Tuesday, May 27, 2014

3 Reasons Why Twitter Killed The Soundcloud Deal

Soundcloud logo image
Twitter has been trying hard to get into the music business, but keeps on coming up empty. First there was its ill-conceived #Music service which died on the vine about a year after it was launched due to low adoption numbers, and now the company reportedly has nixed a deal to buy the Berlin-based Soundcloud music streaming service. 

It was only last week that a deal between the two looked imminent, but the Twitter looks to have bowed to pressure from stockholders and the investment community alike, both of which took a dim view of the acquisition.

On one hand, Twitter-Soundcloud looked to be synergistic in may ways. Twitter has a large number of influential music celebrities that use the platform and have extremely large followings, so incorporating some sort of a music service seems like an ideal match. Soundcloud has roughly the same number of active users as Twitter, and any added users (there’s some overlap between the two) could possibly provide a needed boost in Twitter’s plateaued user numbers, which in turn could help it’s slowly dwindling stock price. That’s the theory, but as we well know, reality is frequently a different story, especially in this case. Here are three reasons why Twitter might have chosen not to consummate the deal.

Reason #1: User Attrition

While Soundcloud might look attractive because of its 250 million or so users and $700 million estimated valuation, it has it’s own set of problems. Like Twitter, there’s ongoing user attrition, especially with the DJ community, who are leaving for other services like MixCloud, MixCrate and Play.fm

One of the reasons is that Soundcloud uses Audible Magic technology to identify unlicensed songs, which then flags Soundcloud, who then issues a take-down notice much like YouTube does in similar cases. Unfortunately Audible Magic, or any other content identification service for that matter, isn’t perfect and many times users are directed to take down their own compositions. No one wants the hassle of having to defend their own material, and the three strikes and your account is cancelled policy forces many users to make the decision to jump to another service. Read more on Forbes.

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