Twitter writes off $70 million SoundCloud investment

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.”

Twitter had been in on-and-off talks to acquire SoundCloud for years, but instead ended up investing $70 million into the music service as part of a $100 million round of funding back in June of 2016. 

However, SoundCloud ran out of money in early 2017 and wasn’t able to raise any additional financing.Twitter had been in on-and-off talks to acquire SoundCloud for years, but instead ended up investing $70 million into the music service as part of a $100 million round of funding back in June of 2016. However, SoundCloud ran out of money in early 2017 and wasn’t able to raise any additional financing.

SoundCloud finally secured a Hail Mary deal that included $170 million of new funding from the Raine Group and Singapore’s Temasek in August of 2017. However, that deal came with a corporate restructure that wiped out many of the start-up’s early investors, and ultimately also forced out SoundCloud’s founding CEO Alexander Ljung.

 

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.

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