Businessmodel of SoundCloud

Customer Segments

SoundCloud has a multi-sided business model, with two interdependent customer segments that are both needed in order to operate: music artists who want to distribute their music and consumers who want to hear it.

Value Proposition

SoundCloud offers six primary value propositions: accessibility, pricing, customization, performance, risk reduction, and brand/status.

The company creates accessibility by enabling music artists to find audiences with whom they can share their work. It also increases access by allowing performers to embed their files on social media sites such as Facebook and Twitter so that their songs can be heard through those platforms. Lastly, SoundCloud supports AIFF, FLAC, WAV, ALAC, MP2, OGG, MP3, AMR, AAC, and WMA files.

The company offers a pricing value proposition. Consumers can utilize a free option or purchase a paid subscription for only $9.99 a month. It offers a 30-day free trial for the premium version. Artists are also charged low fees – $7 per month for a basic version and $15 a month for the premium one.

The company creates customization by allowing consumers to build playlists of their music. Artists can choose to share their songs privately or publicly with blogs, social networks, and other websites.

The company has demonstrated strong performance through tangible results. It has partnered with various brands to assist them in promoting their offerings through music-related efforts. High-profile examples of positive outcomes for these partners include the following:

• Asics used SoundCloud’s solution to create the Go Run It playlist as part of its promotion for the Gel-Quantum 360 shoe, resulting in a 30% increase in plays and 4,500 profile followers
• AXE: White Label used SoundCloud’s solution to create two “Classical Remixes” as part of a marketing effort, resulting in more than a million branded track plays The company reduces risk by helping to ensure security. It maintains the SoundCloud Status Blog, which provides up-to-date information on system availability, changes, and maintenance.

The company has established a powerful brand due to its success. It bills itself as the world’s leading social sound platform, drawing more than 175 million monthly users worldwide. It attracts more than 82 million monthly users in the U.S., reaching over 25% of the mobile population. Its artists upload an average of 12 hours of audio per minute, and its artist membership is evenly divided between up-and-coming performers and established musicians. Lastly, it offers access to over 135 million tracks.

Channels

SoundCloud’s main channel is its website, through which it acquires most customers. The company promotes its offering through its social media pages, advertising, and participation in conferences.

Customer Relationships

SoundCloud’s customer relationship is primarily of a self-service, automated nature. Customers utilize the service through the main platform while having limited interaction with employees.

The company’s website provides answers to frequently asked questions. That said, there is a personal assistance component in the form of phone, e-mail, and social media support and a community element in the form of a forum.

Key Activities

SoundCloud’s business model entails maintaining a robust common platform between two parties:  music artists and music listeners. The platform includes its website and mobile app.

Key Partners

SoundCloud partners with brands to produce music-related promotions in order to help them market their offerings. Specific partners include Amazon, HBO, Jaguar, Jeep, Microsoft, Netflix, Pepsi, Red Bull, Sonos, Sony Pictures, Starbucks, Target, Taco Bell, and Warner Bros.

Key Resources

SoundCloud’s main resource is its proprietary software platform, which serves over 175 million users.

It depends on its engineering employees to maintain the platform and its customer service staff to provide support.

As a startup it has relied heavily on funding from outside parties, raising $228.32 million from 10 investors as of June 2016.

Cost Structure

SoundCloud has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions.

Its biggest cost driver is likely transaction expenses, a fixed cost. Other major drivers are in the areas of customer support/operations and sales/marketing, both fixed expenses.

Revenue Streams

SoundCloud has two revenue streams:

Subscription Revenues – Revenues generated from the following:

• Artist Subscriptions - The company charges artists to upload and share their music on a monthly or annual basis. Fees are $7 per month or $63 per year for the basic edition (SoundCloud Pro), and $15 per month or $135 per year for the premium edition (SoundCloud Pro Unlimited).
• Consumer Subscriptions – The company charges consumers to access the music provided by artists. The basic edition is free, but fees are $9.99 month for the premium edition, called SoundCloud Go. Advertising Revenues – Revenues generated from fees charged to third parties to advertise their offerings on the company’s platform. Ad options include audio, display, native, and sponsorship opportunities.