Jack Dorsey invested in the music streaming service in 2016; last year he wrote off the deal.

One more reminder that digital music remains a very, very difficult place to make money: Twitter has written off a $70 million investment it made in SoundCloud, the music streaming service.

Twitter put the money into SoundCloud in in 2016, via its Twitter Ventures unit, in a deal that valued the company at $700 million. Now Twitter, via its 2017 annual report, says it has written off $66.4 million it invested in SoundCloud because that money is “not expected to be recoverable within a reasonable period of time.”

Variety first reported the news. For context: Twitter generated revenue of $2.4 billion in 2017, and ended the year with $4.4 billion in cash and short-term investments.

Twitter’s SoundCloud writedown isn’t a surprise, since almost all of SoundCloud’s existing investors were crammed down in a last-ditch funding deal last summer, which also brought in a new management team.

But it should be a formal coda to Twitter’s on-off infatuation with SoundCloud. Two years before the investment, Twitter had looked at buying SoundCloud for more than $1 billion, but didn’t.

And it’s a reminder that even though consumers have embraced free and paid music streaming services, the companies that run those services generally aren’t making a profit.

For giant tech guys like Apple and Google who run streaming music as a side business, that’s probably OK. For standalone companies like Pandora and Spotify, that’s not (reminder: Spotify is planning on going public in the next couple months).

Meanwhile SoundCloud, which had been pushing a $10-a-month subscription service like the one Apple and Spotify offer, is changing its strategy.

The new plan, as outlined by CEO Kerry Trainor at our Code Media conference this month: Focus on a more limited $5-a-month plan, as well as a renewed emphasis on a subscription service SoundCloud has always sold to music creators, producers and other prosumers.

Here’s my Code Media chat with Trainor:


Recode – All Go to Source
Author:

Peter Kafka

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