Rivals to Merge? Spotify In Advanced Talks to Acquire SoundCloud

By Sowmya Venkataramani - 30 Sep '16 17:19PM

The Swedish streaming music provider Spotify is said to be in talks to acquire its German rival SoundCloud according to a report in Financial Times. The move is seen as a measure to face upcoming competition from Apple Music and others like the one recently launched by Amazon.

According to sources the talks are in an advanced stage but they could still collapse any point. There is also no clarity on how much Spotify might pay for its rival.

Spotify recently hit the 40 million mark in terms of its subscribers while Apple announced during the recent iPhone 7 event that Apple Music had 17 million subscribers. Although the gap between the two brands is significant, a recent customer survey by J.D. Power pointed out that Apple Music came on tops in terms of customer satisfaction. The halo effect from its brand ecosystem has been cited as the major reason for this.

Spotify has earlier walked out of talks to buy SoudCloud, reportedly over disagreements on pricing. But with SoundCloud struggling to make a mark revenue-wise, and its new subscription product SoundCloud Go failing to get the required traction, the deal could be more attractive for Spotify now.

Despite its commercial struggles, SoundCloud offers several reasons for Spotify's continued interest.

SoundCloud has been seen as a "YouTube of content creators", with artists loading their music directly bypassing record labels. This has resulted in the site becoming a hub of original underground music including remixes with a buzzing community.

"It has the best artist relationships of anyone, especially with the large number of unsigned artists," said a former SoundCloud investor.

The site has a staggering collection of over 125 million tracks as against the 30 million on Apple Music and Spotify. SoundCloud has also been working out deals with all major record labels to ensure that music uploaded on the site is not taken down due to copyright violations.

The merger between the two has also been seen as opportunity to create "a European superpower in digital music " as pointed out by analyst Mark Mulligan, founder of Midia Research.