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Reasons Twitter Didn’t Close the Deal with SoundCloud

For a long time now, Twitter has tried to venture into the music business with no luck. It keeps coming up empty-handed. It started with #Music service that somewhat was not well received by the public after a year of its release. The numbers behind the service dwindled leading to its slow death. Now it is alleged that last week, Twitter may have had plans of trying to purchase Soundcloud, a Berlin-based music streaming service.

According to sources, a deal was about to happen between the two companies, but Twitter bowed down to pressure from the investment community and stakeholders alike who viewed the purchase as a ‘wrong investment move’. The merger, if it ever were to happen, would have synergized well with the micro-blogging platform that plays host to a handful of leading music celebrities. You could say it would’ve made an ideal match, to include a music service.

Twitter Music

Like Twitter, Soundcloud has an active user base that is almost the same number of active Twitter users. So besides bringing on board a music service, Soundcloud would’ve provided a boost of user numbers to Twitter (the users may have even overlapped at some point).

Right now, Twitter could do with high user numbers considering its stock prices are declining as days go by. That was, in fact, the reason for their wanting to purchase Soundcloud. However, as you well know, reality often brings about a different story and alters your well-laid out plans. So why did Twitter choose not to consummate the deal?

#1: Soundcloud’s Massive User Attrition Doesn’t Appeal Much

Although Soundcloud’s estimated valuation of $700 million and a user base of 250 million may seem attractive on the surface, but its high number of on-going user attrition remains a huge concern that it’s not ready to deal with. Twitter sees the exodus of users to other streaming services such as Play.fm, MixCrate and MixCloud as a costly investment. Soundcloud users are taking the decision to move to other services en masse – reason being?

That Soundcloud is taking down unlicensed songs using Audible Magic technology that simply identifies songs that are unlicensed and flags Soundcloud to take them down. Unfortunately, it sometimes flags legit, original compositions of users. This creates anger amongst users, and they decide to move to other streaming services.

#2: Revenue

It came to the realization of Twitter that Soundcloud isn’t after all designed the same way as other music streaming services. It has a revenue ceiling that hinders much of its advertising capabilities. So power users simply move to other services that provides them all the bells and whistles such as extensive stats and unlimited downloads and allow them to reach high tiers.

#3: Licensing

The fact that Soundcloud has no licenses from publishers or music labels like the way YouTube does is a red flag and partly a discouragement for Twitter. Having no license could simply cost Twitter more money, and for its executives more panic attacks and night sweats. Soundcloud is seen as an annoying headache that Twitter is not ready to deal with.