14 DAY TRIAL // Music streaming service Spotify is in secret talks to acquire its main rival, Soundcloud, according to a report from The Financial Times.
Negotiations are in their initial stages, but this is the third time Spotify has approached Soundcloud with a bid this year, after attempting the same during early spring, and again in June, after Soundcloud had raised $100 million from a group of investors that also included Twitter.
Battle for the music streaming market intensifies
Spotify, which has a paying customer base of over 40 million subscribers, is interested in boosting its userbase with Soundcloud's community, estimated to be of around 200 million users, most on free accounts.
According to reports, Spotify is looking to beef up its catalog and subscriber numbers ahead of a battle with Apple Music for the top position in the music streaming market.
After its failed launch, Apple Music has slowly grown, and currently has a total userbase of around 17.5 million paying subscribers. Apple has well-established relations with music labels since the 90s, when it launched iTunes. These deals had contributed to the service's quick rise, with a vast catalog available to users from the get-go.
Other competitors on the music streaming market include Pandora and Amazon, the latter of which has recently launched its own service called Amazon Prime Music.
There are plenty of acquisitions that never make any sense, but this one does, and most users won't have a problem accepting Soundcloud's new patronage.
Soundcloud has financial problems
Soundcloud has recently introduced a subscription plan after a financial report from 2014 showed the company had lost $44.19 million (€39.14 million). Numbers for 2015 aren't publicly available.
In March 2016, Soundcloud signed a legal agreement with Sony Music Entertainment and finally managed to have deals with all three major music labels that also include the Warner Music Group and Universal Music Group.
Soundcloud also had deals with various independent music labels via an agreement with the Merlin Network, who represents many of the labels.
These deals are crucial for stream music services because it allows them to avoid getting sued into the ground by music rights holders. With these deals signed, it is no wonder that Spotify came knocking.