Over the last few weeks I've been keeping tabs on the once wildly successful music company SoundCloud. The business was started in 2007 by Alexander Ljung and Eric Wahlforss. The founders wanted to create a tool that would allow musicians to share their work with one another. For years the company grew and became quite popular among the artists and music production community. By January of 2014 after its most recent round of funding the company was valued at roughly 700 million dollars. By May of that same year it was reported that Twitter was considering acquiring the company for 2 billion dollars. I feel that most people would agree that these are very impressive numbers for a music startup from Berlin. So here we are three years later and SoundCloud has closed two offices and laid off a large portion of their workforce. Now tech industry insiders are speculating if the company can survive the next few weeks without an all out collapse.
According to a few articles I've read online, SoundCloud's troubles began with their inability to secure licensing deals with the major record labels. This comes as no surprise as many companies including Apple, Spotify, and Google have had to form some kind of working relationship with the major labels. Even though from my perspective Apple and Google are not in the business of music. Apple sells hardware and devices, iTunes is just another way to drive sales to their core products. Google is a tech giant that has its hands in a lot of products and services. But a huge part of their revenue comes from advertising. So all of the content available through their search engine and YouTube is just another way to capture an audience for their advertisers. As an entrepreneur myself, I love Apple and Google. They both started from humble beginnings only to grow to to a size that no one could have imagined. But their business models don't rely on music sales. Over the last decade alot of people who's livelihoods do depend on music sales have had to reinvent themselves.
So moving forward I look to the startup community to continue to bring innovation to the music industry. And where better to look then right here in New York City. For decades New York has been the home of the music business. From the label heavy Avenue of the Americas to tin pan alley, where music publishers collected royalties for vast catalogs of music. Today we have what is known as Silicon Alley, the east coast's answer to the tech center of the Bay area of California. With New York's rich history of music business dominance coupled with the spirit of disruption that runs wild in the startup community, I feel there is no better place for a revolution in entertainment. So I began my search right here in NYC and found a long list of pioneers in the music space. Companies like Bkstg who are helping artists foster a better connection with their fanbase. Next Big Sound who aggregate information from all over the web so that music professionals can make better informed decisions based off of actual data instead of gut feelings. The Orchard who provides a quality alternative to the traditional channels of music distribution. Peerlogix who is taking a big data approach to the entertainment industry. They are offering their SaaS technology platform to the music and streaming media business. And of course Spotify who have been able to work directly with labels to provide a valuable music service to consumers.
So in closing the latest news on SoundCloud is that they are here to stay and that the media is over exaggerating their current state of affairs. Great, I want to see companies like this thrive and continue to grow. The demand for music, art, and the cultural industries as a whole wll always be strong. My hope is that a lot of smart and talented people will be able to adapt to the current landscape and usher in a new age for the entertainment business. As someone who has experienced the rise and fall of the traditional music business first hand. I aspire to be among the new wave of entrepreneurs working toward a bigger and brighter future for the entire digital media industry.