new algorithmic playlists similar to that of Spotify, as well as some region-specific charts to highlight more local artists. The focus on creators is clearly intended to address the concerns of the company's central constituency: artists.
"SoundCloud is not in the world to just go head-to-head with mass streaming services to try to deliver the same commodity catalog," Trainor says. (It was, or tried to be, not that long ago.)
The appeal of SoundCloud has always been the same — the ease of its use for artists and the chance at serendipitous discovery it offers listeners. Spotify, as the critic Ben Ratliff recently and accurately wrote for this site, tells you very little about what you're hearing. It tells you even less about the interconnected artists, labels and scenes between that song and the one you may listen to next. SoundCloud does this as a matter of course and habit. Its decision to refocus on that could end up a positive step for both it and the digital music community as a whole, which has no centralized space quite like it.
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