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SoundCloud confirms debt financing, as Universal deal seemingly gets closer

By | Published on Tuesday 12 January 2016


SoundCloud has confirmed that last year it secured debt financing from ‘alternative investment management firm’ Tennenbaum Capital Partners. The monies, which totalled $32 million according to Swedish news outlet Di Digital, helped the digital firm as it got busy spinning round its business model into advertising and subscriptions.

2015 was a tricky year for SoundCloud, of course, despite its impressive user figures and continued importance as a music discovery and marketing platform. The company has been busy trying to generate revenue streams beyond the fees it traditionally charged content producers, with the On SoundCloud ad platform and a long-in-development subscription offer.

Getting the labels and publishers on board has been a challenge, even though they more than anyone have wanted SoundCloud to get into the advertising and/or subscription game, so that content owners can generate revenue via the platform as well as boosting audiences for new acts.

Warner Music and many indies are on board, but the two big majors are not. Though Universal Music was close to a deal at one point last year, but then the announcement that UK collecting society PRS was suing SoundCloud seemingly put everything on hold.

That litigation was settled just before Christmas, and the New York Post is now reporting that the mega-major is once again close to announcing a tie-up with SoundCloud around its new revenue streams. This would just leave Sony Music as the remaining hold-out on the recordings side, with more work to be done in the publishing domain.

It is interesting though not that surprising that SoundCloud has been funding its latest evolution through credit rather than raising new capital by selling further equity. Some analysts reckon that the SoundCloud company would have been in a stronger position had it been acquired by a major tech or media player before 2015, but the firm’s high valuation coupled with licensing issues made such an acquisition unlikely as of last year. Debt financing possibly makes more sense given the current position.

Confirming its credit facility with Tennenbaum Capital Partners, which was seemingly struck up early last year, the digital firm told that the financing deal was “an attractive option for companies like SoundCloud that have a solid credit rating, and offers an appropriate funding option for a company at our growth stage”.