Spotify has acquired SoundBetter Music Production Marketplace aiming to diversify its business model from overdependence on music streaming services to enhance its relationship with content creators.
On September 12, Spotify announced that it has acquired SoundBetter Music-Production Marketplace. Through that acquisition, the company has increased its suite of tools for music artists aiming to diversify itself. The company seeks to invest away from the model founded on paying music streaming royalties to labels.
SoundBetter, founded in 2012, is a Brooklyn-based audio production that also doubles up as a collaboration marketplace. It caters to mixing engineers, mastering engineers, producers, songwriters, artists, and session musicians who connect on particular projects. Furthermore, it assists people seeking to distribute music tracks to the entities who want to license them.
SoundBetter reportedly has over 180,000 artists registered on its network living in 14,000 cities spanning 176 countries. It claims that it has a host of several big names using its services and that it has paid more than $19 million to producers and musicians. That adds up to an average of $1 million monthly and the company takes a cut as commission on every deal secured on the platform.
Just like the commission that the audio production company takes is concealed so is the amount paid by Spotify to acquire SoundBetter. The Financial terms are hidden which means that it might not be a significant sum for the $24 billion streaming giant. Spotify reportedly has 232 million users, including 108 million Spotify Premium subscribers.
An official announcement from Spotify states that it will integrate SoundBetter into the Spotify for Artists group. That group caters to over 400,000 artists and their teams. The acquisition will also offer artists a new channel to generate extra income and connect with collaborators.
In the past, SoundBetter raised a hidden amount of funds from investors that included Nautilus (Eric Ries and Verizon Ventures), 500 Startups, and Foundry Group. Its last funding was done in 2015 as a convertible debt from Drummond Road and others.
What Happens to SoundBetter Now?
A spokesperson affirmed that SoundBetter will not shut down with the acquisition. It will remain business as usual with the two companies striving to integrate SoundBetter’s services with Spotify for Artists seamlessly. Spotify for Artists currently helps musicians on Spotify tracks and other services to market their work.
SoundBetter operates two main services which include an online marketplace for musicians to connect with sound engineers, singers, and producers. It also helps other professionals to put finishing touches on their tracks. In June 2019, it launched Tracks for people to license finished music to compete with Soundcloud and Epidemic Sound.
Notably, Spotify tried to launch a direct music distribution platform but that effort shut down last July. The shut down could have been initiated to pave way for the SoundBetter deal. This deal shows that Spotify is committed to continue investing in many other behind-the-scenes services to help in the growth of the music ecosystem.
The Investment Strategy
Spotify feels the need to invest in the music ecosystem since musicians have long lamented about how little they earn from the platform. Thus, increasing services of marketing and revenue generation for the artists will enhance the relationship. Also, the company says it has paid over €13 billion ($14.3 billion) to rights holders since launch but the company is still operating at a loss from its fundamental business model.
The company seeks to diversify to reduce the pressure on the streaming side of the business generally. Even after putting profitability on one side, the company was criticized for failing to achieve its targets for subscription growth.
Over the years, Spotify has amassed a growing list of assets that have taken it far beyond offering only the basic music streaming services. However, music continues to throb at its epicenter and the company will continue building that business area to lead competitors.
Despite that announcement, the Spotify stock (SPOT) continued to head southwards. Currently, it is trading at 128.55 USD representing a 2.61% loss in the past 24 hours.